Making public investments Paris Agreement-aligned in a cost-effective way – Calculating marginal abatement cost curves for agricultural investments

This paper proposes a novel methodology for calculating marginal abatement cost curves (MACCs) for public finance in agriculture using granular data on specific activities from investment projects. The proposed MACCs target public investment decision makers from the international and national financing institutions, as well as governments. The methodology is based on information obtained from agricultural projects implemented by international funding institutions (IFIs) and carbon accounting appraisals conducted using the Food and Agriculture Organization of the United Nations (FAO) EX-Ante Carbon-balance Tool (EX-ACT). The curves are estimated through a bottom-up approach, in which actual data on mitigation potential of agricultural investments and their associated costs are used to derive the cost-effectiveness of individual agricultural activities. The resulting curves illustrate the relationship between the cost of each individual activity and their individual mitigation potential helping decision makers to identify how to achieve best results at lowest cost. The application of the methodology is demonstrated using a sample portfolio of projects under World Bank’s Global Agriculture and Food Security Programme (GAFSP).Isolating the contribution of individual practices and highlighting their contextual cost-efficiency is a key factor in investment decision making for private and public entities aligning with the global climate targets. Given the complexity of estimating real costs, bottom-up MACCs offer a precious reference for evaluating activities' abatement potential and supporting decision-making processes of policymakers and investors interested in efficient and climate-friendly investments.