Economics and Policy Innovations for Climate-Smart Agriculture

Early lessons from the field

Developing a Climate-Smart Agriculture strategy at country level

Building on recent experience in Malawi, Viet Nam and Zambia, FAO has identified five key building blocks for developing an effective Climate-Smart agricultural strategy in the context of a changing climate : 

Assess the situation
Assess the potential food security, adaptation and mitigation benefits in order to identify and prioritize Climate-Smart Agriculture (CSA) practices for a specific context. Comparison of the relative benefits and costs of the CSA strategy with a baseline conventional growth strategy is then needed. Such an analysis will reveal adaptation and mitigation benefits that can be considered “additional” and potentially qualify for climate change finance. It will also indicate the additional costs of implementing a CSA strategy. 

Understand barriers to adoption 
A number of barriers might prevent farmers from adopting CSA practices. They can be institutional barriers, financial bottlenecks, or lack of access to input or output markets. Understanding the nature of these barriers and how they can be addressed is crucial to making informed decisions on policies and investments. 

Build coherent policies
CSA strategies have a greater likelihood of adoption if they are in line with existing national development priorities and if agricultural producers clearly see benefits from their uptake. Policy-makers have access to a number of tools and instruments to incentivize the adoption of CSA. However, only a limited set of policy levers will be appropriate and feasible for a specific country. Identifying the best policy levers can be done by developing options for feasible and coordinated policy interventions to address identified barriers, followed by an assessment of their effectiveness through a process of stakeholder consultation and rigorous evidence-based analyses (econometric, simulation and cost-benefit analyses). 

Manage climate risk
Managing risks associated with climate change represents a key challenge for farmers. In designing a CSA strategy it will be crucial to get a better understanding of the risk profile of potentially relevant CSA practices and designing policy tools to reduce the climate risk faced by farmers without reducing farmers’ incentives to adapt to climate change. This can be done by better understanding how to address vulnerability and managing climate risk, analyzing the risk profile of potentially relevant CSA practices, looking at how safety nets (including weather-index insurance) interact with autonomous adaptation by households and providing timely and relevant information. 

Guide investment
CSA strategies can lead to the identification of investment options in terms of costs and benefits, which may involve blending of climate and agricultural investment finance. In this regard, recent experience shows that investments are likely to be more effective if guided by cost-benefit analysis, a better understanding of the barriers to adoption, and risk management considerations. These different components should all feed both into investment proposals and policy.

Download the full publication.