The dairy sector will soon be able to participate in international carbon credit markets thanks to a new methodology that lets farmers and project designers reliably document how they are reducing harmful greenhouse gas emissions - a step that will open up new sources of finance for the livestock industry and help promote investment in smallholder operations.

FAO's new Smallholder dairy methodology, tackles two major challenges facing agriculture today: the need to make agriculture more productive by increasing yields, while at the same time cutting agriculture's carbon footprint. By opening up new sources of finance, the methodology addresses the critical question of how to finance the necessary transition to a greener livestock sector.

The new methodology, developed by FAO and partners, for the first time clearly identifies areas within dairy production where greenhouse emissions can be curbed --  for example, by changing feed composition or feeding practices, or improving the energy efficiency of equipment -- and explains how those reductions can be measured and reported.

Importantly, it has been certified by Gold Standard, an independent body that evaluates climate projects under the UN's Clean Development Mechanism and ensures they deliver genuine emission reductions.

This certification is key to allowing smallholder dairy operations to receive internationally-accepted carbon credits in exchange for emission reductions. These can be sold on carbon markets - a potential revenue stream that creates a financial incentive for the dairy industry to go greener and opens new opportunities for small-scale producers to access investment funding for their farms.

"Investing in ways to make smallholder dairy systems more productive is an efficient way to simultaneously reduce greenhouse gas emissions and ensure food security," said Henning Steinfeld, Chief of FAO's Livestock Information, Sector Analysis and Policy Branch. "This methodology will help to channel finance to projects that have real impacts on the livelihoods of millions of smallholder dairy farmers," he adds.

He estimated that milk production will have to grow by 144 million tonnes by 2025 to meet rising demands.

Strategic changes in housing and feeding animals, in managing their manure and selecting breeds that produce more milk with equal inputs, hold the key to meeting those demands with the least possible environmental damage.

Why it's a game-changer

Under current carbon credit schemes, project developers -- such as governments, businesses and NGOs -- can apply for permits that allow their projects to emit a certain amount of greenhouse gasses, such as carbon dioxide or methane. If a project manages to emit fewer gasses than the full allowance it received, developers can trade the remaining "carbon credits" on the open market - meaning there is a financial incentive for project developers to adopt environmentally friendly technologies and management practices.

But until now, climate finance - and carbon markets in particular -- were closed to the livestock sector, partly because there was no methodology for calculating credits and certifying emission cuts. The new tool now sets a global standard that fills that gap.

Enhancing Kenya's dairy sector

In Kenya, which served as developing ground for the new tool, the methodology is already part of the country's effort to sustainably intensify its dairy industry under the country's climate action plan.

Because Kenya's livestock sector is dominated by smallholder farmers who have limited access to productivity-enhancing technologies, productivity in dairy has been low and emissions per unit of milk high. This means there is great opportunity to make Kenya's dairy sector more productive and environmentally friendly by introducing new technologies and resource management practices.

With the new tool the Kenyan government is able to track, quantify and certify that its interventions indeed result in lower emission intensity - in other words, fewer greenhouses gasses per unit of milk. This is essential for involving the dairy sector in the country's international climate commitments and has allowed Kenya to extend its Nationally Appropriate Mitigation Action to the dairy sector.

There are additional benefits, beyond emissions reductions as well. For smallholder dairy farmers - some 750 million around the world-changes at the farm level that increase milk yield also bring stronger food security and more income. Increased investment in agriculture also tends to drive development of rural areas at large.

Emissions

Greenhouse gas emissions from milk production vary greatly across the world.  Some countries have production systems that emit as little as 1.7 kg of carbon dioxide equivalent per kilogram of milk (CO2e/kg) while in others it can be five times as high, reaching up to 9 kg of carbon dioxide equivalent for each kilogram of milk. But these large variations don't just show in comparisons between countries - they can also be very evident within countries. As a case in point, Kenya's average emissions from milk are 3.7 CO2e/kg -- compared to the global average of 2.8- but emissions range 3 to 8 CO2e/kg depending on the farm. This underscores the significant impacts different production methods can have on carbon emissions and the potential for climate mitigation.  

A great deal of attention will be dedicated at the upcoming UN Climate Change Conference in Marrakech (COP22) to  finding innovative ways to fund climate adaptation and mitigation work and make good on the commitments made under the Paris Climate Treaty, making this new tool particularly relevant.

The new methodology was developed by FAO in partnership with the International Livestock Research Institute the State Department of Livestock in Kenya, Unique Forestry and Land Use, and Climate Check Corporation.