Climate finance can accelerate transformation towards low-carbon and sustainable livestock value chains, but it misses that opportunity due to a series of barriers.
Large and bankable mitigation options exist, with 30% GHG emissions reduction potential.
Six investment opportunities could channel climate finance towards the sector’s sustainable transformation, resulting in reducing the sector’s GHG emission intensity, raising incomes, and improving animal welfare and food security.
By Pierre Gerber and Tobias Baedeker
The livestock sector and its value chains contribute to about a sixth of greenhouse gas (GHG) emissions globally. This is a problem. The good news is that the sector can also be part of the solution in tackling climate change because adopting already existing best practices could reduce its emissions by 30%.
Climate finance can play a key role and bend the curve of livestock sector emissions, shifting from being a sector that threatens to produce increased emissions and environmental damage, to one that reduces its emissions and makes a larger contribution to sustainable development.
At the recent gathering of the World Bank’s Climate and Livestock Community of Practice, we launched a report on removing obstacles and realizing potential for climate finance in the livestock sector. The discussion identified large and bankable approaches that can lead to multiple wins: lowered GHG emissions, sustained and improved livelihoods, and food security and protection for the natural environment, among others.
Low-carbon livestock aims to unlock the mitigation potential of the sector – by minimizing GHG emissions (i.e. efficient land management), maximizing GHG removals (i.e. extracting manure for fuel) and productivity (i.e. improving animal feed digestibility) – while paying close attention to adaptation outcomes and other sustainability objectives (ending poverty and hunger in particular).
Despite its fairly huge potential for mitigating climate change, currently less than 1% of climate finance goes into the livestock sector. Injecting climate finance will play a crucial role in the transition towards low-carbon livestock. It could also advance the achievement of the Sustainable Development Goals (SDGs), in particular SDGs 1 (no poverty), 2 (zero hunger), 3 (good health and wellbeing), 8 (decent work and economic growth), 10 (reduced inequalities), 12 (responsible consumption and production), 13 (climate action), and 15 (life on land).
Our research has identified four main obstacles restricting the flow of climate finance to the livestock sector in low- and middle-income countries (LMICs):
- Investor perception of low profitability and high risk;
- Difficulty and cost of measuring the economic impact of mitigation;
- Limited technical knowledge about the benefits of mitigation action; and
- Fear that animal productivity will sharply increase total GHG emissions.
Achieving something that was previously considered impossible – reducing GHG emissions while maintaining livelihoods and reducing poverty – is essential for a sector that plays an economic role for 60% of the world’s population and contributes up to half of agricultural GDP. Through early action, public finance can help jumpstart integrating climate in the livestock sector, address market failures, and attract private actors.
Our report also identifies six investment opportunities that can drive the sector’s sustainable transformation. These opportunities need to be taken alongside complementary efforts to rethink the role of livestock products and proteins in sustainable diets, especially where meat consumption is high and where it is increasing.
- Condition credit lines along mitigation actions: Climate finance can define mitigation conditions against which it enables stakeholder access to finance through existing credit institutions by lowering interest rates and providing technical assistance, among others.
- Encourage value chain finance for native ecosystem protection: Climate finance can support the development of righteous value chains as stakeholders adopt sustainable practices linked to robust traceability systems and with the right incentives.
- Drive clean investment through Emissions Trading Schemes (ETS): Climate finance can help obstacles of linking livestock producers to an ETS by aggregating stakeholders to lower transaction costs or by developing a cost-effective Measurement, Reporting and Verification system.
- Reward proactive policy commitments through funding from Overseas Development Assistance (ODA) or International Financial Institutions (IFI): Programmatic ODA or IFI funding can support policy changes and improve the enabling environment for climate action, innovation, and private sector investment.
- Verify sustainable sourcing of livestock feed: Verified Sourcing Area-based climate finance supports the marketing of feed, certifying that feed is sourced from areas which is free from deforestation.
- Innovate in livestock climate finance through prize-based results: Climate finance can accelerate innovation, incentivize research and development, and scale up technologies, pushing the frontier of mitigation potential to a wealth of ideas.
The livestock sector cannot be ignored considering its contributions to global GHG emissions. Climate finance should take advantage of the sector’s mitigation potential, resulting in triple wins of mitigation, adaptation, and productivity gains, and contributing to achieving the SDGs.
The authors of this guest article is Pierre Gerber, Senior Agriculture Economist, Agriculture and Food Global Practice, World Bank Group (firstname.lastname@example.org), and Tobias Baedeker, Agriculture Economist, Agriculture and Food Global Practice, World Bank Group (email@example.com).