title: Climate finance instruments and Kenyan agriculture

authors: Kiremu, Mercy Kangai Gatabi

subjects: Climate finance

abstract: Human activities lead to the emission of carbon and carbon equivalents into the atmosphere which leads to climate change. Some of the negative impacts of climate change include increased frequency of flooding and drought. These lead to loss of soil and crucial soil nutrients which affects agricultural production leading to food insecurity, increased poverty, and may have a significant impact on the quality of life. The majority of Africa’s population are smallholder rain-dependent farmers. Their success depends on actual rainfall (amount and distribution) whose variability is projected to increase due to climate change. As the impact of climate change is felt, the inhabitants’ activities may further exacerbate land degradation through unsustainable agricultural practices. To escape from these adverse impacts requires investment. To this end, climate finance has been offering funds for investments in climate-smart agricultural projects. This has the possibility of enhancing Africa’s adaptive capacity, food security and economic growth. 
This thesis estimates weather-related yield risk in agriculture and the possible use of climate finance instruments for risk weather management. First, the global climate finance landscape was reviewed. This provided an overview of the available financing mechanisms, the sources of climate finance and the overall distribution of the finances across the various regions and sectors. It also highlighted the opportunities and challenges faced by climate finance investments as well as the innovative approaches that have been adopted to tap the available climate risk finance.

Upon establishing the current climate finance landscape and the approaches adopted for climate risk management in agriculture, this study estimated the probable risk in Kenya's agriculture as a result of weather events such as drought. To achieve this, the national annual maize yield data from 1961 to 2014 was utilised. The yield variation was calculated by comparing the actual yield with the average expected yield. First, the average yield for each year was defined as a 5-year running mean of yields for the interval comprising of 2 years before and 2 years after the year under consideration (t-2 to t+2). This was then compared against the actual yield to obtain the yield variation. The results were fitted to a probability distribution and the Value at Risk (VaR) method was used to estimate the agricultural drought risk. The study finds the risk of yield loss due to drought to be high especially for the 50 and 100-year return period which was an estimated loss of approximately 24%. In the 1980s, yield losses of approximately 20% were experienced affecting over half a million people. These results provide information on drought risk and the possible associated losses which could be useful for drought risk management. This information is relevant to financial institutions when pricing financial products for farmers and to the government for estimating the financial resources required to manage the impacts of drought. 
After estimating the agricultural yield risk due to weather changes, the viability of Index Based Weather Derivative as a risk management tool against drought losses for maize farmers in Western Kenya was evaluated. To this end, option contract prices were estimated using the growing period rainfall and a Standardised Precipitation Evapotranspiration Index (SPEI). Burn analysis and the equilibrium pricing models were also used. The study finds that farmers would have benefitted if they had hedged against drought using option contracts. Specifically, at a strike level of 1 and 4, the positive pay-outs would have been in 41 and 18 seasons out of the 108 seasons during the period under study. Further research is recommended regarding the use of market price-based models to price SPEI based weather derivatives.

An analysis of the efficiency of Weather Derivatives (WD) in hedging against drought risk exposure by maize farmers in Kenya was undertaken. A put option with the Standard Precipitation Evapotranspiration Index (SPEI) as the underlying index was assumed to have been bought by the farmers to hedge against income variations due to drought. The study finds that the option contracts do not efficiently hedge against drought risk in Kenya’s agriculture. This is probably because the level of risk in Kenya’s agriculture is higher than that which would be effectively covered by option contracts. It is recommended that further studies should be conducted to establish the factors that may affect the efficiency of option contracts in hedging against drought risk.

Finally, this study evaluated Kenya’s readiness for climate finance. This is based on the premise that the level of a country’s readiness greatly influences the amount of climate finance that it mobilises. It was found that Kenya has instituted legislation and policies aimed at enhancing climate finance readiness. While these have been meticulously and pragmatically formulated, the implementation and effectiveness could not be confirmed. There is a need for measures that enhance data availability which would make it easier to evaluate the performance of the implemented measures.  

As a result of this study, the application of VaR for risk estimation in agricultural production is better understood. Similarly, in terms of financial risk management of weather-related risk in agriculture, the viability of SPEI drought index in pricing option contracts, as well as the efficiency of weather derivatives in hedging drought risks, are better understood. This study offers insights for investors and policymakers who wish to use financial instruments to manage weather risks in agriculture.

text: Climate finance instruments and Kenyan agriculture Human activities lead to the emission of carbon and carbon equivalents into the atmosphere which leads to climate change. Some of the negative impacts of climate change include increased frequency of flooding and drought. These lead to loss of soil and crucial soil nutrients which affects agricultural production leading to food insecurity, increased poverty, and may have a significant impact on the quality of life. The majority of Africa’s population are smallholder rain-dependent farmers. Their success depends on actual rainfall (amount and distribution) whose variability is projected to increase due to climate change. As the impact of climate change is felt, the inhabitants’ activities may further exacerbate land degradation through unsustainable agricultural practices. To escape from these adverse impacts requires investment. To this end, climate finance has been offering funds for investments in climate-smart agricultural projects. This has the possibility of enhancing Africa’s adaptive capacity, food security and economic growth. 
This thesis estimates weather-related yield risk in agriculture and the possible use of climate finance instruments for risk weather management. First, the global climate finance landscape was reviewed. This provided an overview of the available financing mechanisms, the sources of climate finance and the overall distribution of the finances across the various regions and sectors. It also highlighted the opportunities and challenges faced by climate finance investments as well as the innovative approaches that have been adopted to tap the available climate risk finance.

Upon establishing the current climate finance landscape and the approaches adopted for climate risk management in agriculture, this study estimated the probable risk in Kenya's agriculture as a result of weather events such as drought. To achieve this, the national annual maize yield data from 1961 to 2014 was utilised. The yield variation was calculated by comparing the actual yield with the average expected yield. First, the average yield for each year was defined as a 5-year running mean of yields for the interval comprising of 2 years before and 2 years after the year under consideration (t-2 to t+2). This was then compared against the actual yield to obtain the yield variation. The results were fitted to a probability distribution and the Value at Risk (VaR) method was used to estimate the agricultural drought risk. The study finds the risk of yield loss due to drought to be high especially for the 50 and 100-year return period which was an estimated loss of approximately 24%. In the 1980s, yield losses of approximately 20% were experienced affecting over half a million people. These results provide information on drought risk and the possible associated losses which could be useful for drought risk management. This information is relevant to financial institutions when pricing financial products for farmers and to the government for estimating the financial resources required to manage the impacts of drought. 
After estimating the agricultural yield risk due to weather changes, the viability of Index Based Weather Derivative as a risk management tool against drought losses for maize farmers in Western Kenya was evaluated. To this end, option contract prices were estimated using the growing period rainfall and a Standardised Precipitation Evapotranspiration Index (SPEI). Burn analysis and the equilibrium pricing models were also used. The study finds that farmers would have benefitted if they had hedged against drought using option contracts. Specifically, at a strike level of 1 and 4, the positive pay-outs would have been in 41 and 18 seasons out of the 108 seasons during the period under study. Further research is recommended regarding the use of market price-based models to price SPEI based weather derivatives.

An analysis of the efficiency of Weather Derivatives (WD) in hedging against drought risk exposure by maize farmers in Kenya was undertaken. A put option with the Standard Precipitation Evapotranspiration Index (SPEI) as the underlying index was assumed to have been bought by the farmers to hedge against income variations due to drought. The study finds that the option contracts do not efficiently hedge against drought risk in Kenya’s agriculture. This is probably because the level of risk in Kenya’s agriculture is higher than that which would be effectively covered by option contracts. It is recommended that further studies should be conducted to establish the factors that may affect the efficiency of option contracts in hedging against drought risk.

Finally, this study evaluated Kenya’s readiness for climate finance. This is based on the premise that the level of a country’s readiness greatly influences the amount of climate finance that it mobilises. It was found that Kenya has instituted legislation and policies aimed at enhancing climate finance readiness. While these have been meticulously and pragmatically formulated, the implementation and effectiveness could not be confirmed. There is a need for measures that enhance data availability which would make it easier to evaluate the performance of the implemented measures.  

As a result of this study, the application of VaR for risk estimation in agricultural production is better understood. Similarly, in terms of financial risk management of weather-related risk in agriculture, the viability of SPEI drought index in pricing option contracts, as well as the efficiency of weather derivatives in hedging drought risks, are better understood. This study offers insights for investors and policymakers who wish to use financial instruments to manage weather risks in agriculture.

year: 2020

title: Spatial and temporal trends of phytoplankton and physiochemical variables in a hypertrophic, monomictic lake

authors: Simmonds, Bernard Michael

subjects: Phytoplankton

abstract: Spatial and temporal variations in the physical, chemical and biological composition of Lake Ōkaro were measured over 16 months. Lake Ōkaro is a small (0.32 km2) hypertrophic, monomictic lake located in the Central Volcanic Zone of the North Island, New Zealand. Vertical profiles of temperature, chlorophyll fluorescence, dissolved oxygen concentration (DO), pH, specific conductance, photosynthetically active radiation (PAR) and nutrient species, including ammonium-nitrogen (NH4-N), nitrite-nitrogen (NO2-N), nitrate-nitrogen (NO3-N) and phosphate-phosphorus (PO4-P), were collected at up to nine stations at weekly to monthly frequencies. High-frequency variability was assessed during two separate 24-hour monitoring periods, coinciding with an Anabaena spiroides-dominated surface bloom, and a Ceratium hirundinella-dominated deep chlorophyll maximum. Additional data for wind direction and velocity, incident solar irradiance and rainfall was sourced from a meteorological weather station and a lake monitoring buoy at Rotorua, 20 km north of the lake. Spatial variability was more pronounced during summer. Observed vertical gradients in chlorophyll fluorescence, DO, specific conductance and nutrient species were closely linked to thermal stability of the water column. There were large variations in chlorophyll fluorescence amongst stations in summer, which related to displacement of the metalimnion and associated changes in chlorophyll fluorescence. Winter mixing was characterised by relative homogeneity of the water column. Nutrient concentrations were elevated at all depths whereas high concentrations had previously been confined to lower depth strata (the hypolimnion). Temperature profiles in summer displayed clear vertical gradients with a well-defined metalimnion that increased in depth until winter mixing generated isothermal conditions. Chlorophyll fluorescence profiles were characterised by the formation of a DCM that was recurrent over both summer periods, and was strongly statistically related to the depth of the thermocline for the duration of stratification. Dissolved oxygen, specific conductance and pH were relatively uniform horizontally, though pH was consistently lower at a well-sheltered near-shore station. All variables showed strong variations with depth during the stratified period. Dissolved oxygen was negligible or zero below the thermocline for much of the stratified period while specific conductance was lowest above or at the thermocline. There were also strong vertical gradients in nutrient concentrations in summer, with concentrations below the thermocline often an order of magnitude higher than those above. The representativeness of fluorescence at a central station to a whole-lake scale was assessed using a vertical integrated value and the standard error derived from up to eight other stations. Values at the single station frequently deviated from the mean fluorescence of the wider lake, particularly at the DCM which suggests that extrapolating single-station measurements to a whole lake could provide highly exaggerated values of lake fluorescence. High-frequency sampling during the A. spiroides-dominated surface bloom showed diel temperature variations attributed mostly to solar irradiance. There was high light attenuation from the high phytoplankton biomass and consistently elevated pH and DO. Fluorescence profiles suggested that the phytoplankton population was strongly buoyant and did not undergo diel vertical migration. High-frequency sampling during a period when there was a dinoflagellate-dominated DCM showed two coinciding fluorescence peaks had formed at 6-7 and 7-8 m depth and contained morphologically and physiologically distinct taxa. The 6-7 m DCM was predominantly Ceratium hirundinella, while the 7-8 m DCM was composed of C. hirundinella and unidentified colonial picoplankton. Fluorescence profiles suggested diel vertical migration was not taking place, and strong gradients in light, nutrient availability and the relative biomass of the dominants suggested that the 6-7 and 7-8 m DCM populations potentially differed in their modes of nutrition, light history and susceptibility to grazing. This research illustrates the degree of spatial variability that can exist in a small, monomictic hypertrophic lake at a given time, and highlights some of the potential limitations of using single-site monitoring stations to represent the physical, chemical and biological conditions of a whole lake. This information may be used to critically evaluate the reliability of phytoplankton biomass estimates that have been derived from spatially-limited sampling methods. This study further illustrates the role that thermal stratification plays in creating vertical gradients in a number of biological and chemical variables, and demonstrates that parallels exist with regard to DCM formation in oligotrophic and hypertrophic lakes, relating to the interplay between light, chlorophyll fluorescence and thermal stratification. Evidence is also provided showing that diel-scale variations in phytoplankton biomass can differ markedly between a cyanobacteria-dominated surface bloom and a dinoflagellate-dominated DCM, which further highlights the value of high-frequency sampling when seeking to estimate phytoplankton biomass using in situ methods.

text: Spatial and temporal trends of phytoplankton and physiochemical variables in a hypertrophic, monomictic lake Spatial and temporal variations in the physical, chemical and biological composition of Lake Ōkaro were measured over 16 months. Lake Ōkaro is a small (0.32 km2) hypertrophic, monomictic lake located in the Central Volcanic Zone of the North Island, New Zealand. Vertical profiles of temperature, chlorophyll fluorescence, dissolved oxygen concentration (DO), pH, specific conductance, photosynthetically active radiation (PAR) and nutrient species, including ammonium-nitrogen (NH4-N), nitrite-nitrogen (NO2-N), nitrate-nitrogen (NO3-N) and phosphate-phosphorus (PO4-P), were collected at up to nine stations at weekly to monthly frequencies. High-frequency variability was assessed during two separate 24-hour monitoring periods, coinciding with an Anabaena spiroides-dominated surface bloom, and a Ceratium hirundinella-dominated deep chlorophyll maximum. Additional data for wind direction and velocity, incident solar irradiance and rainfall was sourced from a meteorological weather station and a lake monitoring buoy at Rotorua, 20 km north of the lake. Spatial variability was more pronounced during summer. Observed vertical gradients in chlorophyll fluorescence, DO, specific conductance and nutrient species were closely linked to thermal stability of the water column. There were large variations in chlorophyll fluorescence amongst stations in summer, which related to displacement of the metalimnion and associated changes in chlorophyll fluorescence. Winter mixing was characterised by relative homogeneity of the water column. Nutrient concentrations were elevated at all depths whereas high concentrations had previously been confined to lower depth strata (the hypolimnion). Temperature profiles in summer displayed clear vertical gradients with a well-defined metalimnion that increased in depth until winter mixing generated isothermal conditions. Chlorophyll fluorescence profiles were characterised by the formation of a DCM that was recurrent over both summer periods, and was strongly statistically related to the depth of the thermocline for the duration of stratification. Dissolved oxygen, specific conductance and pH were relatively uniform horizontally, though pH was consistently lower at a well-sheltered near-shore station. All variables showed strong variations with depth during the stratified period. Dissolved oxygen was negligible or zero below the thermocline for much of the stratified period while specific conductance was lowest above or at the thermocline. There were also strong vertical gradients in nutrient concentrations in summer, with concentrations below the thermocline often an order of magnitude higher than those above. The representativeness of fluorescence at a central station to a whole-lake scale was assessed using a vertical integrated value and the standard error derived from up to eight other stations. Values at the single station frequently deviated from the mean fluorescence of the wider lake, particularly at the DCM which suggests that extrapolating single-station measurements to a whole lake could provide highly exaggerated values of lake fluorescence. High-frequency sampling during the A. spiroides-dominated surface bloom showed diel temperature variations attributed mostly to solar irradiance. There was high light attenuation from the high phytoplankton biomass and consistently elevated pH and DO. Fluorescence profiles suggested that the phytoplankton population was strongly buoyant and did not undergo diel vertical migration. High-frequency sampling during a period when there was a dinoflagellate-dominated DCM showed two coinciding fluorescence peaks had formed at 6-7 and 7-8 m depth and contained morphologically and physiologically distinct taxa. The 6-7 m DCM was predominantly Ceratium hirundinella, while the 7-8 m DCM was composed of C. hirundinella and unidentified colonial picoplankton. Fluorescence profiles suggested diel vertical migration was not taking place, and strong gradients in light, nutrient availability and the relative biomass of the dominants suggested that the 6-7 and 7-8 m DCM populations potentially differed in their modes of nutrition, light history and susceptibility to grazing. This research illustrates the degree of spatial variability that can exist in a small, monomictic hypertrophic lake at a given time, and highlights some of the potential limitations of using single-site monitoring stations to represent the physical, chemical and biological conditions of a whole lake. This information may be used to critically evaluate the reliability of phytoplankton biomass estimates that have been derived from spatially-limited sampling methods. This study further illustrates the role that thermal stratification plays in creating vertical gradients in a number of biological and chemical variables, and demonstrates that parallels exist with regard to DCM formation in oligotrophic and hypertrophic lakes, relating to the interplay between light, chlorophyll fluorescence and thermal stratification. Evidence is also provided showing that diel-scale variations in phytoplankton biomass can differ markedly between a cyanobacteria-dominated surface bloom and a dinoflagellate-dominated DCM, which further highlights the value of high-frequency sampling when seeking to estimate phytoplankton biomass using in situ methods.

year: 2011

title: Experiencing cultural tourism: Visitors at the Maori Arts and Crafts Institute, New Zealand

authors: Ryan, Chris

subjects: indigenous tourism

abstract: This study reports results derived from semistructured interviews with 40 visitors to the Maori Arts and Crafts Institute in Rotorua, New Zealand. The article discusses briefly the mode of data capture used and adopts an approach of identifying classifications of a primarily functional nature to list reasons why people visit such a site and what it is they seek. In general, visitors reported high levels of satisfaction, yet the cultural component of their experience was primarily reported in terms of the visit being informative and entertaining. Additionally, whereas modest levels of interest in things Maori seemed to motivate visits to other Maori sites, the actual list of other locations being nominated was few in number. The impression results that visits are made to Maori sites because this is a "done thing" when visiting New Zealand, but overall, the level of interest shown by most visitors in indigenous culture is modest.

text: Experiencing cultural tourism: Visitors at the Maori Arts and Crafts Institute, New Zealand This study reports results derived from semistructured interviews with 40 visitors to the Maori Arts and Crafts Institute in Rotorua, New Zealand. The article discusses briefly the mode of data capture used and adopts an approach of identifying classifications of a primarily functional nature to list reasons why people visit such a site and what it is they seek. In general, visitors reported high levels of satisfaction, yet the cultural component of their experience was primarily reported in terms of the visit being informative and entertaining. Additionally, whereas modest levels of interest in things Maori seemed to motivate visits to other Maori sites, the actual list of other locations being nominated was few in number. The impression results that visits are made to Maori sites because this is a "done thing" when visiting New Zealand, but overall, the level of interest shown by most visitors in indigenous culture is modest.

year: 2006