We can use nature to protect agriculture from the negative effects of climate, but such solutions come with significant challenges
Agriculture is both a contributor to greenhouse gas emissions and a victim of the consequent climate change. As a result, food security is compromised locally, regionally and globally. Nature-based solutions can protect agriculture from the negative effects of climate change, but we need to understand the challenges in ensuring these projects have sustainable investment potential.
Nature-based solutions offer a promising way to transform the way we think about the natural world, land use and agriculture. They deliver climate benefits alongside broader sustainable development outcomes and societal benefits. One of these is future-proofed resilience. This might take the form of more drought-resistant agriculture, or soils which absorb flooding and prevent damage to people, land and infrastructure.
Resilience manifests in a complex web of mutually dependent human and natural systems, contextualised by the UN Sustainable Development Goals. Nature-based solutions not only benefit the goal of “climate action,” but also those of “zero hunger,” “clean water and sanitation,” “responsible consumption and production,” “life below water” and “life on land”
Such initiatives require funding, which can return a profit in the form of carbon credits for sale on voluntary carbon markets, and this is a legitimate revenue stream. However, nature-based solutions with a carbon-only focus risk failing to deliver wider societal benefits, with consequent reputational risks to investors.
Nature-based solutions can look attractive until we factor in the opportunity cost of the available land, the consequent impact on food prices and increased risk to food security, and the upfront and longer-term costs. Other barriers include inappropriate financing options, entrenched cultures, and risk aversion. So, when testing nature-based solutions for investment value, a much smaller sustainable potential emerges.
In looking at why nature-based solutions are not more widely implemented, it’s clear the cost components of such projects are often not covered by the returns from the voluntary carbon markets. The disparity becomes even greater when we consider those projects that constitute high-quality, nature-based solutions and truly deliver wider societal benefits.
Our work focused on Brazil-based examples for ease of comparison, although the findings are equally applicable to other developing countries, particularly in the tropics. Brazil is home to the largest rainforest in the world and is a global agricultural powerhouse, making it a natural candidate for nature-based solutions. We looked at three types of solution that reduce carbon emissions and therefore offer revenue from carbon credits: avoiding deforestation, afforestation and regenerative agriculture.
REDD+ projects (reducing emissions from deforestation and forest degradation) provide incentives to curb deforestation, a chronic challenge in Brazil. However, opportunity costs alone can reduce the investible potential by almost half and are hugely affected by fluctuating agricultural commodity prices. For example, if a specific crop like soybeans offers profits above the value of carbon credits resulting from leaving forested areas untouched, it can jeopardise the investment potential of such projects.
Afforestation (forest restoration) projects require careful planning and continued maintenance to ensure they reach maturity. The most effective method – planting seedlings or saplings – is also the most expensive. Nature-based solution projects tend to have short lifetimes, typically less than five years, but the benefits of forest regeneration can take over 50 years to accrue, making the long-term maintenance costs potentially unattractive to investors.
Regenerative agriculture has been attracting considerable interest and includes many types of activities. In Brazil, integrated crop-livestock forestry systems have numerous demonstrated advantages over monoculture crop or livestock practices but are not economically feasible for small farms that don’t enjoy the advantages of economies of scale. High initial investments can be compensated by the sale of diverse products and the selling of carbon credits, alongside provision of environmental benefits such as carbon sequestration, water security and animal welfare.
It’s clear nature-based solutions offer enormous potential but come with equally significant challenges. There is latent potential in the voluntary carbon market, but investors will need to do their own due diligence to ensure these projects have truly sustainable investible potential. This may cost more upfront but will ensure maximum potential return and have the longer-term benefit of driving up quality in the nature-based solutions market, which will in turn create more potential for investment.
As carbon markets scale, the voluntary carbon market will also need clear and robust standards that recognise the broader societal benefits of nature-based solutions – such as clean water and resilient land – addressing the disjoint between what is possible and desirable, and what is realistic and implementable. Private investors arguably have a responsibility here to drive the value of the market for nature-based solutions and create a more resilient and sustainable approach to land use.
This article draws on findings from "Future of Food Part 2: Nature-Based Solutions and the Quest for Low-Carbon and Climate-Resilient Agriculture" by Alexandre C Köberle, Pernille Holtedahl, Mandeep Singh, Gireesh Shrimali (Imperial College London).