Aligning climate change mitigation and agricultural policies in Eastern Europe and Central Asia

# Donald F. Larson, Ariel Dinar and Brian Blankespoor

## **I. Introduction**

Greenhouse gas emissions are primarily determined by how energy is created and used. Necessarily, policies to slow climate change focus on this dominant source. However, discussions centered on the energy sector frame policy tradeoffs in general terms that can obscure differences among sectors and can lead to policy instruments that do not suit significant but less dominant sectors. This is especially true for agriculture where complementary relationships among mitigation activities, agricultural productivity, climate resiliency and resource management are key. Specifically, mitigation activities in the agricultural sector often generate cobenefits of various kinds. Sometimes, the mitigation benefits of the activity dominate and general climate change instruments work well. Often however, large co-benefits are associated with mitigation activities and when this is the case, general climate change instruments by themselves may be insufficient for good policy.

An example of this dichotomous set of policy outcomes is found in the types of projects that emerged from the two Kyoto project investment mechanisms, Joint Implementation (JI) and the Clean Development Mechanism (CDM). As we explore in this paper, the twin mechanisms have proven effective in mobilizing private investment in mitigation activities in general and have worked well for certain types of bio-energy projects in the agricultural sector. In contrast, other mitigation activities, especially those related to how land is used, are poorly suited for the program and largely absent. This matters since there is abundant potential for both types of mitigation projects worldwide and especially in Eastern Europe and Central Asia (ECA).

A related consequence of a climate change policy debate centered on energy has to do with real and perceived tradeoffs. Because changing the way energy is produced and used is costly, economic growth and climate polices are linked as competing objectives, and comparisons of policy instruments are cast in terms of lost growth.<sup>1</sup> This characterization obscures areas where tradeoffs are not stark and can encourage entrenched positions that preclude progress on any front.

While policies designed to tap significant mitigation and adaptation opportunities in agriculture fit uneasily within a general policy framework for climate change, components of a good agricultural policy framework often contribute to mitigation and adaptation objectives, even when such objectives are not a policy priority. For example, promoting institutions that secure land rights can help promote sustainable land management practices and investing in agricultural research can boost land productivity. Both are key components of a sound agricultural policy since they can help improve the livelihoods of the rural poor and help protect valuable core environmental resources. Both also work to boost the sequestration of carbon in soils and forests and help improve the reliance of the agricultural sector to forecasted changes in climate. Still, even when policy makers actively promote these types of actions within agricultural policy, incentives to fully pursue such activities will be of a second-best nature and likely fail to elicit the scale of investment that a full accounting of benefits would bring.

> 1 For example, a recent report, the European Bank for Reconstruction and Development (EBRD 2011, p27) estimates that achieving a goal of 500-550 ppm CO2e would reduce the GDP of ECA economies by about 5.7 percent for the period 2010-2050, compared to a business-as-usual counterfactual. The estimated costs are higher for the transitional economies of ECA at about 8.3 percent for oil-exporters and about 6.2 percent for the non-oil exporters.

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