AcknowledgmentsT he analysis presented herein is part of a research project to support the U.S. Initiative to End Hunger in Africa (IEHA). The report draws upon and extends an earlier analysis published as DSDG Discussion Paper No 1. We thank Siet Meijer, Mark Rosegrant, Yukitsugu Yanoma, and Weibo Li for their contributions to the discussion paper. We also thank the many people who made important contributions to this research project, particularly Peter Hazell for providing overall guidance and many helpful suggestions during the entire research process. Eleni Gabre-Madhin, Michael Johnson, and Nicholas Minot also provided valuable input in brainstorming sessions during the early stages of the project. Steven Haggblade, Jock Anderson, and outside reviewers of an early version of the discussion paper manuscript, and the three anonymous reviewers of the present manuscript, provided helpful comments and suggestions. Thanks also go to Danielle Resnick, Sarah Cline, Christen Lungren, Liangzhi You, and Bingxin Yu, who assisted with data and other aspects of the research. Finally, we thank USAID for funding this research. ix Summary I n today's more integrated world economy, agricultural growth in the countries of East and Southern Africa depends crucially on increasing their competitiveness in the world agricultural market and expanding their market opportunities. This report focuses on demandside constraints on agricultural growth and their implications for three broad alternative agricultural development strategies: promoting traditional exports, developing nontraditional exports, and increasing food staple growth. We address three major questions. First, how constraining will demand be for future agricultural growth in East and Southern Africa and, in particular, is there sufficient demand to permit agriculture to grow at a rate that can significantly reduce poverty and hunger? Second, if technological change and increase in supply are achieved, which agricultural subsectors offer the greatest potential and can become the most powerful engine for raising real incomes and increasing food consumption? Finally, what are the implications of reductions in marketing costs and growth linkages with nonagricultural sectors for achieving increased market demand for agricultural products?The report applies a general equilibrium framework for the analysis, focusing on seven East and Southern African countries-Madagascar, Malawi, Mozambique, Tanzania, Uganda, Zambia, and Zimbabwe-and finds that an export-led agricultural growth strategy is unlikely to generate substantial overall income growth in these countries. Despite significant market reform initiatives, future growth prospects for traditional agricultural exports in many countries in the two regions do not appear promising, even if lost market shares are recovered through improvements in productivity, product quality and variety, and marketing conditions. Simulation of a recovery of traditional exports to their historical high levels results in only an additional 0.08-0....

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We examine the Clean Development Mechanism (CDM) market as form of cooperative involvement between developing-host and developed-investor countries, likely to evolve into a form of Foreign Direct Investment (FDI) with opportunities for further collaboration. We use three variables to measure the level of cooperation, namely number of joint CDM projects, volume of CO_2 abatement realized from the CDM projects, and volume of investment in the CDM projects. We rely on international economics and international relations literature to suggest that the levels of economic development and institutional development, energy structures of the economies, country vulnerability to various climate change effects, political constraints, trade, and historic relations between the host and investor countries are good predictors of the level of cooperation in CDM projects. The main policy relevant conclusions include the importance of simplifying the CDM project regulation/clearance cycle as an essential policy option for further growth of joint CDM projects; improving governance structures in the host and investor countries that would lead to higher political stability and trust between the countries for business, including CDM; and strengthening trade or other long-term economic activities that connect the countries for fostering CDM cooperation. © 2011 by the Massachusetts Institute of Technology.

We describe important institutions that shape climate change policies together with a set of key market-reliant instruments. We selectively review the related economic literature, emphasizing empirical studies that assess the efficacy of current policies and the workings of policy-dependent markets. Special attention is given to new carbon finance markets tied to the Kyoto Protocol's flexibility mechanisms. Promising areas for future research are identified.

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