Insetting: State of PlayResearch findings

Charlie Henderson

Full name: ‘An evaluation of the potential of Carbon Insetting to protect coffee supply chains and provide ecosystem benefits’

Why Coffee?

• Coffee is often cited as the world’s second most traded commodity (after oil)

• Export value of US$ 33bn in 2012

• Provides livelihoods for 20-25 million farming families & employs 100 million in production activities

• Global demand is rising by 2-3% pa and 40% pa in China

Refs: Potts, J et al, 2014; ED&F Man, 2013; Frisby, 2013

Why Coffee? • Coffee is very sensitive to temperature and

grows only within limited altitude bands and specific rainfall patterns – ‘Canary Commodity’

• Yields are highly affected by fluctuations outside the normal ranges

• Climate change is already reported to be affecting yields in Ethiopia, Peru, Brazil

• It is projected that between 66% and 100% of Ethiopian growing areas will be unviable by 2080 (depending on emissions scenario)

Refs: Davis, 2012; Haggar and Schep, 2012; Ramirez-Vallegas et al, 2012

Why Insetting? • Coffee naturally occurs under shade and

production systems use it to varying extents

• Shade trees offer a way to adapt to weather fluctuations, can improve quality - and mitigate GHGs too (but can have negative impacts)

• Many coffee producers have close links with their smallholders, and encourage shade tree management and planting

• Insetting could offer them a mechanism to strengthen these relationships and activities

• Insetting is new and un-explored and hence an ideal candidate for (academic) research

Refs: Vaast, 2006; Soto-Pinto, 2000; Beer, 1998; Bosselmann, 2009

Research Themes

1. To what extent is climate change adaptation a priority of the coffee industry?

Research Themes

1. To what extent is climate change adaptation a priority of the coffee industry?

2. How important is shade tree management by smallholders to the coffee industry?

Research Themes

1. To what extent is climate change adaptation a priority of the coffee industry?

2. How important is shade tree management by smallholders to the coffee industry?

3. To what extent is carbon insetting viewed as a priority measure for supply chain sustainability and what is preventing its uptake?

Research Method• ‘Multi-dimensional’ approach i.e. speaking to

those involved along the supply chain

• Coffee producers• Coffee ‘sellers’ (exporters, importers, traders,

roasters, retailers)• Carbon offset retailers• Expert organisations

• Chosen via a combination of random and selective sampling from recommendation, interest groups, snowball sampling, events

• Surveys (by audience) and personal interviews

Summary of Results Themes1. Responses

Context2. Respondent classification: a. certification; b. priorities; c.

promotion; d. offset types

3. Climate change impacts

4. Protecting coffee – current activities inc. shade trees

5. Working with smallholders

Insetting6. Numbers practicing and expressing interest

7. Perceived benefits

8. Costs for insetting

9. Suitability of carbon standards

10. Satisfaction with insetting

11. Opinions on unavoidable challenges and problems

Responses

• 40 responses to survey• 48% anonymous• + eight interviews

Context - classificationProportion of respondents signed up to certification standards (multiple responses allowed)

Question respondents: ten coffee producers and sellers

Stated importance of management themes of selected respondent expert organisations

Question respondents: 24 ‘other’ organisations

Promotional and publicity activities of coffee producers and sellers

Question respondents: nine coffee producers and sellers

Context – climate change impacts

Number of respondent producers and sellers who reported climate change is currently affecting their supply chains

Question respondents: 12 coffee producers and sellers

“Late rains in El Salvador resulted in a lower crop and exacerbated the spread of leaf rust…lack of rain in Brazil has decreased the country’s overall production”

“There have been changes in growing conditions. May is usually dry. This is changing. Last year there was heavy rain” (Ethiopia)

“flowering of crops seasonality” (general)

Context – protecting coffee

• All (nine) respondents confirmed they are protecting coffee against climate change

“Education, technical assistance”

“Gradual implementation of Rainforest Alliance certification”

“Helping farmers to intensify and diversify shade”

• 12 (of 13) reported they or their partners actively avoid cutting and plant shade trees

• Reasons include coffee quality, supply chain resilience, social improvement, GHG mitigation

“Inga tree species which provide ecosystem and agronomic services for the farmers (N fixing, leaf litter, micro-climate, protection against hard rains, protection against dry conditions in longer dry season”

Context –smallholdersReported closeness of working relationships that respondents have with their smallholder suppliers

Question respondents: 11 coffee producers and sellers

Number of years that respondents have worked with smallholder suppliers

Question respondents: 11 coffee producers and sellers

Respondent opinions on the benefits of having a close working relationship with smallholders

Question respondents: 11 coffee producers and sellers

Insetting

Practitioners of InsettingRespondent coffee producers and sellers who have an interest in, or practice insetting

Question respondents: 12 coffee producers and sellers

Respondent expert organisations whose stakeholders have expressed interest in, or practice insetting

Question respondents: 24 expert organisations

• Four carbon offset retailers (of four respondents) have developed or sold carbon inset products

• One retailer has 7-8 clients who are considering Insetting, and three have 1-3 clients considering it

• Of the 19 not currently Insetting, 5 are ‘considering’ it

Benefits of Insetting

• Similar results for expert organisations

• Carbon retailer clients also reported ‘CSR and marketing’ and ‘social improvements’

Respondent coffee producers and sellers’ opinions on the benefits of insetting

Question respondents: five coffee producers and sellers (who have been involved in, or whose stakeholders expressed interest in insetting)

“Strengthens our relationship with suppliers and helps address long-term supply chain risks”

“Considered as part of good coffee cultivation practice”

“Helps business engage on climate change – drives agenda”

“Improves transparency in the value chain”

“Consumers want stories”

Costs of Insetting

Coffee producers / project developers:“Mexico: $11.5 t/CO2; 6.23c per tin of coffee”

“Project design, several thousands of dollars for preliminary studies”

“Opportunity cost: how much benefit you will obtain with insetting rather than without”

“No data available, but costs probably outweighed by benefits, at least longer term (we consider this a long term investment in resilient coffee supply)”

“Challenging question. It is very project/site specific”

Carbon offset retailers:

• one replied US$11+/tCO2e, two replied US$7-9/tCO2e“Higher, since harder to find a good project with such specific requirements”

“Same price”

Standards for Insetting

• There was no clear consensus on a suitable carbon standard for insetting: stated preferences were CCB, Plan Vivo, GS and VCS

• Rainforest Alliance (80%), Fairtrade (60%), Flo-Cert (50%) and Other (organic, UTZ and Cam(Bio), 30%) certification standards were believed to be driving forward the insetting agenda (multiple responses given)

“All standards work towards more sustainable coffee production”

Satisfaction and challenges of Insetting The level of satisfaction with their carbon inset project, expressed by respondents

Question respondents: 12 coffee producers, sellers and other organisations (who have been involved in, or whose stakeholders expressed interest in insetting)

Coffee producers

“Scale and Costs”

“They can be resolved with practical experience and more buyers taking the initial risk”

Coffee sellers

“Land ownership, cost of standard implementation and administration of scheme”

“…the audit…could be more effectively included in existing audit and producer QMS systems”

Carbon retailers

“One has to have a very good partner e.g. for coffee marketing”

“very close to an emission reduction, which is something people expect…”

Experts

“…to ensure higher uptake amongst mainstream buyers” “…collaboration”

“…market too volatile” “too complex for smallholders to participate”

Conclusions• A useful snapshot of a wide representation

of views in the coffee, development and carbon industries

• Respondents shared a common interest in social and sustainability aspects (due to self-selecting sample?)

• Very strong concern and experience of climate change, consistent with projections

• Agronomic and other close farmer support is common

• Use of shade trees is ubiquitous

Conclusions• Insetting is being practiced by a small (20) but

growing number of businesses

• Benefits include protection of coffee supply chains, mitigation of GHGs, strengthen supplier relationships

• Eight common challenges:

• Demand: i. finding buyers• Design: ii. smallholder buy in; iii. land tenure; iv. scale of

planting• Management: v. team skills; vi. financial hurdles at set-up• Technical: vii. MRV• Information: viii. Lack of understanding / awareness