Adaptive Policymaking for Agriculture, Water Resources and Climate Change

1. Adaptive Policymakingfor Agriculture, Water Resources and Climate Change Designing Policies that can Adapt to a World of Uncertainty, Change and Surprise COP 11, Montreal 9 December 2005

2. Why Study Adaptive Polices?

3. The world’s poor are most heavily dependant on agro-ecological services, and most vulnerable to deteriorating environmental conditions, worsened but not necessarily created by climate change [IPCC, 2001]. Key point: critical impacts and vulnerabilities are in agriculture and water resources

4. The details are, however, unknowable: global and regional perspectives

5. The Need: recent IDRC research [Moench et al, 2003] • “When situations are characterized by variability, uncertainty and change, conventional planning scenarios provide little guidance regarding future needs and conditions.” • “Specific solutions are less important than the existence of processes and frameworks that enable solutions to be identified and implemented as specific constraints and contexts change.” Civil aviation policy of Netherlands: expansion of Schiphol airport “If we were able to predict the future accurately, preferred policies could be identified in principle by simply examining the future that would follow from the implementation of each possible policy.”

6. Project Research Premise • the adaptive capacity and resilience of communities is a critical aspect in the transition to sustainable development… • and one of the important factors in building adaptive and resilient communities is for the public policies, which influence the behaviour of communities, to themselves be adaptive and resilient to uncertainty, change and surprise. Research Hypothesis Policies and instruments that are adaptive have specific characteristics and mechanisms that make them adaptive These characteristics and mechanisms are poorly understood at both a practical and theoretical level.

7. Project Goal • To advance the understanding of adaptive policies and policy instruments to help government agriculture and water resource policymakers at the local, state and federal levels to design adaptive policies – policies that have the following characteristics: • Robustness - the ability to be effective under a range of anticipated conditions. • Adaptability - the ability of a policy instrument to respond well to unanticipated circumstances and longer-term change. • Adapted from Walker, W.E., S.A. Rahman, and J. Cave 2001. Adaptive policies, policy analysis, and policy-making. European Journal of Operational Research 128: 282-289.

8. Our Current Conceptual ThinkingRules and Delivery Policy Implementation Policy Design Objective Setting Operation Instrument Rules Instrument Delivery Monitoring & Evaluation Staff Training Delivery System Development Instrument Design Understanding the Issue Monitoring, Evaluation & Improvement Learning & Improvement Idealized illustration of policy design and implementation

9. Adaptability Via Monitoring, Learning and Improvement Others’ actions Unforeseen events Changing preferences Stage Setting Walker et al. (2001) Assembling a Basic Policy Reassessment Certain Mitigating actions Vulnerabilities Triggers Corrective actions Hedging actions Uncertain Defensive actions Signposts from Walker, W.E., S.A. Rahman, and J. Cave 2001. Adaptive policies, policy analysis, and policy-making. European Journal of Operational Research 128: 282-289.

10. Adaptability Via Defining CharacteristicsExamples: • Ensure that social capital remains intact (Ruitenbeek and Cartier 2001). • Create opportunity for self-organisation and build networks of reciprocal interaction that foster trust and cooperation (Berkes et al. 2003; Glouberman et al. 2003; Axelrod and Cohen 2000) • Promote variation and redundancy (Berkes et al.; Glouberman et al.) • Combine experiential and experimental knowledge (Berkes et al.)

11. Insights from Case Study Research – Canada’s Crow Rate War Measures Act Suspends Crow Rates Crow Rates Restored for Grain and Flour Western Grain Transportation Act terminated Manitoba Government Requests Change: Crow Rtes put into Railway Act as “statutory grain rates” Crow Rates terminated and replaced with Western Grain Transportation Act Crow Rates extended to westbound export grain shipped to west coast Temporary maximum freight rate period ends All producer payments completed Crow’s Nest Pass Act Crow Rates extended to rapeseed and flaxseed. 1897 1903 1919 1922 1925 1927 1946 1961 2001 1984 1996 Period of revenue loss for railways sparks a chain of studies to understand the issue Lower than anticipated inflation since Inflationary period due to pressures of First World War War time price controls lifted Substantial drop in grain prices Sources: Excerpts from Rothstein (1989); Earl (1996); Schmitz et al. 2002)

12. Insights from Case Study Research – Canada’s Crow Rate High Flexibility 1984-1996 Robustness (capability to deal with a range of circumstances through discretion) 1897-1925 1925-1984 Low Flexibility Adaptability (the capability to recognize a significant change in conditions, interpret and learn from the information, and make necessary changes)

13. India Case Study Research – Background • Vulnerability of Indian agriculture to climate change • Poor insurance penetration • - informal sector excluded • Rural credit – indebtedness – poverty Variation during 1960-82 of (a) rice yield over the Indian region (b) total food grain production (c) all-India rainfall (Source: Gadgil 1996)

14. Insights from India case study research: Evolution of crop insurance Farm income insurance scheme National agriculture insurance scheme Comprehensive crop insurance scheme Higher premiums (subsidy for small farmers to be phased out) Option of higher risk for higher premium Extended to non-loanee farmers Commercial crops included For wheat and paddy To replace NAIS Pilot crop insurance scheme Insurance linked to short-term credit 2% premium, subsidy for small farmers Basic rainfed foodgrains covered Weather indexed insurance Experimental crop insurance scheme Experimental individual scheme Very poor coverage of farmers Very low premium to claims ratio MFIs, SHGs, village internet kiosks Coverage and financial viability still an issue 1972 1984 1985 1978 1991 2004 1997/8 1999 2001 2003 1979 IRDA Act Entry of private and foreign players Economic reforms Green Revolution High level task force AIC takes over from GIC Working group for Xth Plan

15. Insights from India case study research • Crop insurance robust by definition: helps deal with range of weather conditions • Problems: coverage, financial viability, adverse selection • Long delays in payment of claims • Small and marginal farmers lose out • Weather indexed insurance MORE robust • Minimizes adverse selection • No need to draw up and monitor individual contracts • Protects overall income rather than yield of specific crop • Improves farmers’ risk profile and access to bank credit • Quick payouts can improve recovery times • Important role for micro finance institutions • Need for institutional backing • Adaptability • Periodic review and improvement of crop insurance • Weather insurance learning from pilot schemes

16. Future Activities • Community-level research • Conducted in India by TERI and Canada by IISD • To identify the characteristics and mechanisms of policy instruments that can adapt to surprises and longer-term changes • Synthesis Paper No.1 (available April 2006).

17. Project Website and Contact Information • www.iisd.org/climate/canada/adaptive_policy.asp • Preety Bhandari • The Energy and Resources Institute • preetyb@teri.res.in • Stephan Barg • International Institute for Sustainable Development sbarg@iisd.ca