NAMA Café » NSP Low Carbon Coffee

What is an NSP?

NAMA Support Projects (NSP) funded by the NAMA Facility are projects that will provide support to governments for the implementation the most ambitious parts of their NAMAs through the provision of financial support and technical cooperation instruments. The NAMA Facility was established by the German Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety (BMUB) and the Department for Business, Energy & Industrial Strategy (BEIS) of the United Kingdom (UK) and co-funded by the Danish government and the EU Commission. It provides financial support to developing countries and emerging economies that show leadership on tackling climate change and that want to implement transformational country-led NAMAs within the global mitigation architecture. The Facility conducts competitive calls and selects the most ambitious and promising NAMA Support Projects for funding.

NAMA Support Project “Low-Carbon Coffee Costa Rica”

The implementation of the Costa Rican Coffee NAMA is assisted by the NAMA Support Project (NSP) “Low-Emission Coffee Costa Rica”, funded by BMUB and BEIS. This NSP is implemented by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH and financed by the NAMA Facility. It was developed by the BMUB/ICI Project “Programa ACCION Clima”, which was also implemented by GIZ in Costa Rica in collaboration with the members of the NAMA Café Steering Committee. These include the Costa Rican Ministry for Agriculture and Livestock (MAG), the Ministry for Environment and Energy (MINAE), the National Coffee Institute (ICAFE), and Fundecooperación para el Desarrollo.

The NAMA Facility approved the NSP in February 2015 and its implementation phase runs from January 2016 to February 2019 with a total funding commitment of € 7 million.

The NAMA Support Project (NSP) for the “Low-emission coffee NAMA Costa Rica” (NAMA Café, in Spanish) aims to promote a lower-emission and sustainable production and processing of coffee in Costa Rica. Therefore, the NSP collaborates with the main actors of the coffee production value chain in Costa Rica and international markets and uses closely integrated technical and financial cooperation instruments.

The total funding commitment of the NAMA Facility amounts to € 7 million. The greater share of these funds will enable technical and feasibility studies, capacity-building measures, carbon audits and other awareness raising activities to take place. In addition, an adequate financing mechanism is at the core of a NAMA Support Project. The financing mechanism needs to be defined in a way to incentivise a behavioural change of market participants (consumers, investors) towards a low carbon pathway. The NAMA Fund will offer partial guarantees for low-interest credits for the implementation of larger-scale low-emission technologies that will be disbursed in collaboration with national financial institutions.

Climate change impacts in lower regions and urban pressure will reduce coffee production areas in the future. To maintain coffee production as an important economic factor, NSP considers three strategies: a) production of highly competitive low emission coffee on the remaining coffee areas, b) elevate cost-efficiency by low emission processing in coffee mills and c) facilitate access to new or future markets by certified sustainable coffee. At the level of coffee farmers, NSP will implement capacity building measures for efficient fertilizer use and additional low-carbon practices, like the provision of shade trees. These measures will increase coffee production per ha and at the same time reduce GHG emissions. In regard to coffee mills, the NSP supports capacity development to implement technical mitigation projects, e.g. wastewater treatment, drying processes or use of renewable energies. These environmental and energy efficiency measures will reduce processing costs of coffee and also mitigate GHG emissions. Costa Rican coffee is negotiated as commodity on international markets. To maintain access to these highly volatile markets, the NSP is addressing new and future markets. Therefore it is necessary to analyse market mechanisms and future customer behaviour with regard to low-emission and sustainable products foot print. The NSP project will also support the establishment and implementation of a national MRV system for the NAMA-Café. Emission reductions are estimated to be about 120,000 Ton CO2/year.

The above mentioned strategies implemented by NSP and coffee cooperatives and mills, as well as by multipliers such as the national extension services, and the regulated financial sector will contribute to a transformation of the coffee sector in Costa Rica. The NSP’s implementation strategy includes the selection of projects which are highly profitable and result in high emission reductions. Its main scope will be in the Zona los Santos, Valle Central and Valle Occidental regions because these areas have a high influence on the coffee sector and will likely mobilize the other areas. These areas include around 12,000 coffee growers, thus the mills have a high number of suppliers.

In five years, the NSP “Low-Emission Coffee Costa Rica” aims to reach up to 6,000 producers on up to 25,000 ha, who apply at least 2 of the promoted technologies and practices, and up to 50 coffee mills, which apply at least 2 emission-reducing technologies. It thus creates valuable best practice experiences, supports the creation of indispensable framework conditions, and kick-starts innovative collaboration projects at the country level that will continue to yield results beyond the NSP’s conclusion.

Details on the activities:

Sustainable coffee production

Capacity building measures and advisory are the main services for coffee producers. The focus is on awareness and capacities of low-emission technologies and practices in sustainable coffee production, as those have been identified as the major barriers. In order to reach a large number of farmers there will be a strong focus on working with representative cooperatives and multipliers in existing extension services, e.g. training of trainers of extension officers of ICAFE, MAG and internal services of cooperatives. The NSP will also facilitate knowledge transfer from pro-active farmers and cooperatives to peers through visiting model farms and field trips. In Costa Rica, the fertilization of coffee plantations is responsible for the majority of N2O emissions coming from the agricultural sector. It is important to understand that N2O has a 20 times higher greenhouse effect than CO2. Therefore, the optimization of fertilizer use is crucial to reduce emissions. There are still producers that manage fertilizers inefficiently by using incorrect doses and disregarding adequate time tables, which results in environmental contamination and an increase in production costs. Merely changing the type of fertilizer used could already result in a significant reduction of GHG emitted.

These are some of the best practices that will be verified and validated in order to establish low-emission procedures that maintain or even increase the productivity of the farm. Cost-benefit analyses will yield additional evidence on the economic profitability of such measures. Training of trainers (for example of extension officers) and capacity building measures for farmers in collaboration with the extension services will promote these practices. The NSP also plans to use the opportunity to support the PSA-Café (Environmental Service Payments for Agroforestry Trees on Coffee Plantations). Within the context of the NSP, only additional trees with species diversification will be subsidized via the implementing agency FONAFIFO.

Cost efficient and low emission technologies on level of coffee mills

In order to encourage and facilitate investments in low-emission technologies and practices and, to promote these innovative technologies at the level of coffee mills, a combination of technical and financial instruments will be applied, e.g. use of renewables in the drying process, subsequently towards “full market-readiness”. The technical assistance offered in this component will mainly work on carbon audits, capacity building measures, trainings and exchange of experiences at national and international level. Additionally, one part of financial cooperation will be linked to this component, offering technical assistance to the preparation and implementation of bankable project concepts, e.g. realizing feasibility studies and project proposals for the provision of investment subsidies and long-term credit of national banks. NSP will help the mills to invest in those technologies and measures to process high-quality coffee in a low-emission manner. Furthermore, the exchange of information and the promotion of technologies at a national and international level will be facilitated.

NAMA Café MRV System

A functioning MRV system plays a key role for ensuring the project´s results. With solid information on GHG emission reduction potentials, the NAMA Coffee MRV system enables the planning and implementation of low-emission measures; the measurement of annual and bi-annual ongoing progress, as well as the reporting of emission reductions. This will lead to national and international recognition of NAMA’s contribution to the country´s carbon neutrality target and creates a basis for marketing low-emission coffee. The off-farm MRV system will use the existing ICAFE data base and the data base of FONAFIFO, where the current technology use is registered. These data bases need to be partly revised and updated. The newly installed low carbon technologies will be monitored and registered in the ICAFE data base and emissions will be calculated based on the new emission factors. The on-farm technology will depend on a functioning extension service which will be strengthened under output A. Changes in low carbon technologies can then be monitored, quantified and related to emission factors and activity data.

The NSP will establish internal indicators in order to check whether the project is on track. Internal M&E and the national MRV system will be linked. The connection of the Coffee NAMA to the National Metrics System for monitoring, evaluation and follow-up of the National Program on Climate Change (SINAMECC) will be crucial to show the coffee sectors contributions to Costa Rica’s overall progress in mitigation, being the first sector in contributing to this national system. 

Competitiveness and access to differentiated markets

In the medium to long-term range, one of the most important and sustainable drivers for the implementation of low-emission, sustainable coffee production and processing in Costa Rica, are cost-efficiency going hand in hand with access to differentiated markets for quality coffee which pay a stable and long term premium price. The activities under this output consist of supporting coffee cooperatives in monitoring their cost-efficiency as well as in business planning, aiming to produce low emission coffee in a competitive and sustainable way to access new markets. For example, recently, ICAFÉ and the coffee sector have intensified commercial relationships with Japan and South Korea, selling high quality coffee in long term contracts with stable and reliable prices. Another tendency is offering certified coffee, e.g. Fairtrade or Rainforest Alliance, to European or US market. Starbucks International is producing its own coffee in Costa Rica. All these initiatives will be analysed by NSP regarding strategies to access these markets. These strategies make Costa Rica less dependent on volatile commodity markets. In first contacts, international coffee traders like Hochland or Neumann in Germany, showed high interest in collaborating with NSP in the production and commercialization of competitive low emission coffee from Costa Rica and the region. This component will be implemented in cooperation with the marketing sectors of ICAFE, MAG and the national exporting agency COMEX.

Engaging the financial sector – NAMA Credit Fund

The availability of credit and microcredit, as well as, incentives for clean energy use and water reductions will be critical to ensure the uptake of low emission technology development in the agricultural sector. To be able to develop market incentives and commercialization of agricultural products with lower carbon footprint, it is necessary to strengthen local and national markets, with timely access to information.

The NSP aims to provide financial instruments through cooperation and financing agreement with the “Central American Bank for Economic Integration” (CABEI), of which the Government of Costa Rica is a shareholder. CABEI will set up a second-tier credit fund (NAMA Fund), which can be accessed by regulated and supervised financial institutions at the national first-tier level. It is envisaged that blending of public funds, NAMA funding and additional BCIE funding as well as private capital, resourced from participating commercial banks will facilitate the creation of concessional loans as long-term financing with adequate repayment conditions and affordable interest rates. Coffee mills are expected to take up these loans for investments into low-emission technologies in the range of 10,000 USD up to 200,000 USD. Such technologies include efficient ovens and larger-scale tunnels for coffee drying, waste water treatment solutions, ethanol production and large-scale bio-digesters, which coffee mills cannot or do not want to finance by equity capital only and for which they would currently not get access to credit at all or only at too high interest rates. Technical assistance in output A and B will provide support and facilitate efficient and agile use of credit or NAMA fund.