Climate-smart agriculture needs functioning market systems to become an effective tool for climate resilience

Los proyectos de resiliencia del sistema de mercado analizan lo que se necesita en el sistema y se asocian con personas que tienen la capacidad de generar ideas pioneras.

Market systems resilience projects look at what is necessary in the system and partners with the ability to pioneer ideas.

Kristina Mastroianni

Kristina Mastroianni

Agriculture Sector Lead

July 21, 2023

There is an opportunity to establish functioning markets for environmentally sustainable production systems to drive change among smallholder farmers to adopt new, innovative solutions that improve climate resilience or reduce deforestation. This opportunity requires a holistic view of the market systems. The financial risk of losing the yield due to negative climate impacts provides a clear incentive for change. By targeting activities to tackle the bottlenecks that currently inhibit appetite for and the adoption of more sustainable systems, we can make sustainable farming systems and markets accessible for more farmers to improve their general livelihoods while increasing their climate resilience.

Generally, the MSD approach is a flexible approach that engages the private sector in development, unlocking potentials in the market systems. At the heart of every intervention in an MSD programme is a sustainable business model, which sells products and services needed and demanded by the market. Systems change is not brought about by the implementer but rather by local partners. Market systems resilience projects look at what is necessary in the system and which partners have a willingness and also the ability to pioneer ideas. Incentives to implement changes in a market system can be achieved using co-investment, leveraging of partners, facilitation of ideas and de-risking pilots financially.

A Market Systems Development (MSD) approach works with economic or political actors to bring about lasting changes in incentives, rules, norms or supporting functions within markets, to improve the terms of participation in these markets for poor women and men.

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Addressing scale, sustainability and time factors

Scale and sustainability are core concepts in MSD that pose a specific challenge when aiming to address environmental and climate-related issues. MSD aims to deliver systemic change at scale – often with the objective of  enabling thousands of farmers to adopt new practices and benefit from more sustainable systems. There are successful examples of where climate-resilient technologies have been adopted on a large scale when the incentives for behavior change align. But often investments in “green markets” has been achieved by targeting high value export crops where the opportunity for a price premium covers higher production costs. This can be very attractive to provide quick wins for an MSD project, but there is a risk that such investments do not reach scale or that poorer smallholders are not able to live up to the quality requirements, e.g. organic products that require expensive traceability and certification systems.

Time is also a critical factor when trying to change systems to become more environmentally friendly, climate-smart alternatives. The MSD approach requires longer projects to be able to deliver sustainable change, but many donor funding cycles require results within a few years. Benefits from switching to an agroecological system, for example, take time to materialise, and the rapid economic benefits that poor farmers need as an incentive to adopt new technologies are simply not there. Considering that most agriculture products have only one season per year, there is little opportunity to facilitate changes in practice within the timeframe of a short project. Often system change requires cultural change; in the Amazon, farmers have come to consider cattle as their most important source of income and this has been a major contributor to deforestation. Facilitating a cultural change which is needed to persuade them to develop other, more environmentally friendly livelihood options that protect the forest requires a holistic, long term investment.

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Climate targets need to be incorporated in programme design from the beginning

It is largely the donor’s prerogative to decide how an individual programme fits within a wider strategic perspective and to enable programmes to build on other engagements to drive the same agenda from different perspectives. To complement the implementer who is restricted to the frames of the individual programme, a donor has an important role to play in engaging with, and gaining commitment from, local government and key stakeholders, and in designing contracts that leverage cross-fertilisation with other programmes. The donor also defines the length of the engagement and has the main responsibility to set objectives and targets that encourage longer term sustainability aspects and not only deliver numbers in outreach and engagements.

It is best not to be too ambitious in setting environmental goals; the best results are obtained when goals are objective and realistic. If protecting the environment becomes the sole purpose, it can undermine the market ability of the programme, and its interventions become more likely to fail. Mixed strategies offer a compromise and a way to reach change at scale while still promoting more sustainable technologies. Conventional products cannot be completely avoided and there is a need to balance between short- and long-term interventions, e.g. conventional and bio-fertilisers.

Closer collaboration with the public sector is needed

Some aspects of climate change adaptation/mitigation and environmental protection are inherently public in nature, however most MSD programmes tend to focus primarily on private sector engagements and aim to strengthen the private sector to drive an inclusive market system, including engaging in advocacy for policy development. However, it has been a challenge for MSD projects in general to expand from advocacy work to engage directly at policy level and contribute to concrete changes, e.g. in the development of new legislation or setting structures for their efficient implementation or enforcement. A closer collaboration with the public sector across MSD programmes is recommended to gain further traction, especially to target environmental/climate sustainability. This intention needs to be built into the programme design, in its commitments and requirements for partner set up and in its objectives and targets. There is evidence of positive results when the donor takes an active role in enhancing policy dialogues and driving policy changes by making effective use of its project portfolio and networks.

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Managing trade-offs is not easy

There are trade-offs between different environmentally friendly systems, e.g. no-till systems can improve organic content and water retention in soils but can require more weeding or even increased application of herbicides. Environmental/climate considerations are usually neither black nor white. In addition, these considerations have to be weighed against the socio-economic benefits for the poor. In some cases, it can be a matter of choosing between the lesser of two evils, each with their own environmental/climate impacts. The importance then is to look at it as a step-by-step approach to reaching a longer-term objective that may even be beyond the programming cycle. For instance, should an environmentally concerned MSD project work with staple foods such as maize or rice when they impose such direct environmental implications in reduced soil fertility or methane gas emissions? Or should a project promote diversification from these staple crops to crops that are more suitable for dry weather conditions such as sorghum and millet? Or rather address the gas emissions in paddy rice by focusing on introducing climate-smart technologies into the prevailing staple crop such as recurrent drainage to reduce the water lock and the amount of bacteria causing the methane emissions? There is no simple answer as it is important for MSD programmes to create impact at scale. These staples offer an opportunity to change their production to, for example, be more climate tolerant across a larger population, while focusing on an alternative that does not have a large share of the food system in the country and may only reach a small slice of the population, at least in the short term. A weighting of these opposite objectives is needed on a case-by-case basis and both strategies have value. A combination based on donors coordinating their programmes could open the opportunity to target both aspects as focus may be diluted and effectiveness reduced if resources in one programme are diverted too thinly.

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Creating incentives is key

With climate adaptation production technologies, the incentive is not always to turn a profit but rather to reduce cost, e.g. introduce composting on the farm instead of buying expensive chemical fertilisers. For most of the farmers we work with, climate change is also directly linked to disaster risk reduction; climate and financial risk are one in the same. In climate-resilient programming, it is important to find a balance between profit and risk, then environment considerations come naturally.

Even though it may not sound like a climate-mitigation method, focusing on increasing production and investing in food quality systems, while promoting efficient and high quality production has a direct effect in maximising output and minimising waste. Improved hygiene and post-harvest management practices throughout the food supply chain can also increase efficiencies and reduce food waste. For example, by improving the productivity and quality of cattle farming in deforested areas it is possible with retained production levels to reduce the number of cattle needed and hence the impact on the forest. This can be done in tandem with promoting other sustainable livelihood options to improve resilience. An increased output per production area requires less area for cultivation or less cattle, limiting the CO2 emissions needed for each consumable and can leave more land undisturbed for the natural biota that can take up CO2. This simple equation is often overlooked in climate programming as it doesn’t sound as innovative as, for example, investing in solar-driven irrigation systems, but it can have a much larger impact on the climate.

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Building on NIRAS’s experiences

NIRAS is able to extract a lot of learning from the achievements of the 12-year implementation of the Swiss Development Cooperation (SDC)-financed Agro-biodiversity Programme in Laos as well as the FCDO/USAID-funded Green Economic Growth for Papua Provinces programme, which promoted agroforestry and green economy in Indonesia. We are also learning from the ongoing implementation of the FCDO-funded Commercial Agriculture for Smallholders and Agribusinesses (CASA) where increased investments into climate-smart systems and COVID-19 rapid response activities have demonstrated that it is possible to stimulate markets in difficult circumstances. The SDC-funded Markets and Seeds Access Project in Zimbabwe and Zambia is beginning to show some concrete learnings after the first production season, and we are just starting up the implementation phase of the Non-Timber Forestry Product project in Chad. Learn more on our website or follow us on LinkedIn.

Kristina Mastroianni is NIRAS Agriculture Sector Lead and Project Director of a number of NIRAS flagship programmes (including CASA and MASAP above) enabling her to coordinate learnings from across NIRAS.

Kristina Mastroianni

Kristina Mastroianni

Agriculture Sector Lead

Stockholm, Sweden

+46 8 545 533 32