How Carbon Markets Can Help Avert a Chocolate Shortage
How Carbon Markets Can Help Avert a Chocolate Shortage
[Editor's note: This article originally appeared at Ecosystem Marketplace and is reprinted with permission.]
Can carbon save cocoa? That, some say, is the million-dollar question -- or, more accurately, the US$2.2 billion question, since industry insiders estimate that's the value of carbon stored in Ghana's cocoa landscapes.
That value could play an important role in ensuring the long-term survival of the nation's cocoa industry, which faces existential threats in the wake of depleted soil fertility, reduced water supplies, and various diseases worldwide. Already Brazil, once the second-leading cocoa producer in the world, has seen its cash cow fall victim to a massive fungal disease. Now, instead of making money from cocoa, Brazil pays to import it.
Meanwhile Ghana -- which is second only to Côte d'Ivoire in world cocoa production -- has experienced a decades-long decline in cocoa yield per acre farmed, spurring farmers to abandon the livelihood that supported their families for generations. That decline and the accompanying flight from farming have been in remission for three years -- thanks largely to the current high price of cocoa -- but current agricultural techniques are unsustainable over the long haul.
Two-thirds of Ghana's stored carbon lies in its high-forest region. The country has already lost most of this, seeing it shrink from 8.2 million hectares in 1900 to less than 1.2 million hectares today.
The Cocoa Conundrum and the Sun Curse
Cocoa has always been rough on land. Under the best of circumstances, the cacao trees from which cocoa is harvested suck nutrients out of the soil at rates that require massive infusions of chemical fertilizer, which only 3 percent of cocoa famers use, and also require heavy doses of insecticides, which are also not in wide use.
Traditional cocoa-farming techniques recommend leaving much of the standing forest intact, because traditional strains of cacao tree grow best in filtered sunlight. Over time, hybrid varieties have improved yields, beginning with strains that can be harvested twice per year instead of once. Newer plantations, however, are shifting to even newer hybrid trees that tolerate more direct sunlight. This makes it possible for farmers to chop down larger shade trees and plant more cacao trees, an apparent improvement over traditional farming because it, like earlier hybrids, offers higher yields.
Unfortunately, sun-free or low-shade systems suck even more nutrients out of the soil than do the already ravenous multi-harvest varieties. They also encourage some pests and, more importantly for the world at large, rob the planet of both carbon-sequestering trees and of valuable habitat for various species of rare animals and plants by encouraging the destruction of natural shade trees that store carbon and provide shelter.
As a result, these newer plantations are often abandoned within a few decades and replaced with newly deforested land, says Michael Richards, a natural resources economist with Forest Trends, publisher of the Ecosystem Marketplace. Cocoa farmers often then extend their farms or move into other forested areas, bringing deforestation with them and releasing more carbon into the atmosphere.
Most Ghanaian farmers still use the shaded variety of cacao tree, but the hybrids are taking hold, especially in the Western part of the country, and the global atmosphere is paying the price. Long-term, farmers are paying a price as well.
Soil fertility has shrunk noticeably; the newer hybrid-cocoa trees' lifespan is growing shorter, and farmers are struggling to survive. Climate change and unsustainable farming techniques have decreased the amount of land supporting cocoa crops by 40 percent in the past four decades alone, reports the Ghanaian Nature Conservation Research Center, the leading conservation NGO in West Africa -- although that amount has been increasing in recent years as cocoa prices rise.
Some experts believe that if nothing is done, Ghana's cocoa sector could go the way of Brazil's.
"The world is focusing on whether Kraft is going to buy Cadbury and how much it'll pay for it, but it may not be a great long-term investment, if we run out of cocoa in 30 years," says John Mason, executive director of the Nature Conservation Research Centre (NCRC).
Preliminary research by the University of Reading in the U.K. suggests that traditional shaded-cocoa farms store more than twice as much carbon as shade-free farms. Farmers could be persuaded to increase their tree canopy and decrease their cocoa yield if carbon trading makes it worth their while.
Re-Thinking the Process
Scores of environmental NGOs have called for a moratorium on new sun cocoa plantations and a return to shade-cocoa. Many believe that carbon offsets for projects that reduce greenhouse gas emissions from deforestation and forest degradation (REDD) can make it worthwhile for farmers to return to shade-growing, but Michael Packer, managing director of ArborCarb Ltd., says simply reviving the shaded growth method will not be enough.
"Traditional cocoa is problematic, too, in the way it has been produced," he says. "After all, that led to the deforestation that exhausted soil, which lead to the requirement for hybrids."
The solution, he adds, is to manage cocoa plantations differently.
"We need to work with the ecosystem to manage soil nutrient content, biodiversity, and associated ecosystem services, including carbon sequestration and disease control," he says.
Pioneering Cocoa Carbon
This sparked a push to create the world's first-ever cocoa carbon initiative and, not surprisingly, its Petri dish is Ghana.
Forest Trends, NCRC, and the Katoomba Group, the international network promoting ecosystem service markets and co-publisher of the Ecosystem Marketplace, are spearheading a three-part carbon-offset pilot project under the Forest Trends Incubator program, which has already initiated community-based projects across Latin America.
If the program overcomes funding and logistical hurdles, it could start as early as mid-2010, insiders say.
Who Are the Farmers?
Most cocoa farmers are share croppers, but many also live on gifted land or land they have purchased. Regardless of the ownership structure, the project plans to measure whether farm owners who preserve or enhance the carbon-storing forest canopy of their farms can compensate for their decreased cocoa production with the sale of carbon-offset credits -- and how this compensation can be spread among land-owners who lease their land to share-croppers and land-owners who farm their own land.
This could answer the US$2.2 billion question, if policymakers can navigate several complex hurdles. Chief among them is land tenure.
The Tenure Quandary
The Katoomba Group recently invited key participants from a range of stakeholder groups, including various government departments, to a REDD Opportunities Scoping Exercise that identified tree tenure as a major constraint for REDD.
Tree tenure laws in Ghana, for example, discourage farmers from keeping timber trees because the state owns all naturally occurring trees, while planted trees belong to the person who plants them. Farmers, therefore, are only permitted to fell timber trees for household use, but not for income. Only timber groups with government concessions can fell naturally occurring trees for money, leaving cocoa farmers no economic or financial interest in preserving trees growing on the land they either own or work.
Adding to the complexity: Many cocoa farms are located within the 'off-reserve' areas of timber concession zones. This means that a logger with a concession can harvest the farm's trees, although the logger does have to let the farmer know he's harvesting them, and technically he has to compensate the farmer for the felled timber trees and any damage to cacao trees from machinery. Unfortunately, there are no standards of compensation, and disputes are quite common.
To avoid the hassle -- and the risk of damage -- cocoa farmers often select smaller shade trees in preference to timber shade trees. They have also been known to destroy timber saplings and even ring-bark mature timber trees. Those who keep the trees often sell them clandestinely to chainsaw operators who cause minimum damage to cocoa.
The Katoomba Scoping Exercise concluded that the best chance for sustainable shade-tree cocoa farming, as well as other tree-based systems, would be the extension of what are known as Community Resource Management Areas (CREMAs) in which communities can hold greater rights to the natural resources on their land, including trees.
NCRC is working with a few pilot CREMAs, but there are currently only a handful in the country, and the government has not adopted a policy of promoting them. Local NGOs argue this must change as part of a national REDD program.
The Importance of Education
A public-private partnership named the Sustainable Tree Crops Program (STCP) kicked off in 2000 to introduce sustainable innovations such as integrated pest management and reduced chemical use to enhance cocoa productivity.
Farmers graduating from the program's "farmer field school" have seen their incomes improve by 15-50 percent, says Bill Guyton, president of the World Cocoa Foundation that supports the partnership and represents nearly 70 chocolate companies worldwide.
So far, however, only a small percentage of cocoa farmers participate in the field school, and Guyton says he's anxious to explore the use of carbon credits to augment farmer income and industry sustainability.
Credits could be generated through four types of transactions activities under the REDD banner or as afforestation/reforestation projects under the Kyoto Protocol's Clean Development Mechanism, or in the voluntary carbon market.
Compensation for Limitation
REDD-wise, cocoa growers could be compensated for not encroaching on forest reserves or deforesting to extend their plantations. On farms, they could get credits for maintaining shade cover and not promoting full-sun exposure. As for reforestation, farmers would be rewarded for reverting from a full-sun system to shaded cocoa to planting trees and encouraging regeneration. They could also get credits for rehabilitating abandoned plantations and not letting them turn into low-productivity agricultural land or bush, which have low carbon-storage capacity.
"It is a potential win-win situation for everyone," says Richards. "It promotes biodiversity and environmental sustainability, would ensure supply sustainability for the big cocoa buyers, and it could improve the livelihoods of thousands of small farmers."
Potential vs. Practice
Potential is one thing. Practice is another.
"We're all convinced that this area has real potential," says Ken Norris, a researcher from the University of Reading and lead scientist for the pilot projects. "The problem is there are a whole lot of practical issues to overcome to make it work."
For instance, because verification of carbon offsets is expensive, CO2 contracts typically apply to land sizes ranging from 3,000-5,000 hectares. But the average cocoa farm in Ghana is only two to three hectares. Each contract, then, would require approximately 2,000 farmers to federate.
And carbon rights are not established in law yet, although many are going on the assumption that they will follow the timber rights outlined above, namely, that standing trees will fall under the jurisdiction of the Forestry Commission, while planted trees, and their largesse, will be owned by whoever plants them.
"This is a major organizational democracy initiative about benefit-sharing," says Mason. "We're trying to work out the best way of doing it, perhaps through existing community groups or organizations."
And, of course, there is the issue of funding. Norris estimated the project cost at US$5.5 million and believes potential funding organizations will wait until after funding issues are resolved at the year-end Copenhagen Climate Conference before they decide how much they will contribute.
Cocoa carbon credits are not expected to flow for at least another two or three years, yet Mason says he is optimistic; he already has potential buyers.
"The cocoa industry is prepared to buy our credits as soon as we're able to bring them to market," he says, adding that he's been working with the cocoa industry over the last three years, and his message is sinking in.
"It's gone from ignorance and skepticism to the realization that a major shortage of cocoa beans is looming."
But, he says, he is concerned about what's been done to mitigate the crisis so far.
"All the big manufacturers are competing against each other when this is a time for a major concerted effort."
The Ghana Cocoa-Carbon Initiative and pilot projects under the Forest Trends/NCRC/Katoomba Incubator-effort could answer these concerns. The initiative already raised US$1.5 million from international donors such as the Rockefeller Foundation and NGOs such as the Rainforest Alliance.
Winning Industry Support
Mason also asked the cocoa industry to chip in. He recently presented the initiative at the launch of a new not-for-profit organization called Source Trust. Set up by Armajaro, a leading cocoa supplier whose clients include Cadbury, Nestlé, and Kraft, amongst others, Source Trust certifies and promotes sustainable cocoa-farming practices in local communities.
It already raised US$1 million to pay for education and water projects that promote sustainable farming, as well as bed nets that reduce malaria. Chocolate manufacturers pay Armajaro a premium of US$30 per ton in exchange for a traceable and sustainable cocoa supply.
"As an industry, our interest is to ensure that farmers have good yields over the long term, not just in the next couple of years," says Nicko Debenham, head of traceability and sustainability at Armajaro and a spokesperson for Source Trust.
Encouraging farmers to leave 40 percent shade cover on their farm would serve that purpose. Debenham says Source Trust will assess its stakeholders' interest in providing the US$4 million Mason requested for the cocoa carbon initiative. The carbon pilot project could also piggyback on Source Trust's certification program as the administrative platform for carbon payments.
Cocoa Carbon Projects
Once funded, the project plans to learn more about carbon sequestration in varied landscapes, Norris says. Three pilot sites will be chosen, one in western, one in central and one in eastern Ghana. Two of the incubator's projects will be dedicated to carbon and cocoa.
Their objective is threefold. They will undertake detailed scientific work to build a robust case for future contracts between farmers and carbon credit buyers. They will establish methodologies and structures to take the credits to market. And they will federate farmers into groups or cooperatives that will work under a single contract to spread the impact of transaction costs.
Outside the Box
It will take years before cocoa-industry stakeholders can answer the US$2.2 billion question. But the final answer could transform not only the cocoa industry and carbon trading, but farming as we know it.
"Instead of thinking about producing food to the detriment of the environment," Norris says, "we could produce food to preserve the environment."
Image CC licensed by Flickr user wildxplorer.