In Ethiopia, CompensACTION is promoting agroforestry.
Photo: © GIZ

CompensActION aims to reward farmers for climate performance

The CompensACTION Initiative for food security and a healthy planet, launched by the German Federal Ministry for Economic Cooperation and Development (BMZ) in 2022, is gaining momentum. It aims to financially compensate smallholder farmers for their contribution to preserving ecosystems and thus create incentives for climate, biodiversity and environmental protection. Initial successes have been achieved in Ethiopia, Lesotho and Brazil.

Around 84 per cent of all farms world-wide are smaller than two hectares. A large proportion of these are run by smallholders in partner countries. They make a significant contribution to preserving ecosystems. According to estimates, at least one-third of family farms follow agroecological principles in whole or in part. They should be adequately compensated for services such as these. This requires compensation mechanisms that combine income from agricultural production with a payment for positive externalities. This is where CompensACTION comes in.

CompensACTION was launched in July 2022, under the German G7 Presidency by the German Federal Ministry for Economic Cooperation and Development (BMZ) as part of the Working Group on Food Security. It is implemented by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, together with its partner CLIMEAT.

The initiative aims to promote so-called Payment for Ecosystem Services (PES) innovations on a large scale.  These can include CO2 storage, water and soil conservation, biodiversity protection and other activities for which farmers are rewarded. Some of this already exists in the European Common Agricultural Policy. A strip of old grass, a late-mown meadow or supplementary flowering strips lead to higher subsidies in Germany.

CompensACTION plans to increase the income of small farmers in low- and middle-income countries as well. To achieve this, the initiative has already started the first pilot projects with support from the International Fund for Agricultural Development (IFAD).

Pilot projects in Ethiopia, Brazil, and Lesotho

In Ethiopia, CompensACTION is promoting agroforestry. The project aims to introduce sustainable agricultural practices on 25,000 hectares of land that sequester at least 2.2 tons of CO2 equivalent, a bundle of different greenhouse gases, per hectare per year. In addition, more than 8,000 households are to increase their income by trading carbon credits. CompensACTION also provides incentives for nature- and climate-positive agriculture in Lesotho and Brazil.

In Brazil, it supports the establishment of a financing system for deforestation-free value chains. In the first step, a partner organisation of IFAD identifies relevant ecosystem services. In the next step, it develops the mechanisms to reward smallholder farmers for these services. CompensACTION plans to work with 1,500 families to sustainably manage about 10,000 hectares of forest land, starting in 2024.

In Lesotho, there is a national fund for payment for ecosystem services (water efficiency, biodiversity promotion/conservation, carbon abatement/sequestration). This is expected to reach up to 40,000 people and is designed to continue beyond the life of the project.

The CompensACTION initiative disseminates experiences from another BMZ-funded pilot: refinancing a system of agricultural extension services for 30,000 farmer families by introducing agroecological practices in western Kenya (on 11,000 ha, each with 3.6 tons CO2 equivalent/ha/year).

Curious? Looking for support or exchange regarding similar projects? CompensACTION is open to collaborating to implement projects and sharing ideas about compensation mechanisms. We look forward to hearing from you (



More information:

Link to Compensaction

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