Why voluntary carbon markets for nature are needed right now

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Campbell Moore, Managing Director, Carbon Markets, The Nature Conservancy, Giulia Carbone, Director, NCS Alliance, Jack Hurd, Executive Director, Tropical Forest Alliance, World Economic Forum, Emily Nyrop, Vice President, Climate Change at Conservation International

• Nature-based solutions (NbS) can provide up 30% of the mitigation needed to limit global warming to 1.5ºC above pre-industrial levels by 2030.
• The voluntary carbon market can help mobilize public sector finance towards NbS, particularly in the Global South where it is most urgently needed.
• While the solution is not an alternative to rapid decarbonization within value chains, NbS can play an invaluable role in reducing and removing emissions.

The best available science makes clear the devastating impacts if global average temperatures surpass pre-industrial levels by more than 1.5°C. However, it is widely agreed that avoiding this scenario is not achievable without sustained and rapid industrial decarbonization.

It is also widely agreed that we need nature-based solutions (NbS), which can provide up to 30% of the mitigation required by 2030 in order to keep the 1.5°C target in reach. NbS are a collection of nature-based approaches that both reduce and remove emissions, such as avoiding emissions through protected landscapes to limit deforestation or restoring ecosystems for carbon removal from the atmosphere.

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What is the World Economic Forum doing about nature?

Biodiversity loss and climate change are occurring at unprecedented rates, threatening humanity’s very survival. Nature is in crisis, but there is hope. Investing in nature can not only increase our resilience to socioeconomic and environmental shocks, but it can help societies thrive.

There is strong recognition within the Forum that the future must be net-zero and nature-positive. The Nature Action Agenda initiative, within the Centre for Nature and Climate, is an inclusive, multistakeholder movement catalysing economic action to halt biodiversity loss by 2030.

The Nature Action Agenda is enabling business and policy action by:

Building a knowledge base to make a compelling economic and business case for safeguarding nature, showcasing solutions and bolstering research through the publication of the New Nature Economy Reports and impactful communications.

Catalysing leadership for nature-positive transitions through multi-stakeholder communities such as Champions for Nature that takes a leading role in shaping the net-zero, nature-positive agenda on the global stage.

Scaling up solutions in priority socio-economic systems through BiodiverCities by 2030, turning cities into engines of nature-positive development; Financing for Nature, unlocking financial resources through innovative mechanisms such as high-integrity Biodiversity Credits Market; and Sector Transitions to Nature Positive, accelerating sector-specific priority actions to reduce impacts and unlock opportunities.

Supporting an enabling environment by ensuring implementation of the Kunming-Montreal Global Biodiversity Framework and mobilizing business voices calling for ambitious policy actions in collaboration with Business for Nature.

Some good news is that we have a powerful tool at our disposal that can mobilize private sector finance and channel it toward NbS in the Global South, which is where it is most needed. That tool is the voluntary carbon market – where companies or individuals can buy carbon credits as part of their own plan to meet their climate goals.

The solution isn’t perfect. In fact, the market has come under increasing scrutiny. As we wrote earlier in the year, when we outlined five reasons why forest carbon credits are critical to climate action, the fact is that we won’t achieve our global climate targets without nature, and we won’t protect and restore nature at the scale required without carbon markets.

Here’s the simple truth. As companies work toward net zero, they will continue to put greenhouse gas emissions into the atmosphere.

Voluntary carbon market to help address emissions

The voluntary carbon market is currently the most effective way for them to address these emissions by mobilizing billions of dollars in private sector finance every year – and also helps make up the $4.1 trillion financing gap in nature by 2050. Such finance is additional to that pledged by national governments.

The value of the global voluntary carbon market topped $1 billion for the first time in 2021 and could be worth between $5-30 billion per year by 2030, with perhaps two thirds of this channelled into nature-based solutions, filling existing gaps in climate finance for nature.

However, in the last three years, only 1.2% of the annual cost effective potential of NbS has been unlocked by the voluntary carbon market.

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One of the barriers is that far too often the use of carbon credits – and NbS carbon credits in particular – have been framed as an ‘either/or’ proposition. This implies companies think they can either invest in them or fund the decarbonization of their operations.

But the truth is it’s now too late to choose one or the other. Adopting a single approach is not enough to solve the twin crises of nature loss and climate change. This is why climate science is now demanding a ‘both/and’ approach – that is, simultaneously investing in internal reductions and NbS credits.

What is encouraging is that leading companies understand this “both/and” approach, and are publicly committed to it. In addition, recent research has further shown that companies that purchase a material amount of carbon credits on average reduced their emissions faster than those who have not.

High-quality carbon credits are essential for integrity

It is also key to recognize that high-quality carbon credits are essential to creating a high-integrity voluntary carbon market. The good news is that initiatives like the Integrity Council for the Voluntary Carbon Market which are aiming to forge a clear path forward towards higher integrity, greater transparency and overall more consistency in the marketplace.

While it’s clear that there is still much work to do on this front, the good news is that recent recommendations issued by civil society, such as the Tropical Forest Credit Integrity guide and the NCS Alliance’s Buyer’s Guide, offer clear guidance that companies can turn to in the interim.

What does all this counsel have in common? Purchasing carbon credits through the voluntary carbon market is not an alternative to rapid decarbonization within value chains.

Rather, high-quality carbon credits are a way for companies to support a range of critical mitigation efforts outside of their value chains, including the potential to channel billions of dollars into NbS that would not receive funding otherwise.

In the future, NbS carbon credits must improve in line with this new science and guidance, updated methodologies and evolving technology.

Voluntary carbon market to accelerate climate action

When investments are made with due diligence, high-quality NbS credits will ensure that emissions reductions or removals happen, that nature is being protected or restored, and that communities are not only receiving benefits, but are also active participants.

There’s the potential for the voluntary market to do so much more, if we let it. Failure of the market now would slow humanity’s path to net-zero emissions and derail financial innovation in other ecosystem services.

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How is the World Economic Forum fighting the climate crisis?

The World Economic Forum’s Centre for Nature and Climate accelerates action on climate change and environmental sustainability, food systems, the circular economy and value chains, and the future of international development.

• Through the Global Plastic Action Partnership, the Forum is bringing together government, business and civil society to shape a more sustainable world by eradicating plastic pollution.
• Global companies are collaborating through the Forum’s 1t.org initiative to support 1 trillion trees by 2030, with over 30 companies having already committed to conserve, restore and grow more than 3.6 billion trees in over 60 countries.
• Through a partnership with the US Special Presidential Envoy for Climate John Kerry and over 50 global businesses, the Forum is encouraging companies to join the First Movers Coalition and invest in innovative green technologies to enable net-zero emissions by 2050.
• The Forum is bringing global leaders together to reduce the environmental impact of value chains and make the $4.5 trillion circular economy opportunity a reality. The African Circular Economy Alliance is funding circular economy entrepreneurs and circular economy activities in Rwanda, Nigeria and South Africa, while the Circular Electronics in China project is helping companies reduce and recycle 50% of e-waste by 2025.
• Since launching in 2020, the Forum’s open innovation platform UpLink has welcomed over 40,000 users who are working on more than 30 challenges crowdsourcing solutions to the climate crisis.
• More than 1000 partners from the private sector, government and civil society are working together through the 2030 Water Resources Group to ensure availability and sustainable management of water and sanitation for all by 2030. The group has facilitated close to $1 billion of financing for water-related programmes.

Contact us for more information on how to get involved.

Climate change and nature loss are crises and inaction is not an option. The voluntary carbon market is critical for climate action and major progress has been made to improve outcomes – with many more improvements already under way.

Now is exactly the time to invest in nature-based solutions through the voluntary carbon market, alongside other immediately deployable climate solutions, so we can ensure a better future for the planet.