Bernardo M. Villegas
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Large Scale Investments in Agribusiness (Part 3)

             The planned replication of the Lionheart Farm project in Rizal, Palawan in five other 20,000-hectare corporate coconut farms in five regions of the Philippines can also make a major contribution to addressing the problem of climate change.  Coconut farming combined with agroforestry can represent a unique and scalable Natural Climate Solution.  The 3.565 million of hectares planted to coconut or 26 % of total agricultural lands of the Philippines can be very promising resolutions to climate change.  The opportunity connected to Natural Climate Solutions in the coconut industry is significant and brings with it many benefits that support the BBM Administration’s 8-point socio-economic plan and commitment to the international community.  Importantly, sustainable development with a strong climate action aspect also attracts international investments, development finance support and helps fund the planned transformation. Financing this transformation can be one of the major objectives of the so-called Maharlika Investment Fund now being deliberated in the Senate.   As described in the previous articles, the model being presented here requires very effective management and control of the supply chain for certification and validation (think ISO), etc.  If not done properly via a model like the Lionheart Farms, the Philippine Government may end up carrying “all” the costs, requiring a continuation of the “ayuda” programs for the marginalized which have relatively poor convertibility into a sustainable and generational transformation.

            It must be pointed out that reduction in emissions as referred to in a previous article in this series is not what drives the Carbon Sequestration and Climate Action in the coconut industry.  That only represents a small reduction in emissions.  It is the tree planting and following a regenerative agricultural system which creates the drawdown effect, making the entire operation net negative on emissions.  Coconut planting combined with agroforestry contribute to offsetting emissions from other industries like coal-powered energy plants and construction activities.  This is especially important if we consider that in the long-term plan of the Department of Energy, the Philippines will continue to rely on fossil fuels for a long time to come.  It is obvious that planting trees—agroforestry programs with coconut as Lionheart Farms is doing—can make an important contribution to the transformation of the energy sector in the Philippines.

            Furthermore, it is not only in offsetting carbon emissions from other industries that the coconut industry can contribute to addressing the problem of climate change.  Coconut replanting combined with agroforestry can address head on the problem of deforestation.  Some 1.7 billion pallets are produced annually for Asian exporters, causing the unnecessary cutting down of approximately 200 million trees per year.  Pallets can be produced from sustainable coconut wastes.  Imagine the millions of trees that can be saved from illegal logging.  The coconut industry can also contribute to a safer and greener environment through the use of coconut fiber fabricated into nets that can help to stabilize earthy grounds, thus preventing soil erosion.  Biodegradable coconut fiber can also replace microfibers which constitute the tiny debris found in rivers and oceans that come from textiles and clothing made of synthetic materials.  Additionally, coconut husk can be used for waste water treatment. There are very few industries that not only can contribute significantly to attaining economic growth, generating more jobs and contributing to poverty eradication but also to attaining a greener environment. 

            For a better scientific understanding of this unique contribution of the coconut industry, let me quote from a summary prepared by the Lionheart Farms management about the nature of the coconut palm.   Coconut palm is a prodigious remover of atmospheric carbon:  a mature hybrid coconut palm absorbs more than 500 kg of CO2 per year.  Sustainable farming can help make this carbon removal permanent.  Carbon credits may be earned when farmers plant new seedlings provided the farmer gets no other incentives (additionality condition).  In the current carbon market only voluntary carbon units (VCU) may be earned but the next decade will see a convergence between VCUs and compliance emission offsets as the standards are tightened.  That means today’s VCUs are mostly companies who have set themselves carbon emission reduction targets, plus investors who take a view that VCUs’ prices will start approximating the compliance markets.  Coconut palms should contribute to the Philippines NDC accounting and may be traded among other signatory countries of the Paris Agreement Article 6 which sets the framework for adjusting carbon credits bilaterally.  It has been shown that coconut carbon credits are considered afforestation, nature-based credits so that there should be no lack of credits generated by planting coconuts in the foreseeable future.

            Buyers of carbon credits are very careful to pay only if the new project is not viable without such incentives.  Why pay for pay for a project that would have been undertaken following market forces alone? It is clear, however, that in the Philippines coconut planting has not been financially attractive as evidenced by hundreds  of thousands of farms that have been practically laid to waste over the past three decades.  The Government has not assigned high priority to finance more than a very small fraction of the required replanting and the private sector has never seriously considered replanting coconuts as a sound financial investment.  Philippine private banks have been notorious for their willingness to pay hundreds of millions of pesos to the Government as penalty for their not lending to agricultural projects under the Agri-Agra Law.  The entire Philippine agricultural sector has suffered from insufficient bank lending.

            All these may sound purely theoretical if one cannot present a proof of concept in the Philippine setting.  Fortunately, Lionheart Farms provides such proof of concept.  It has successfully implemented in Palawan a business model that provides local farmers (including indigenous people) with significantly enhanced yields and corresponding higher income levels while simultaneously providing the additionality of incremental and improved carbon removal and storage capacity.  Lionheart’s model is rapidly scalable and exportable across multiple appropriate geographies.  According to the Food and Agricultural Organization (FAO), more than 3 million hectares of existing coconut lands require replanting in the Philippines and Indonesia alone.  Such replanting, however, will not happen unless additional financial incentives are made available in present economic circumstances.  Fortunately, the ability to monetize carbon credit services provides the financial incentives to make replanting economically viable.

            All these considerations should motivate our leaders from the government, business and civil society sector to do everything possible to make the sustainable transformation model suggested in this series of articles a reality, not only in the envisioned additional 5 other coconut regions but in the long run (at least until 2040---the target hear of  NEDA for the Philippines to be close to a First World country)  to cover all the 3.6 million hectares of coconut farms all over the Archipelago.  Such a sustainable transformation will not only contribute to the Ambisyon 2040 of NEDA become a reality but also to helping the whole world (at least the Indo-Pacific region) cope with the challenge of Climate Change.   For comments, my email address is