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nature-based solutions

PRESS RELEASE: Spinnaker Capital makes strategic investment in carbon finance pioneer Respira International

By News

London – December 22, 2023, Spinnaker Capital, a prominent emerging markets investment management firm, announced a proprietary strategic investment, alongside existing investor Capricorn’s Sustainable Investment Fund, in Respira International, the impact-driven carbon finance business.

Investment Overview

Since its establishment in 1999, Spinnaker Capital has been a pivotal player in the evolution of emerging markets financial instruments. 

Respira operates with an innovative offtake and profit share model which reinvests back into project stakeholders. Respira’s high-quality carbon credits allow corporations and financial institutions to mitigate their environmental impact. Respira channels private capital into climate solutions ensuring long-term relationships with trusted carbon project developers that enable its clients to build sustainable, climate-positive businesses and portfolios. 

Strategic Implications

This investment reflects Spinnaker Capital’s commitment to the environment and its recognition of a strategic market opportunity. It marks a significant step in the firm’s sustainability journey and positions it to capitalize on the burgeoning voluntary carbon credit market. The collaboration envisages combining Spinnaker’s financial acumen with Respira’s innovative carbon finance strategies, promising future synergies and expanded market opportunities.

 The investment will also allow Respira to access core emerging markets, including Brazil where Spinnaker Capital has a physical presence, as well as providing additional funds to enhance new deal capacity and enable the on-boarding of large corporations and financial institutions.

Statements from Principals

Alexis Habib, founding principal of Spinnaker Capital, remarked: “These projects are beneficial for the environment and for communities in our strategic focus areas – the emerging markets. The voluntary carbon markets today are reminiscent of the EM financial markets of three decades ago, characterized by limited liquidity and lack of standardization. This investment allows us to apply our skills and experience to foster, and benefit from, the evolution of this market.”

Robert Schultz, partner at Capricorn, added: “We believe that the Respira team have the best voluntary carbon markets origination team. The addition of Spinnaker Capital as a strategic investor, with deep domain expertise in emerging markets, allows Respira to gain access to new markets and opportunities.”

Ana Haurie, Respira co-founder and CEO, said: “Scaling the carbon credit market is a prerequisite for any successful journey to Global Net Zero – there is no credible scientific pathway without it. This investment will help Respira reach more of the corporate institutions which hold the influence and – most importantly, the financial power – to deploy rapid and at scale solutions which support business efforts to decarbonise and turn the tide against climate change.”

 ENDS

22 December 2023
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Satellites in Action: Why Ed Mitchard founded Space Intelligence

By Tech in Action

When he was 15 years old, Ed Mitchard went to Brazil. For a teenager so keenly interested in tropical forests, this was a dream come true. Yet this was no school trip – Ed had won a competition to appear on a Japanese TV show. He now found himself 4,000 miles from home, in the depths of the Amazon rainforest.

Although Ed saw many areas of intact forest on his adventure, he also observed severe degradation and deforestation. Determined to make a difference, Ed pursued biology and forest ecology at university. As he learned more, it soon became clear to him that the world seriously lacked data on forest change. While there was some data on deforestation, Ed found nothing at all on forest regrowth. 

Ever since his undergraduate, Ed has been countering this problem. Becoming a full professor at the University of Edinburgh, he has published approximately 100 papers on different methods for monitoring forest change. Now, as Chief Scientist at his company Space Intelligence, Ed uses innovative satellite technology to provide high-quality data on forest carbon, forest regrowth and habitat loss.

Can you introduce yourself and explain why you founded Space Intelligence?

During my PhD, I developed new ways of working with radar satellites to measure the biomass of tropical forests. Unlike other satellites, radar satellites allowed us to see through clouds from space which is absolutely essential if you want to monitor tropical forests all year round.

I continued to research and write papers on this topic, first as a Research Fellow and then as Professor of Global Change Mapping at the University of Edinburgh. Between 2015 and 2018, a colleague and I received requests from a number of REDD+ projects asking to use our technology to monitor deforestation. It was a little tricky to help them from within the university as they wanted maps within a shorter time frame than we could offer.

At the time, there was no one doing high accuracy monitoring, so the university encouraged us to start a company. So in 2018, we set up Space Intelligence. We were small – I kept my university job and we employed just one other person – but we provided maps to some of the world’s largest NGOs including the Wildlife Conservation Society and The Nature Conservancy. 

Today, we have more than 50 employees and produce on-demand maps to support nature-based solutions. We work with project developers, predominantly in the tropics, who need us to produce the data to enable their carbon credits to be generated and validated. We also work with registries, such as Verra, to generate activity data for host countries. For Verra, we have generated activity data for Kenya and Tanzania which is supporting the introduction of their jurisdictional REDD+ methodology. 

We also work with the stakeholders buying carbon credits from those projects, who tend to be global-north-based corporate and financial investors conducting due diligence. As Chief Scientist, I run the map production side of the business and focus on developing these technologies to improve the data we can offer in the future.

Could you say more on the problem you seek to solve?

Throughout my life, a steady one percent of tropical forest has been lost every single year. I’m 37 now and around 37 percent of the world’s tropical forests have been destroyed since the 1980s. For people, for biodiversity and for our levels of atmospheric CO2, deforestation is a massive crisis.

For a minute, let’s take it back to the ‘big picture’ problem. Every year, humans release about 40 gigatonnes of carbon dioxide into the atmosphere. The burning of fossil fuels accounts for 40 percent of that figure, while another 20 percent comes from deforestation. However, the atmospheric burden of CO2 only goes up by about 20 gigatonnes every year. Yes, this is still a lot, but about half of our emissions are absorbed by the oceans and earth’s vegetation. We need to stop burning coal and reduce our fossil fuel emissions, but simultaneously we must stop deforestation to conserve our natural carbon sink. It’s a no brainer.

Space Intelligence is playing a part in solving this problem. Without measuring forests, how can we know the extent of the problem or when we have made progress? This is why we provide high-quality data on deforestation and forest regrowth to project developers, carbon credit buyers and governments. 

As governments start to make large transfers of cash to countries conserving forests, Space Intelligence is producing the data to make these transactions possible. There’s no way the UK government would transfer tens of billions of dollars a year to different tropical countries based on data produced by those countries themselves. Instead, they want to go to an external independent third party that uses the latest scientific methods.

Space Intelligence exists to be an independent provider of data. We don’t have data precomputed – we talk to clients about their requirements and then produce high-quality maps on demand. Our teams conduct the analysis and then will report back to the client.

Let’s get technical: how does your product work?

Space Intelligence produces on demand maps of land cover and forest carbon. First, I’ll speak about HabitatMapper, our tool to map land cover. 

In HabitatMapper, every pixel is assigned a class such as tropical forest, degraded forest, savannah, grassland, urban area, agricultural land or water. We use a year’s worth of satellite data to determine these classes, meaning that every pixel has been viewed around 400 times using both optical and radar data. 

We use this satellite data to train a machine learning algorithm to assign each pixel to the most likely class. This is very useful for project developers to work out how much forest they have within their site and to assess its deforestation rate.

Our second tool is called CarbonMapper. Instead of placing pixels into landscape classes, CarbonMapper only considers those pixels containing forests. While HabitatMapper would display a forest as uniform, CarbonMapper visualises the differing amounts of carbon stored in each pixel of forest.

You can estimate the carbon stored in a tree very accurately if you measure its diameter, height and water density. Obviously you can’t do all this from space, but on the ground it is very easy to measure a tree’s diameter. Once you know a tree’s species and diameter, height and water density can both be estimated accurately.

Space Intelligence monitors forest canopy height using space-born LIDAR and then correlates these height measurements with local field data. We try not to fly out to the places we map. Instead, our clients will employ local teams to collect field plots. Although this is anyway a requirement of the carbon standards, it provides us with the field data we need to calibrate our equations. From here, we can reveal if a forest is gaining or losing carbon and if deforestation occurs in carbon dense areas.

Could you share a story of success?

I’d like to talk about our recent work with Verra. This November, Verra announced updates to its REDD+ methodology as another step in increasing the overall integrity, transparency and efficiency of carbon markets. Under this revised methodology, it will be Verra, not project developers, who will provide baseline data. What’s more, the data will cover the entire jurisdiction. 

When it considered making these methodology updates, Verra recognised that advancements in remote sensing can provide the accuracy needed to address some of the challenges in the market. Space Intelligence was selected by Verra to produce data for two jurisdictions – Kenya and Tanzania. We worked across an area of approximately 150 million hectares to provide Verra with maps and data on forest coverage and activity data on deforestation.

We followed our usual HabitatMapper process for this work, which included mapping around eight classes for each region across three time periods. We then converted these land cover maps to change maps with the following classes:

  • Stable forest; 
  • Stable non-forest;
  • Deforestation; and 
  • Reforestation.

In this type of work, distinguishing between vegetation types, especially accounting for seasonal changes, can be challenging. Indeed, an aerial view can change quite dramatically within the year as parts of the country look drier and wetter at different times. 

To overcome these challenges, we sought the expertise of our ecologists and local partners in Kenya and Tanzania to identify the different vegetation types in our satellite imagery. Without this in-house ecological expertise – and without applying it to our machine learning models – our estimates of deforestation rates would not be accurate.

To test the performance of the maps, we undertook an independent accuracy assessment. More than 1,600 sample points were assessed, both internally and by our project partners, the Kenya Forest Service. For any points we disagreed on, we met for resolution sessions. As a result, we were able to supply Verra with jurisdictional level data with confidence.

And finally, what’s next for Space Intelligence?

As well as providing our on-demand maps, we’d like to continuously monitor our clients’ project sites. We want project developers to have a platform through which to access monthly data on their area and quickly catch illegal deforestation or natural degradation. It would also provide a visualised record of conservation successes that could be shared with customers and the public. 

The prototypes are developing well, so our aim is for this product to be ready by the summer of next year. When I started out, there weren’t many people working in forest change mapping, but now I feel there is a lot more interest and commitment to stop deforestation.

 

Learn more about Space Intelligence here.

15 December 2023
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How can the voluntary carbon market support Indigenous Peoples?

By News

Are you an urban person or a nature person? This binary distinction is one with which we readily self-categorise. While in reality it is unlikely any one of us is entirely one or the other, there is no denying that some of us live more deeply connected to the natural world than others. With each passing generation, globalisation has allowed city-dwellers of the Global North to grow increasingly detached from the land on which we all depend. However, for many of the world’s 476 million Indigenous Peoples, ancestral ties to the natural world remain strong. 

The best custodians of nature

While culturally and geographically disparate, Indigenous Peoples tend to have in common a close connection ‘to the land where they live or from where they have been displaced.’ As much as 22 percent of the earth’s land is traditional Indigenous territory including 11 percent of global forests are legally owned by Indigenous Peoples and local communities. In the Amazon, research shows deforestation rates within securely held Indigenous land is on average 50 percent lower than outside of these territories.

These areas are home to an abundance and a richness of species, making them extremely biodiverse. In fact, 80 percent of the planet’s remaining biodiversity can be found within Indigenous territories – a testament to the holistic, sustainable manner in which Indigenous communities live in tandem with the natural world. Indeed, with generations of knowledge, Indigenous Peoples the world over describe working with the land as opposed to on it. It therefore makes complete sense that those with grounded, intergenerational experience of an area are the best equipped to conserve it. 

A challenging landscape for Indigenous Peoples

While several studies report Indigenous Peoples to be the best custodians of nature, all too often these communities fail to receive the recognition, rights and representation they deserve. 

Lack of representation

Indigenous People continue to be unfairly underrepresented in international decision making. While the UNFCCC tallied more than 49,000 attendees at COP27, only around 250 Indigenous people were able to join the conference in person. The inaccessibility of climate decision making demands that greater effort be made to help Indigenous Peoples and local community members take their seats at the table.

Lack of formal land rights

Nearly one quarter of all land is Indigenous territory. However, a systemic lack of formal land rights threaten the security of many Indigenous Peoples. Without secure land rights, it is far harder for these communities to conserve nature and biodiversity as they have done for generations.

Undelivered pledges

At COP26 in Glasgow, a total of $1.7 billion was pledged to support Indigenous land rights. While this sounds positive, only 7 percent of this sum has so far been delivered. 

Misdirected funding

Supposedly $270 million of funding is allocated to Indigenous-led forest conservation every year. However, only a meagre 17 percent arrives in the hands of a named Indigenous-led organisation. 

The voluntary alternative

Amid such lack of delivery and serious under-representation, the voluntary carbon market can provide an alternative form of funding for Indigenous-led conservation. High quality carbon credits, generated from nature-based projects, can be sold to corporates seeking to voluntarily compensate for their hard-to-abate emissions. The proceeds of these sales must be shared equitably with the Indigenous and local communities working to conserve forests. Not only does this recognise and reward efforts, but can also fund further forest conservation activities.

The projects in our portfolio are high-integrity. We conduct our own due diligence to ensure positive impacts on communities is an integral part of the project design. Once we onboard a project to our portfolio, we use our balance sheet to support project developers through long-term offtake agreements. Consequently, they can concentrate on running their projects rather than fundraising and local people have a reliable and consistent source of revenue.

How does this work in practice?

Two of our flagship portfolio projects are developed by Carbon Tanzania. As a social enterprise, Carbon Tanzania counters the prevalent conservation notion that to protect ecosystems and biodiversity, humans must be excluded from the area. Instead, Carbon Tanzania helps Indigenous and local communities to protect nature and biodiversity under fair, equitable economic conditions.

In Tanzania, the Hadza, Datooga and Masaai people have, for generations, lived with the land. Yet, as more people move to Tanzania and demands on resources increase, many communities are finding their way of life to be threatened. Indeed, the territory of the Hadza, Datooga and Masaai is frequently used by migrant farmers. Informed by entirely different life experiences, new arrivals are likely to farm in a way entirely contradictory to that of the Indigenous communities to whom land belongs. 

In response, Carbon Tanzania recognises that strengthening land rights and resource tenure is vital. Ensuring that the Hadza, Datooga and Masaai retain rights to their ancestral land not only safeguards their way of life, but protects naturally forested areas from destruction. This conservation model provides a powerful template for attributing appropriate value to nature and ensuring those responsible for its stewardship are fairly compensated. 

What guidance is already in place for Indigenous Peoples?

Free, Prior and Informed Consent

UNDRIP’s framework on Free, Prior and Informed Consent should form the foundation of any carbon project working with Indigenous Peoples and members of local communities. Let’s look a little closer at what this means: 

Free 

Consent for a project’s operations must be offered voluntarily and ‘without coercion, intimidation or manipulation.’ When consent is sought, communities should also not be placed under stressful timelines that could force or rush their processes of decision making. 

Prior

Developers should seek consent prior to it becoming ‘necessary’ for a project’s operations. In the very beginning stages of a project, information should be given to local people and should take into account the time needed to understand and analyse potentially new ideas.

Informed

The project information provided to Indigenous and local people should be clear, accurate and entirely transparent. Moreover, information should not cease if and when consent is given. Instead, information should continue to pass between developers and locals throughout a project’s lifespan.

Consent

Consent should be discussed collectively among the holders of land rights and local stakeholders. Any decision to grant or withhold consent should be informed by a participatory process, not the will of a minority.

Embedding Indigenous Knowledge

In January, a new report from the World Economic Forum outlined ways in which Indigenous knowledge could be better included in carbon projects. It states, “‘Respecting Indigenous peoples’ cultural knowledge, rights and responsibilities will boost the resilience and long-term impact of landscape conservation and restoration projects.”

Before establishing a carbon project, the report recommends developers consider likely power imbalances between themselves and Indigenous Peoples. It also advises developers not to underestimate the challenges of trust building and to acknowledge they may carry a cultural load, informed by generations of potentially inequitable interactions. 

The report also advocates for greater Indigenous involvement and participation in leadership roles. This can include increasing understanding of unmet community needs, presenting a range of project options and, crucially, an equitably sharing project benefits.

Tropical Forest Credit Integrity Guide 

The Tropical Forest Credit Integrity (TFCI) Guide speaks extensively on the role of Indigenous Peoples as custodians of the world’s forests. It sets an expectation that the equitable inclusion of Indigenous Peoples should be considered a ‘hallmark’ of a high quality, forest conservation project. Rather than considering Indigenous communities members as beneficiaries of carbon finance, projects should form equal partnerships with interested local people. The Guide itself had input from Indigenous stakeholders. 

How could carbon projects be improved for Indigenous Peoples?

In Global North carbon market criticism, we have observed that many opponents neglect to seek the perspectives of the Indigenous people and local communities on the frontlines of climate change. Of course, opinions will not be homogenous – some people will always be in favour while others stand firmly against. However, there are many Indigenous Peoples who see great potential in carbon finance to support global conservation efforts.

At the beginning of May, more than forty Indigenous-led groups and organisations published an open letter asking the global finance and climate communities to support forest protection, or REDD+, carbon credits. The letter highlights the ways in which REDD+ can provide financial resources and help to safeguard ancestral lands. At Respira, we stand alongside the Indigenous-led groups and organisations calling for immediate support to ensure continued funding to the Global South via REDD+ carbon credits. 

As global temperatures continue to rise and deforestation continues to hit record highs, we must listen to and champion Indigenous voices. We are calling for Indigenous voices to finally be uplifted in conversations about climate finance and for private capital to be channelled, at scale, to Indigenous-led forest conservation efforts.

1 August 2023
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Retired carbon credits explained

By News

When we hear the word ‘retirement’, most might imagine a pension, large quantities of free time and perhaps a new-found love of gardening. Given these connotations, it is perhaps unsurprising that used in the context of the voluntary carbon market, the concept of retirement can create confusion.

In the carbon markets, retirement has a different meaning. In its essence, a retired carbon credit means its buyer has ‘redeemed’ the one tonne of carbon reduction it represents and claimed it against their own emissions which they have not yet been able to cut. 

When a buyer retires a credit they have purchased, the credit is removed from the market. This means no one else is able to counterbalance their emissions based on the carbon reduction the credit represents. 

To put this in context, 196 million carbon credits were retired overall in 2022. If these retirements had been evenly distributed throughout the year, more than 500,000 credits would have been retired every, single day. Although this represents a 1.3 percent decline on the previous year, the most recent market sentiment survey from the IETA found optimism among its respondents. Based on the responses from market participants the survey predicts that the market will soon return to a positive upward trajectory.

Wait, how are credits generated?

To truly understand the concept of a retired carbon credit, let us first refresh ourselves on the basics of credits.

What? A carbon credit represents one tonne of carbon dioxide or an equivalent volume of another greenhouse gas (CO2e) that has been either removed from, or prevented from entering, the atmosphere. 

However, historically not all credits have been created equally. Learn more about the criteria for a ‘good’ credit with this article from our archives.

How? A credit can be generated from nature-based projects, technological climate solutions or even renewable energy generation. The volume of CO2e avoided or removed from the atmosphere is calculated and a corresponding number of carbon credits is conservatively calculated. 

The calculation process involves following established methodologies, baseline allocation and verification. Find out more about this process here.

Why? Carbon credits are sold to individuals and businesses to support their decarbonisation strategies. The carbon finance generated from these sales funds further climate mitigation activities and can even support the delivery of impactful, non-carbon benefits for people and nature.

For an example of carbon credits in action, please see this case study of the Gola Rainforest Conservation Project. And to learn more about the responsible purchase of credits, see this flyer on the mitigation hierarchy.

But why do you need to retire credits at all?

In this section we will cover why carbon credits need to be retired, including:

  • Confirming impact
  • Claims
  • Double-counting

When a buyer purchases carbon credits in line with the mitigation hierarchy, the positive benefits of those credits are not automatically attributed to that individual or company. Rather, the buyer ‘holds’ these credits until they wish to retire them. However, once a retirement has been executed, the buyer is free to claim the positive impacts the credits represent. This effectively ends the credit’s ‘life’ for it cannot be reused or reclaimed.

In this way, retirement stops the benefits of credit from being claimed multiple times. In the industry, this is known as preventing double-counting. Only the stakeholder who retires the credit can claim the emission reduction it represents towards its climate targets and they can only do so once. Retirement is extremely important for driving credibility and traceability when using carbon credits to achieve net zero.

What’s the process for retired carbon credits?

Before a carbon project can issue credits, it will complete a process of verification which happens within a framework set up by a programme, such as VCS by Verra or Gold Standard. Only after verification are credits issued in a dedicated registry. Credits are always marked with a unique serial number which allows them to be tracked and accounted for.

Carbon credits can be owned by a number of market participants – the project developer, financing institution, intermediary or a company wishing to use them to counterbalance their own emissions. They can be traded, sometimes several times, among the market participants. This means that carbon credits can exist, unretired, for some time. However, at the point of retirement carbon credits are permanently removed from circulation and cannot be resold. This prevents any double-counting of emission reductions. Information on historic retirements is stored in publicly accessible emission registries, driving transparency for the market.

The future of retired carbon credits

As technology advances, stakeholders across the voluntary carbon market are working to better the carbon markets including the retirement process itself. Blockchain, Tokenization and Distributed Ledger Technology (DLT) all hold great potential for scaling of the voluntary carbon markets. These technologies can boost the overall transparency of credit retirements and support the overall integrity of the markets. We look forward to engaging with new innovations as the world of credit retirements develops and interacts with these emerging technologies.

5 July 2023
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Carbon Credits

“We are not a broker, we’re a carbon finance company”

By News

Traditionally, carbon credits have been bought and sold by brokers on a spot basis, but at Respira, we operate differently, and have helped to shift towards a carbon finance model of carbon credit trading. We recognise that the broker approach creates little long-term certainty for carbon communities, and, at times, even curtails the development of high-quality projects. This is why we offer an alternative – a model prioritising the overall stability of our flagship portfolio projects. 

Respira is not a broker. Rather, we are a source of non-dilutive private capital. We offer revenue certainty for project developers through a guaranteed floor price for carbon credits and use our balance sheet to support them with long-term offtake agreements. Not only does this enable project developers to expand with confidence, but also creates greater certainty for our buyers who can lock-in future prices. 

 

The Respira model

The Respira ethos 

Respira International was co-founded by Ana Haurie and Robin Bowie in 2019. They saw the urgency with which we must address the climate crisis and recognised the role the private sector must play in these efforts. To drive the necessary levels of corporate action, the voluntary carbon market offered great potential. Speaking of the role of high-quality carbon credits in mitigation, Robin said:

“Buying voluntary carbon credits provides an engaging and impactful way for companies to compensate for residual emissions whilst on the pathway to reducing internal emissions. It enables corporations to go beyond what they are mandated to do through regulation.”

He continues:

“Through integrated plans which combine value chain emissions reductions with appropriate use of carbon credits, corporations can set a powerful and engaging example for others to follow.”

Now, four years later, Respira International continues to expand. Our diverse team combines a 30+ year track record in global financial markets with a deep understanding of carbon project development in leading international conservation organisations. 

Reflecting on the Respira team, Chris Villiers, Director of Portfolio Management, said:

“Respira has brought together a team with the network and experience to develop products in the voluntary carbon market that can attract institutional capital at scale that will be used towards reducing emissions globally and deliver significant climate impact.”

The time is now

Our team knows we cannot delay climate action. In the next seven years, we must significantly decarbonise our economies if we are to meet the targets set by the Paris Agreement. Eva Weightman, Director of Corporate Client Relations, said: 

“With 2030 fast approaching, there is no time to sit idle. The world needs business leaders to act with urgency and curb their companies’ emissions if we are to limit global temperature increase to 1.5°C above pre industrial levels. ”

Chief Technology Officer, Jon Mulder agrees:

“The time to act on decarbonisation and nature restoration has never been more critical. The solutions exist today and must be scaled and deployed more rapidly. We all have a role to play and carbon credits provide a vital service in protecting and restoring nature.”

If we are to achieve our 2030 ambitions, Finance Director, Peter Christie, argues that businesses must take voluntary action on climate mitigation.

“In the absence of direct regulation by governments, companies need to voluntarily ramp up their decarbonisation efforts so we can collectively solve the climate crisis. Carbon credits are an essential part of the business toolkit.”

Respira is committed to nature

However, carbon credits are not uniform in the benefits they deliver. Credits can be generated from activities which remove carbon from the atmosphere or from projects that prevent additional carbon emissions from release. But regardless of whether a project focuses on removal or avoidance, they can deliver a great many benefits for people and nature. It is with these projects – those with measurable impacts, aligned with the UN Sustainable Development Goals – that Respira partners.

This is why our flagship portfolio focuses predominantly upon nature-based projects such as forest conservation or mangrove restoration. Director Natural Climate Solutions, Ed Hewitt, further explains Respira’s investment rationale.

“There is a critical need to attach a monetary value to services that nature provides such as carbon capture, water quality, clean air and biodiversity.”

Ed continues:

“Carbon is really the first to be monetised at scale. By doing this we can financially incentivise the conservation and restoration of forests, soils and wetlands, helping us address the twin challenges of climate change and nature loss.”

Josh Schaefer, our Portfolio Director, explains that climate change and nature loss are inseparable challenges.

“Global emissions reductions can’t be achieved without tackling nature loss, because the earth’s natural ecosystems absorb roughly half of man-made carbon emissions – as well as providing numerous other benefits for people and biodiversity. Verified carbon credits have proved to be an effective way to finance the protection of natural ecosystems.”

Our CEO, Ana Haurie, concludes with a call to action:

“The time for the financial sector to act on climate is now. The predicted growth of the voluntary carbon market, with an increasing focus on nature-based solutions, provides a unique opportunity for institutional investors to benefit from this new asset class, while also supporting sustainable development goals and making a positive impact,” she said.

We encourage you to view our introductory video to learn more of our non-broker approach. And if you would like to find out more about our team, you can read more here.

27 June 2023
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Contact Respira

World Environment Day: We need to invest in nature for climate action

By News

As an impact-driven carbon finance company, we channel capital to predominantly nature-based climate solutions while simultaneously supporting corporates to achieve ambitious climate targets. Given our mission, you could almost declare each day in the Respira office an environment day – we are constantly working to deliver positive impacts for both people and the planet. But today is particularly special: it is the 50th celebration of World Environment Day. 

Organised by the United Nations Environment Programme, this day is each year hosted by a different country and in 2023, it is the turn of the Côte D’Ivoire. It is a chance for people around the world to step up their environmental action; reassess measures taken and galvanise new levels of support. This year, World Environment Day is focusing attention on the global challenge of plastic pollution in recognition of the urgency with which we must change our attitudes to single-use materials. Indeed, more than 400 million tonnes of plastic is made new every year, only half of which is intended to be used more than once. With a concerningly low proportion of this recycled (less than 10 percent), it is hardly surprising that around 20 million additional tonnes of plastic pollute our rivers, lakes and seas annually.

For climate action, with need nature

The challenge of plastic pollution does not exist in isolation. If our global ecosystems are degraded, destroyed and polluted, we cannot successfully mitigate against climate change. Yet, caring for our natural world requires substantial funding and policy development. As well as legislation reducing the ease with which we can produce, use and dispose of plastic, we must also think ‘big picture’ and protect our natural world using conservation and restoration projects. 

Nature-based climate solutions are one way in which we can deliver the finance needed to create protected zones. These solutions involve working with natural ecosystems – such as forests or oceans – to address global challenges. This could be a mangrove restoration project or a scheme to conserve an area of tropical forest. It has been estimated that if nature-based solutions are effectively deployed, it could be possible to reduce and remove at least 5 – and potentially 11.7 – gigatons of CO2e from the atmosphere every year. 

At Respira, we understand that to hold open the rapidly closing door to 1.5°C, we must tap into nature’s potential. We recognise that protecting our natural world is absolutely foundational to solving the global climate crisis. However, we are also acutely aware that current levels of funding to nature-based projects is simply not adequate to incentivise conservation and restoration on the scale required for mitigation. At present $2-3 billion is delivered each year. While this may sound substantial, we need at least $130 billion per annum if we are to meet our climate targets.

Therefore, on this World Environment Day, we echo the UN in its call to action. Today, we would like to remind business leaders, corporates and the general public that investing in nature is not simply the right thing to do, but is, in fact, essential for safeguarding our collective futures. To help deliver the finance needed, we are 100 percent committed to helping the voluntary carbon market scale with integrity, transparency and speed. 

5 June 2023
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Respira in Pakistan: Mangrove restoration on an immense scale

By News

Neatly planted mangroves stretch hundreds of thousands of hectares – a growing beacon of climate mitigation within a sea of containerships and fishing vessels. Bright green and full of life, these mangrove forests pose a striking juxtaposition to the industrialisation of Karachi’s port located at the far north of the project.

At the beginning of March, two members of our team were fortunate enough to visit Karachi – a sprawling microcosm of Pakistan and home to more than 20 million people. This was no tourist trip; CEO Ana Haurie and Director of Portfolio Management, Chris Villiers, were touching base with one of our flagship portfolio projects: Delta Blue Carbon.

Blue carbon refers to marine and coastal ecosystems – such as mangroves, seagrass meadows and tidal marshes – which can remove carbon dioxide from the atmosphere. We have recently published an article explaining the term and these ecosystems’ roles in climate mitigation if you would like to learn more.

A brown dirt track leads to a dark green mangrove plantation. Arranged in neat rectangular patches, two people tend to the saplings.

Delta Blue Carbon currently holds an impressive record. As the world’s largest blue carbon project, it is working to conserve and restore mangrove forests across 350,000 hectares of tidal river channels off the southeast coast of the Province of Sindh. Reflecting on her first impressions of the project, Ana said:

“The scale of the project was massive and monumental. When you read or see a PowerPoint, it’s hard to get the full impact of the work these projects are doing. But when you visit a project first-hand, it becomes even more meaningful.”

Chris was also struck by the scale of the project:

“It’s hard to process the extent of the restoration,” he said, “Even spending two days on a boat, we touched only a tiny corner of it.”

The scale of mangrove operations

Such is the scale of operations in Karachi that Delta Blue Carbon has planned mangrove planting schedules stretching to 2029. These plans are ambitious – in 2023 alone, the team hopes to have planted an additional 20,000 hectares of land. Ana remarked on the sheer logistics of these plans:

“When you see the project up close, you realise it’s such a feat to actually get it done! That was another thing which dawned on me was the determination that you have to have to make something like this a reality – it’s so impressive,” she said.

This large-scale project is the result of a pioneering public private partnership between the government of Sindh and a private project developer, Indus Delta Capital. Both Ana and Chris observed that local governments participation has been instrumental to the project’s success.

With over 20 years of planting experience, the Government of Sindh’s Forestry Department has shared valuable knowledge on the most appropriate tree species for the region to ensure resilience and biodiversity benefit. Although four mangrove species are planted in the project area, Rhizophora and Evercinia are most common due to the prevalent local conditions. This highlights the importance of working with local experts who can ensure that reforestation is truly context specific and appropriate for the ecosystem in question.

A man in a pink shirt holds two green mangrove saplings. One is the species Rhizophora and the other is Evercinia.

Rhizophora and Evercinia mangrove saplings.

 

Community participation

An estimated 42,000 people live in the project area and the team are confident that at least 20,000 have, in a variety of ways, benefited from its existence. Chris and Ana explained the four main ways in which people can participate:

  • The planting season brings with it ample temporary employment opportunities. In teams of 20 to 30, people set out to plant mangrove saplings. They are not immune from competition – the team proudly declared that they hold the Guinness World Record for the most planting in a single day!
  • Others gain temporary employment as re-stockers. These teams sail out to areas planted 10 months previously to replace any trees which have failed to grow. From here, the mangroves move to a state of self-sufficiency as they are fantastic self-seeders. With the right conditions, each area can become densely populated within 5 years of planting.
  • Local families or other members of the community can also take their own initiative to supply propagules (mangrove seeds) to the project developer for future planting in return for payments. Paid by the bag load, propagule collecting has become rather popular in the area. Ana and Chris recount how they saw a group of men building a high bank on the mud flats that would act as a collection point for seeds they planned to gather in the coming weeks.
  • The community also puts forwards certain individuals to act as stewards of specific areas of the project through the Mangrove Stewardship Program. . These individuals sign an agreement to protect the planted areas from harm and receive a salary in exchange for their labour. To date, 136 people have signed up to the program.

Considering these opportunities for community participation, Ana remarked on a palpable feeling of ‘collective buy-in’ from many local people. Chris voiced his agreement:

“We heard directly from people that they saw tangible value in the project. It feels like it is making a real difference to their lives.”

“That’s what the carbon markets can do,” Ana added. “It’s for the climate; it’s for biodiversity and it’s for the communities,” she paused for thought. “And that almost becomes more important.”

 

A blue landscape picture showing the calm waters off of Karachi, Pakistan and the cloudless blue sky above.

A group of 11 people, dressed predominantly in shirts, trousers and sun hats, stand by the side of the water.

A blue, decorated boat is mored in shallow waters in Karachi, Pakistan. Two men are on board, tending to mangrove saplings ready to be planted.

Picture credit: Ana Haurie & Chris Villiers

18 April 2023
Love0

Blue carbon: What is it and how can it help the climate?

By News

For millions of years, marine and coastal ecosystems have been silently removing carbon from our atmosphere. As natural carbon sinks, the world’s mangroves, seagrasses and tidal marshes have shielded us from the full impacts of our own greenhouse gas emissions. Yet, these ecosystems are under threat; human activity is undermining their ability to draw carbon from the atmosphere. If we fail to invest in the conservation and restoration of these species, we could almost be accused of shortsightedness. In the face of climate emergency, we must use every tool at our disposal to mitigate environmental risk. The time is now – we must preserve and scale blue carbon climate change solutions if we are to secure a liveable future for all.

 

The brilliance of blue

Mangroves, seagrasses and tidal marshes are the most established blue carbon climate solutions. To varying degrees, these solutions are already available and able to receive funding through carbon markets.

Mangroves

As natural environmental cleaners, mangrove forests bring an impressive array of climate-positive benefits. They absorb and store CO2; process chemical runoff, including chromium and lead, and even help to break down the toxins in raw sewage dumped into the ocean.

Not only do these forests remove more carbon from the atmosphere than any other type of tree, but also reduce the impact of storm surges by up to 50% in at-risk, developing countries. Given that climate change is predicted to increase the frequency and severity of extreme weather events, investing in effective, natural barriers has never been of more importance.

In this way, people are gradually realising the value of these saltwater trees. Taking into account their ability to counteract anthropogenic carbon emissions, their capacity for disaster risk reduction and their existing worth as richly biodiverse ecosystems, their value is estimated to be in the region of $462 billion to $798 billion per year. 

Seagrass

Seagrass has also received an increasing level of attention for its potential as a blue carbon climate solution. As one of only three seawater flowering plants, seagrass is found in shallow, coastal waters. As carbon dissolves in the sea, seagrass absorbs it to use as a building material for new roots and shoots. This process is extremely rapid, taking in carbon 35 times faster than a tropical rainforest. Even when seagrass dies, carbon is (if undisturbed) stored securely in sediment on the ocean floor. Although seagrass carbon capture projects can be expensive, the UK, Sweden and the US are all currently investigating the future potential of this solution. 

Tidal marshes

Tidal marshes are among the world’s most effective carbon sinks. These grassy wetland habitats flood during high tide, absorbing seawater and quickly capturing the dissolved carbon it contains. Yet, these ecosystems are in need of our conservation. Pollution and degradation can disrupt the nutrient balance of water and reduce the capacity of tidal marshes to sequester carbon. Looking to the future, the Blue Carbon Initiative has committed to focus on the conservation of tidal marshes as well that of mangroves and seagrasses.

 

Case study: Delta Blue Carbon, Pakistan

blue carbon project

Delta Blue Carbon mangrove plantation, Pakistan. Picture credit: Indus Delta Capital

Mangroves are estimated to cover between 12 and 15% of the world’s coastlines. While this may sound substantial, it actually translates to only 0.1% of the planet’s surface. Coastal mangrove cover decreased by over one million hectares between 1990 and 2020 due to illegal logging; raw sewage dumping; chemical run-off and pollution from rapid urban development. You can monitor the state of the world’s mangroves using this tool from Global Mangrove Watch. 

It is not all doom and gloom for mangroves. In Pakistan, the tide is turning and forest cover is beginning to increase. As one of the biggest mangrove-restoration programs in the world, our flagship portfolio project, Delta Blue Carbon, has certainly played a part in reforestation efforts. To date, the project has planted nearly 100 million trees. Over a 60-year time period, it expects to sequester 142 million tonnes of CO2 and generate 128.5 million high-quality, nature-based carbon credits. For more information on nature-based carbon credits, please refer to this article. 

On paper, mangrove restoration may sound simple. However, it is essential that any trees planted are region-specific if they are to bring genuine, lasting benefits to the local area. Indeed, the success of Delta Blue Carbon is a testament to the project’s commitment to working with local stakeholders. Throughout its lifespan, Delta Blue Carbon will offer full-time employment to at least 21,000 people, many of whom bring extensive knowledge of the region’s local environment.

 

What’s next for blue carbon?

Blue carbon climate solutions, like Delta Blue Carbon are certainly gaining traction. Just last year, Respira collaborated with Climate Impact X on a landmark, oversubscribed auction for blue carbon credits. With 250,000 tonnes of carbon removal credits selling for USD $27.80 per tonne, the auction was a promising indication of future demand for high-quality, nature-based solutions.

As such, we should look with interest to prospective blue carbon solutions under investigation. McKinsey writes on the ‘emerging’ and ‘nascent’ blue carbon solutions such as seaweed forest plantations, kelp farming or a move away from sea bottom trawling as this fishing method disurbs stored carbon that could otherwise be secured for millenia. Reef-based blue carbon initiatives are in an even earlier stage of research but there is hope that the carbon sequestered throughout the lifespan of shellfish is of a greater volume than that which is released during the formation of the reefs themselves. 

While much remains uncertain regarding the futures of these emerging blue carbon solutions, we know one thing for certain: we must take action now to unlock the full mitigation potential of our coastal and marine ecosystems. To learn more about blue carbon and other nature-based climate solutions, please refer to our flagship portfolio projects on our website: https://www.respira-international.com/portfolio/ 

14 March 2023
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Carbon Credit

Nature-based carbon credits explained

By News

From the dense forests of Brazil to the deep Pacific ocean, our planet has an innate ability to remove CO2 from the atmosphere. For hundreds of years nature has acted as a shield, protecting us from the worst impacts of our own, ever-increasing emissions. Yet, there is a limit – nature cannot continually mitigate without receiving care and investment. While many are waking up to the power of nature in our global climate crisis, it’s still fair to say that its true value is not yet reflected economically. 

However, we have tools at our disposal to help rectify this imbalance. Nature-based solutions (NBS) are one way to drive finance to conservation and restoration. These solutions involve working with natural ecosystems – such as forests or oceans – to address global challenges. The IUCN Global Standard expects NBS to provide a net positive impact on biodiversity, while simultaneously empowering stakeholders.

A similarly named subset of NBS is natural climate solutions (NCS). These are nature-based solutions that specifically address the climate crisis. They can be divided into two categories: those which avoid emissions from being released, for instance through the prevention of logging degradation or burning or existing forests, and those which remove carbon from the atmosphere via the creation of new, natural carbon sinks. Unlike NBS, the minimum requirement for NCS – as stated by The World Business Council for Sustainable Development (WBCSD) –  is that they result in zero net loss for biodiversity. But regardless of whether a project is NBC or NCS, it should be high quality – its benefits should be real, measurable, additional and permanent.

 

The need for nature 

To keep 1.5°C in reach, the IPCC states that we must achieve net zero by 2050. Meeting this target requires rapid decarbonisation and extensive climate mitigation which is a huge challenge. But there is hope. It is widely agreed that the natural world can deliver up to one third of the climate mitigation required by 2030 (see picture below). Indeed, it has been calculated that if nature-based solutions are effectively deployed, it could be possible to reduce and remove at least 5 – and potentially 11.7 – gigatons of CO2e from the atmosphere every year.

Therefore to hold open the rapidly closing door on 1.5°C, we need to tap into this potential. But this requires sustained, financial commitment from global, national and corporate actors. At present, nature-based solutions receive approximately $133 billion of public and private funding every year. While this sounds substantial, it is, in fact, only a conservative 25% of the level needed if we are to reach our 2050 climate target.

 

Respira Portfolio

 

The grave, green problem

Deforestation poses a massive threat to the world’s green carbon sinks. Currently most prevalent in the tropics, trees are felled at scale to make way for cattle ranches, soybean plantations and to meet global demand for timber.

Deforestation places the world’s future in jeopardy. Not only is deforestation a major threat to global biodiversity, but it also reduces the capacity of the world’s forests to capture carbon. Trees naturally take in CO2 when they photosynthesise and, without them, we would have significantly more carbon in the atmosphere than we do today. But when trees are cut and burned, they release carbon. Tragically, the volume of carbon currently emitted from global deforestation and degradation is second only to fossil fuel combustion. Without action to halt deforestation, our greatest carbon sink will remain a significant carbon source.

The world’s forests are also critical for global temperature and rainfall regulation. Water evaporating from the leaves of trees creates a cooling effect on the surrounding environment, while the unevenness of forest canopy’s alter wind speeds, further dispersing rising heat. This ability of trees to cool the planet means that tropical deforestation actually contributes 50% more to global warming than straight up carbon accounting suggests. 

 

The great, green solutions

To prevent deforestation and safeguard our natural carbon sinks, we must take action. It is estimated that 62% of the reductions and removals facilitated through NBS will come from forests and we know that these solutions are here now and ready to scale. 

Conservation

It doesn’t make sense to be losing forests faster than we are planting them, in the same way as it makes no sense to leave the taps running when trying to drain a bath. Moreover, newly planted trees take many years to achieve the same carbon storage capacity as existing, mature forest. Indeed, some Amazonian trees are hundreds of years old so are completely irreplaceable in the window left available to us to avoid the worst impacts of climate change.

Forest conservation, or REDD+, is a well-known method through which to generate nature-based carbon credits based on emission reduction. Independent assessors verify how many tonnes of carbon are stored in a particular landscape’s trees. By measuring the area of trees that has been protected from being cut down, the amount of carbon that has been stored due to a project developer’s conservation can be calculated. From here, a conservatively corresponding volume of carbon credits can be sold via the voluntary carbon market. 

Amid recent critiques, recognising high-quality forest carbon credits is of utmost importance. This means that the conservation would not have been possible without the finance generated through the sale of carbon credits and that the project is, as far as possible, permanent. High quality REDD+ projects typically withhold 10-20% of credits as a leakage and non-permanence ‘buffer pool’ – insurance – in case of fires, pests, or other potential factors that reduce net carbon storage. The revenue from the credits is shared equitably with project communities who decide how to spend it.

Reforestation & Afforestation 

While we should prioritise conserving our existing trees, there are occasions when planting is a very appropriate course of action. 

Reforestation is when trees are planted in an area from which they have recently been felled. It aims to restore forests to their previous state following degradation. Afforestation, on the other hand, refers to the planting of trees on land where none previously existed. It’s important not to be too literal here – don’t think never, think land which has not been recently deforested.

Unlike forest conservation, reforestation and afforestation both remove additional carbon from the atmosphere. As such, these projects generate removal credits and, if done well, can be extremely beneficial to local biodiversity. 

Planting trees in urban environments can also be extremely positive. A recent study of 93 European cities found that raising tree cover by up to 30% (depending on existing levels), can reduce the average temperature by 0.4°C. This may sound minimal, but is enough to reduce heat-related deaths.

 

The big, blue problem

Spanning 72% of the earth’s surface, it is common knowledge that our oceans regulate the climate. Since 1850, the oceans and coastal ecosystems have absorbed a staggering 40% of anthropogenic emissions. Yet, as with forests, this ability to slow climate change is being undermined by human activity. Pollution, marine warming and overfishing all contribute to ocean and coastal degradation. 

The brilliant, blue solutions

To fund the protection of these ecosystems, it is vital we invest in NbS generating blue carbon credits. Mangrove restoration projects – such as Delta Blue Carbon – are already sequestering carbon from the atmosphere, while seagrass has recently received attention for its enormous potential for capture. Indeed, McKinsey reports that even if we just used the currently established blue carbon solutions, they could remove between 0.4 and 1.2 metric gigatons of CO2 from the atmosphere every year (see graph below).

 

(Source: McKinsey Blue Carbon report, 2022)

 

NBS ‘done right’

If implemented with integrity, NbS can help us to meet the goals of the Paris Agreement, protect natural ecosystems and support the rights of Indigenous Peoples and local communities. However, purchasing nature-based carbon credits is not a substitute for direct decarbonisation of the corporate value chain. Rather, investing in these solutions is a way for a company to faster meet, and eventually exceed, its emission reduction targets. 

Indeed, prior to purchasing nature-based carbon credits, an organisation should already have set science-based climate targets and be implementing emission reduction in line with the mitigation hierarchy (see picture below). These principles are also outlined in the NCS for Corporates Guidance.

 

 

Now is a pivotal moment for NBS. Either we enter a negative feedback loop in which deforestation and ocean degradation become key drivers of climate change. Or, we engage in a positive cycle of capacity building and climate change mitigation. The second option is in reach – NBS are here now and readily available to scale – but urgently require funding. Buying carbon credits through the voluntary carbon market helps to channel this much-needed finance to high-quality NBS projects. Contact us to find out more about our portfolio of these high-impact, high-integrity climate mitigation solutions.

14 February 2023
Love0

6 questions to resolve in order for carbon markets to deliver more for nature

By News

By Ed Hewitt, Director of Natural Climate Solutions. First published by Carbon Pulse, 7th February 2023.

The latest debate arising from the Guardian’s recent article criticising ‘rainforest carbon offsets’ has brought the topic firmly to the forefront of public attention again. My position remains that carbon markets can be an incredibly important tool to finance nature-based solutions (NBS) at the scale required to be meaningful on a global scale [1]. However, there are some serious questions which must be resolved as soon as possible if verified (not just voluntary) carbon markets are to deliver their full potential for nature.

Context

Despite accounting for what seems like 99% of the conversations about financing nature, carbon markets still account for less than 1% of total global spend on NBS [2]. However, carbon markets are heralded by many (myself included) as a much-needed way to bring significantly more private finance to the sector. Estimates range as to precisely how much [3], but assuming Mark Carney’s projection of $100 billion per year by 2030 is a reasonable figure, directing half of that to nature could provide 12.5% of the total NBS financing required by 2030 [4] (i.e. not the panacea, but a very material contribution).

Unlocking this potential is hard though. The last 12 months have presented what many would observe to be a perfect storm of challenges for the market – notably a global economic downturn, continued debate over claims and quality (which has resulted in continued negative publicity in mainstream media) and uncertainty about the specific implications of Article 6 for nature-based projects. Demand in 2022 for retirements from nature-based credits in the voluntary carbon market dropped by 30% (53 mln in 2022 vs. 76.7m in 2021 according to AlliedOffsets’ data) and prices for the benchmark nature-based traded contract (the Xpansiv CBL N-GEO) fell by two thirds from over $14/tonne in December 2021 to below $5/tonne in December 2022.

We shouldn’t lose hope despite these concerning headlines. There are some specific technical reasons [5] accounting for the price falls in the N-GEO and, in contrast, there were a number of promising signs for the longer term in 2022. Despite the tough macro conditions, OTC sale prices for ‘high-quality’ NBS projects held up relatively well. Respira had first-hand experience of the Delta Blue Carbon project in our portfolio achieve a price of $27.80 for 250,000 tonnes in the auction conducted with CIX. This is at last a meaningful price for a meaningful volume. Market infrastructure and guidance further advanced; the first drafts were published of the Integrity Council on Voluntary Carbon Market’s (IC-VCM) Core Carbon Principles (CCPs) and the Voluntary Carbon Market Integrity’s (VCMI) corporate claims code of practice, and there was progress on Article 6 which could prove a huge market stimulant for nature-based projects. Further, a recent Abatable report showed that although nature-based credit retirements decreased in 2022, investment into ‘upstream’ (i.e. future supply of) nature-based carbon projects and developers reached record levels [6]. These represent some encouraging signs, but what specifically remains to be resolved in order to truly unlock the potential?

I believe there should be 6 questions at the top of everyone’s mind for the VCM in 2023:

1) Will there be agreement about what nature-based carbon credit ‘quality’ looks like and will this build widespread trust?

As highlighted by the recent Guardian article and the following debate which has ensued, ‘trust’ in the climate (and social + biodiversity) integrity of nature-based credits is not as high as it needs to be. Some of this criticism is justified whilst some is based on a misunderstanding of the methodologies and on the ground realities of the projects. Either way, many people are confused, which is never good for scaling a market. The recent rise of carbon ratings agencies (such as Sylvera, Be Zero and Calyx) are useful attempts to make sense of ‘quality’ (although should be viewed as risk assessment tools rather than the ‘unquestionable truth’) and the IC-VCM’s attempt to develop CCPs is a needed attempt to address these concerns and ensure an underlying and consistent benchmark of ‘quality’. My hope is that the CCPs can be accepted by communities, developers, buyers and financiers alike in 2023. However – the principles do need to also be workable in practice – especially for nature-based projects – and that was one of the biggest areas of pushback with last year’s draft guidance which will need to be resolved in 2023.

This topic of trust is particularly an issue for forest conservation projects which were the specific subject of the Guardian article which called into question their ‘baseline’ integrity (the amount of deforestation which would have occurred in the absence of the project). Confusion also abounds with the mind boggling different uses of the term REDD(+) and whether it is carried out at project, jurisdictional, or national scale. This has all contributed to demand for forest conservation credits not increasing as expected (REDD retirements in 2022 saw the biggest drop off of any credit type). The accuracy of some of the more sensational negative headlines on baselines have been robustly challenged, but uncertainty still reigns. The hope is that new Verra methodologies which require projects to use national ‘nested’ baselines should ensure that new projects coming onto the market don’t suffer the same credibility issues. Similarly, due to the increased jurisdictional and national scale of the pending ART TREES credits, baselines should also be less of an issue with these credits too. It’s not inconceivable that a new crediting standard and mechanism may also emerge. But importantly – it’s crucial that these different crediting mechanisms, operating at different scales can exist side by side and reinforce, rather than undermine, one another. When these issues are resolved, then trust in the climate integrity of forest conservation credits can be regained. Let’s not forget that deforestation and degradation causes 10-15% of global GHG emissions and that rewarding communities, private landowners and governments for protecting forest under threat with results-based payments from corporates is one of the best tools available to halt deforestation.

2) Will corporate claims guidance be agreed and gain widespread acceptance?

It’s a crazy situation where corporates are currently ‘greenhushing’ for fear of making the wrong claim. Or simply withdrawing from and not entering the market because of a fear of reputational scandals. Claims drive the market in the short term, and we need clarity and consistency ASAP. In particular, specific guidance will be needed about whether ‘carbon/climate neutral’ can still be used. That’s the most widely used claim and drives near-term demand, but it’s also one of the most controversial and poorly defined (it’s currently the subject of a court case in Germany). If it’s continued to be allowed (or is replaced by a different term with clearly beneficial implications for the buyer), specific guidance will be needed about whether it can be met with avoided emissions credits (which are still by far the most common form of nature-based credit) and whether a Corresponding Adjustment will be required. If this is done well, we could see the emergence of a semi regulated market here where corporates are required to disclose the specific credits they are retiring and the associated claims they are making – further taking this out of the ‘voluntary’ only space.

My hope is that the two most influential external bodies in this space – SBTi and VCMI – will be aligned in their guidance here. Different bodies recommending different things is never helpful for markets and we all seek consistency and clarity.

If quality and claims are both fully agreed and accepted, I think that ‘greenwashing’ accusations can be put firmly to bed.

3) Will Article 6 of the Paris Agreement be friend or foe for nature-based credits?

Whilst it looks on first glance as though Article 6, which enables the trading of emissions reductions between countries under the Paris Agreement, will be a good thing for nature-based credits, the devil is of course in the detail. Specifically:

  • Which specific nature-based credit types and methodologies will be eligible under 6.2 or 6.4? This will be key for establishing whether existing or new nature-based projects currently being designed will be able to benefit or whether new crediting mechanisms for nature-based projects will need to be developed. It currently looks like 6.2 will have more flexibility to use existing standards, whereas 6.4 looks like it will be a replacement for the CDM which may require new methodologies to be written.
  • Will there still be demand for voluntary credits which do not fit within the Article 6.2 or 6.4 framework? It would be a huge shame to throw away all the impactful climate mitigation projects which don’t end up complying with Article 6, so hopefully a thriving voluntary market with clear quality and claims guidance can continue outside of the Article 6 framework. However, very clear guidance from VCMI (and others) will be needed into what specific claims can be made with these credits (specifically related to what you can and can’t claim with or without a Corresponding Adjustment (CA). The big issue right now with Article 6 is timing. It’s not clear exactly when any of these questions will be fully resolved, yet it makes no sense for the planet to hang around until they are sorted. Climate action can’t wait for perfection.

4) Will compliance programmes allow in more nature-based credits?

Currently, the vast majority of nature-based credits are not eligible for compliance markets. They are under voluntary standards and mainly transacted on the voluntary market. Yet it’s in compliance markets where the real scale lies and high price points can be found ($850 bln market size for compliance markets globally vs just over 1$bn for voluntary in 2021, according to Refinitiv). There are of course some exceptions – California, South Africa & Colombia are good examples where a limited number of domestic nature-based credits are allowed in and the airline scheme CORSIA has approved a limited selection of methodologies for international nature-based credits. However, these are currently small in scale and are all markets with low prices. Article 6 does give rise to the prospect of more international trading for compliance markets, but ultimately policy makers (especially for the largest market – the EU ETS) are going to be unlikely to allow in more nature-based credits until debates about quality are settled. Once they are, it opens up a whole new window for finance to flow – a good reason why we are seeing an evolution of the VCM terminology from ‘voluntary’ to ‘verified’ carbon market.

5) Will biodiversity credits gain traction? And if they do, what will be the implications for nature-based carbon credits?

It finally seems that biodiversity crediting is gaining traction on the back of the Montreal biodiversity COP. ‘Nature positive’ is gaining momentum as a term corporates can use and a few practical frameworks for measuring a standardised unit of biodiversity have now been proposed. Plan Vivo has developed the first crediting methodology. Similar initiatives are also underway at Verra and other standard bodies. My feeling is that these will be developed and adopted very quickly given the urgency and momentum, although it is worth acknowledging that we are still at a very early stage in their development vs carbon markets and the market infrastructure (including safeguards and MRV systems) is yet to be built. Although this a great development for nature-based projects, it could be a long-term risk to the premium price currently enjoyed by nature-based carbon credits with high biodiversity co-benefits (particularly those co-certified by CCB)

6) Will macro-economic growth return?

Of course, this is beyond the control of nature- and carbon-market actors, but it was a large contributor to the downturn in 2022. When growth returns, budgetary constraints for corporate buyers should ease and demand should return. The 2022 macro-economic conditions particularly hit nature-based carbon project retirements as voluntary nature-based credits still tend to trade at a significant premium (+50%) to other common credit types such as renewable energy and household devices. Indeed, 2022 saw a trend for corporates turning back to cheaper technology-based credit types (retirements of renewable energy credits increased from 90 mln in 2021 to 105 mln tonnes in 2022 according to Allied data).

Due to the severity of the climate emergency, we need to act at speed and scale. Nature-based solutions hold the key to one third of the climate mitigation needed between now and 2030 and come with a myriad of co-benefits for biodiversity and people when done right. We need new and increased ways in which to fund them. Carbon markets may not be perfect, but they are improving all the time, and can be a critical way of channelling private capital into nature-based solutions. We know the challenges, and by working collaboratively to solve them we can unlock this puzzle. Resolutions to these questions are within reach. Let’s make the next series of Guardian articles be about how the challenges were addressed successfully!

 

[1] (around $400 bln of investment is needed annually by 2030 according to UNEP, delivering over 10 bln tonnes per year of CO2e reductions and removals by 2030)

[2] Primary demand in voluntary carbon market in 2021 was around $1 bln of which around half was for nature based credits according to Trove Research. UNEP estimate $133 bln annually was spent on NBS in 2021

[3] Trove estimate $296 bln by 2035 in high demand tight supply scenario, BNEF show a scenario of $1 trillion by 2037

[4] UNEP state of finance for nature estimates $400 bln annually needed for NBS by 2030. $50 bln is 12.5% of that.

[5] The N-GEO is an illiquid contract with tiny volumes traded and no control over which project you end up with

[6] Abatable’s report shows over $10 bln of VCM deals were announced in 2022, with a further $16 bln estimated deals completed but undisclosed. It is estimated that just under half are for nature-based deals.

7 February 2023
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