Agriculture and the Clean Development Mechanism

Many experts believe that low-cost
mitigation opportunities in agriculture are abundant and
comparable in scale to those found in the energy sector.
They are mostly located in developing countries and have to
do with how land is used. By investing in projects under the
Clean Development Mechanism (CDM), countries can tap these
opportunities to meet their own Kyoto Protocol obligations.
The CDM has been successful in financing some types of
agricultural projects, including projects that capture
methane or use agricultural by-products as an energy source.
But agricultural land-use projects are scarce under the CDM.
This represents a missed opportunity to promote sustainable
rural development since land-use projects that sequester
carbon in soils can help reverse declining soil fertility, a
root cause of stagnant agricultural productivity. This paper
reviews the process leading to current CDM implementation
rules and describes how the rules, in combination with
challenging features of land-use projects, raise transaction
costs and lower demand for land-use credits. Procedures by
which developed countries assess their own mitigation
performance are discussed as a way of redressing current
constraints on CDM investments. Nevertheless, even with
improvements to the CDM, an under-investment in agricultural
land-use projects is likely, since there are hurdles to
capturing associated ancillary benefits privately.
Alternative approaches outside the CDM are discussed,
including those that build on recent decisions taken by
governments in Copenhagen and Cancun.