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Risks and opportunities for nature-based solutions in Latin America and the Caribbean

October 18, 2024 by ZCA Team Leave a Comment

This article is also available in Spanish.

Key points:

Nature-based solutions (NbS) are actions that aim to address societal challenges through the protection, management and restoration of ecosystems, such as restoring wetlands, forest conservation and developing green infrastructure. NbS are seen as a way to simultaneously tackle climate change and biodiversity loss.
62% of governments had incorporated NbS into their Nationally Determined Contributions (NDCs) as of 2020, including countries in Latin American and the Caribbean.
Studies estimate that NbS could mitigate around 10-12 billion tonnes of CO2 equivalent per year – 27% of the current annual GHG emissions – but meeting this potential would mean reforesting, restoring and changing practices over huge areas of land, much of which would be located in the Global South.
NbS do not address the source of fossil fuel emissions and are not enough to limit global warming to below 2°C. The concept has been criticised for distracting from the need for action to reduce emissions.
NbS is a broad term and some nature-based projects come with significant risks and trade-offs, including biodiversity loss and increasing risk of land grabs. Projects have disregarded the rights and knowledge of Indigenous and local communities and raised human rights concerns.
To be successful, solutions should be based on local knowledge systems and address local concerns, seek the engagement and consent of local and Indigenous communities, and provide clear, measurable benefits for ecosystems.

What are Nature-based solutions?

In 2024, the World Economic Forum (WEF) rated biodiversity loss and ecosystem collapse as one of the top five risks over the next 10 years, requiring urgent attention. One type of response has generated much attention: Nature-based solutions (NbS). The term emerged during the late 2000s – it was used by the World Bank in 2008 and adopted the same year by the International Union for Conservation of Nature (IUCN). The IUCN defines NbS as “actions addressing key societal challenges through the protection, sustainable management and restoration of both natural and modified ecosystems, benefiting both biodiversity and human well-being”.

The concept of NbS emerged as international institutions aimed to address and mitigate the effects of climate change by working with ecosystems, rather than through conventional engineering projects, enhance sustainable livelihoods and preserve ecosystems and biodiversity. The NbS framework was significant because it recognised that people are not just passive beneficiaries of nature’s services – they can actively engage in protecting, managing and restoring natural ecosystems to help overcome various challenges.

Natural climate solutions is a similar but narrower term, explicitly referring to NbS that focus on climate mitigation.

Some examples of NbS outlined by IUCN include:

The restoration and sustainable management of wetlands and waterways, to help enhance fish stocks, support livelihoods, lower flood risks and support recreation and tourism.
Forest conservation to protect biodiversity, help with climate adaptation and mitigation, improve food and energy security and support local incomes.
Restoring drylands to improve water security, reinforce local livelihoods and climate resilience.
Developing green infrastructure in urban areas¹ to enhance air quality, water quality and wastewater treatment, reduce stormwater runoff, and enhance the quality of urban life.
Employing natural coastal defenses, like barrier islands, mangrove forests, and oyster reefs, to shield shorelines from flooding and mitigate the impacts of rising sea levels.

As of 2020, two-thirds of countries recognised in their Nationally Determined Contributions (NDCs) that ecosystems are vulnerable to climate change and 62% included ecosystem-based approaches to adaptation, or conservation actions. However, measures to implement NbS for climate change adaptation differed significantly based on economic development, region and habitat type.

Challenges with the definition of nature-based solutions

‘Nature-based solutions’ is a very broad concept. One of the main criticisms of the concept is that its definition is too vague and does not clarify which types of projects count as NbS, meaning nature-based actions that damage ecosystems and local communities can be labelled as NbS. For example, protected natural areas that encroach on the actions and land rights of local and Indigenous communities.

The concept does not make any reference to who and what are creating the problems that NbS seek to solve, while the focus on nature as a ‘solution’ suggests that nature’s value is solely based on its utility to humans rather than acknowledging it for its own sake.Implementing NbS with clear standards and evaluation criteria is essential to ensure their quality and integrity. WWF advocates using the 2020 IUCN Global Standard for Nature-based Solutions. The framework provides 28 indicators that guide the design and implementation of NbS, “in a way that allows nature to deliver its valuable ecosystem services,” as well as measuring impact.

Nature-based solutions vs. ecosystem-based approaches

NbS is an umbrella concept encompassing a wide range of ecosystem-related actions that address societal challenges. The definition of NbS from the Convention on Biological Diversity (CBD), for example, indicates that NbS “are broader than ecosystem-based approaches and include benefits for biodiversity, water quality/quantity, sustainable land management, etc.”

Ecosystem-based approaches (EbA), or ecosystem-based adaptation, refers to when biodiversity and ecosystem services are used as part of a climate change adaptation strategy. EbA is a subset of NbS focused specifically on using nature to adapt to climate change. According to CBD, EbA “may refer to a wide range of ecosystem management activities to increase the resilience and reduce the vulnerability of people and the environment, including to climate change and disasters.”According to the WWF, although NbS should be considered a broader tool than EbA and both have their own objectives, they can be complementary and mutually supportive.

Nature-based solutions in Latin America and the Caribbean

Countries in Latin America and the Caribbean (LAC) are integrating NbS by embedding ecosystems and their services into their revised NDCs. As of 2022, 10 of the 16 EUROCLIMA+ programme countries in LAC² explicitly adopt an NbS or EbA approach,³ highlighting the growing prevalence of these strategies in climate targets. A smaller group (6 out of 16)⁴ do not explicitly reference these approaches but still incorporate nature in their climate commitments.

Forest conservation and reforestation are NbS that facilitate carbon sequestration, reduce vulnerabilities to extreme weather events such as droughts and floods, and simultaneously protect biodiversity. Costa Rica, Chile, Colombia, Mexico and Panama have widely highlighted forest actions in their updated NDCs, while Argentina, the Dominican Republic, Honduras and Nicaragua outline similar policies as EbA.

In addition to land-based solutions such as planting forests and changing agricultural practices, NbS efforts in the region include coral reef and mangrove restoration to strengthen coastal resilience, adding vegetation on slopes to prevent landslides, and encouraging permeable green spaces to recharge groundwater.

A 2016 projection⁵ estimated that restoring 20 million hectares of degraded lands in LAC – equivalent to around half the surface area of Paraguay⁶ – would generate USD 1,140 per hectare, or around USD 23 billion over a 50-year period. This amount is equivalent to the climate finance received by the ten countries most affected by climate change between 2000 and 2019. Gains would come from timber and non-timber forest products, ecotourism revenues, increased agricultural productivity, carbon capture, and the avoided losses from food insecurity.

A study by the Inter-American Development Bank (IDB) and World Resources Institute (WRI) looked at 156 NbS projects across LAC in 2020. Just under half of the NbS projects (47%) were operational, meaning they had moved beyond the initial pilot phase, with the other half (53%) in preparation and not yet implemented, implying they were still seeking funding or financing. Nearly 75% of these projects rely on grants as a key part of their funding, and 60% are actively seeking further investment or financing. Money provided as grants does not accumulate interest, so projects financed in this manner do not contribute to national debt.

Fig. 1: Projects using NbS in Latin America and the Caribbean (2020)

Nature-based solutions, decarbonisation and ecosystem protection

Several studies estimate that NbS could mitigate around 10-12 billion tonnes of CO2 equivalent (GtCO2e) per year by 2050, potentially reducing peak global warming by approximately 0.3°C. This means that NbS projects could mitigate up to 27% of global annual emissions through the protection or restoration of different ecosystems, such as forests and oceans.

Despite this, a significant gap would remain between the approximately 40 GtCO2 emitted annually from fossil fuel combustion and land-use change and the amount of carbon that NbS can mitigate or capture. This highlights the need for broader climate action to reduce emissions alongside NbS. The timescales projected for most NbS extend beyond the immediate need for atmospheric CO2 reductions and the UN Environment Programme (UNEP) recognises the limitations of the concept, stating that the tool cannot “replace rapid, deep and sustained reductions in greenhouse gas emissions.”

Nature can contribute towards climate adaptation. For example, mangroves reduce annual flooding for over 18 million people worldwide, preventing up to USD 82 billion in flood damage annually.

Biodiversity-rich ecosystems are more resilient, providing more robust protection against the impacts of a changing climate. Since climate change and biodiversity loss share many underlying causes, some solutions could tackle both issues simultaneously. For example, preserving ecosystems that store carbon while supporting native species.

To promote NbS’s ability to tackle the climate and biodiversity crises, well-regulated financial markets are key in mobilising funding for place-based NbS initiatives. However, in 2022, UNEP estimated that annual finance flows to NbS amounted to USD 154 billion, less than half of the USD 384 billion annually required by 2025, and only a third of the USD 484 billion per year needed by 2030.

Potential benefits of nature-based solutions in LAC

Climate-related natural disasters in LAC have increased threefold over the past 50 years, resulting in severe impacts on health, ecosystems and economies. In lower-income countries in the region, these disasters can diminish GDP by 0.9% and damage can reach up to 3.6% in the Caribbean.

The LAC region is one of the most biodiverse areas in the world, but its natural resources are continually being exploited. Ecosystem degradation increases vulnerability to natural disasters, drives up costs, disrupts essential services, raises the risk of infrastructure damage and endangers populations. NbS are being suggested as one way to help address the challenges imposed by climate change in LAC. For example:

LAC lost more tropical primary forest than any other region globally in 2019, with Brazil, Bolivia, Colombia and Peru among the top 10 countries worldwide for primary forest loss. Between 2002 and 2022, deforestation in the Amazon resulted in the loss of 30.7 million hectares of primary forest, an area bigger than Italy. Deforestation in the Amazon is altering hydrological patterns and jeopardising water supplies.
Glaciers in the tropical Andes have been retreating over the past several decades, temporarily boosting downstream water supply during the dry season. This retreat threatens ecosystem balance with a reduction in water availability that impacts sectors such as export-oriented agriculture, mining, hydropower, tourism, and human consumption. NbS can enhance water security and build resilience to climate-related shocks, for example by integrating them with traditional infrastructure projects.
Approximately 11% of the world’s coral reefs are located in this region, primarily along the Central American coastline and around the Caribbean islands.⁷ 70% of the world’s coral reefs experienced damaging levels of heat stress between 2014 and 2017. The degradation of the Mesoamerican Reef – the second-longest barrier reef in the world, located on the coast of Belize, Guatemala, Honduras and Mexico – could result in an average annual economic loss of USD 3.1 billion to the tourism, commercial fisheries and coastal development sectors.
LAC hosts approximately 26% of the world’s mangrove forests, but these ecosystems are in jeopardy due to habitat fragmentation and overexploitation. Mangrove forests protect coastlines by breaking waves and preventing coastal erosion and storm surges, protecting low-lying coastal communities that are particularly vulnerable to the effects of sea-level rise. Additionally, they help mitigate climate change, as one hectare of mangroves can store up to 3,754 tons of carbon.

Drawbacks and trade-offs of nature-based solutions in LAC

Although NbS can contribute to climate mitigation and the protection of ecosystems, the potential impacts of such solutions are limited and must be implemented alongside other actions to swiftly and substantially reduce emissions.

Nature-based projects can also present significant risks and trade-offs for local ecosystems, and local and Indigenous communities.

Impacts on biodiversity and land security

The IPCC Special Report on Climate Change and Land (SRCCL) indicated that solutions for reducing land-use emissions, like new plantations, may increase the demand for land, which could lead to “adverse side effects for adaptation, desertification, land degradation and food security.” For NbS to mitigate 10 billion tonnes of CO2 equivalent per year, land use practices would need to change over huge areas: Ecosystem destruction would need to be stopped globally, including preventing 270 million hectares of deforestation, 678 million hectares of ecosystems would need to be restored – an area more than twice the size of India – and the management of 2.5 billion hectares of land would need to be improved by mid-century.

The majority of this land is expected to be in the Global South, including the land used for afforestation, soil carbon sequestration in croplands and grasslands, and bioenergy. This could mean major disruptions to land and water, and to nitrogen and phosphorus stocks and flows resulting from extensive fertiliser use from new plantations.

NbS could lead to the expansion of large monoculture plantations, impacting biodiversity. Establishing new tree plantations, instead of restoring primary vegetation, has negative ecological consequences. A study has shown that pressure against biodiversity is greater inside protected areas compared to unprotected ones.These new forestations may sow fast-growing and non-native species that are more susceptible to fires, consume more water and are harvested in a few years, quickly returning captured carbon back to the atmosphere.

Friends of the Earth International warns that alongside an increase in monoculture plantations, NbS could lead to extensive land grabs. NbS that involve forests (as with many other tools for mitigation of climate change) raise the risk of a wave of land grabs disguised as climate action and biodiversity protection. Land grabs pose a significant threat to local food sovereignty, particularly for the small-scale producers who provide 70% of the world’s food.

Impacts on local and Indigenous communities and human rights

NbS are often criticised for not aligning with the “wisdom, cosmology, traditional knowledge and sustainable livelihoods” of local communities and Indigenous Peoples, overlooking critical cultural and ecological perspectives held by these communities.

The expansion of plantations and land grabs results in human rights violations, particularly for Indigenous Peoples, local communities and other rural populations. Survival International reports that, the creation of protected areas globally has displaced Indigenous and local communities from their lands and restricted their access to essential resources, food, and medicine they traditionally relied on from those areas. In turn, undermining local and Indigenous land rights from protected areas can have a negative impact on biodiversity by allowing for encroachment and disrupting sustainable practices.

Current safeguards are not enough. Only a third of National Biodiversity Strategies and Action Plans (NBSAPs) presented by each CBD party have provisions to enhance Indigenous Peoples and local communities’ rights. The IUCN Standard for NbS includes a human rights indicator that establishes that “The rights, usage of and access to land and resources, along with the responsibilities of different stakeholders,” should be “acknowledged and respected.” However, these safeguards are voluntary, and compliance can be self-assessed. As a result, adding these ‘safeguards’ to NbS offers little reassurance.

The absence of Free, Prior, and Informed Consent (FPIC)⁸ and human rights references in the design of carbon market activities has raised concerns that this could force already marginalised Indigenous communities to be evicted – communities who are also affected by the impacts of climate change.

Risk of greenwashing

As NbS gains popularity, it is crucial to critically evaluate its financing. Evidence suggests that risks are being overlooked in the rush to scale up funding, which could have significant implications for natural ecosystems and the communities that depend on them.

For example, NbS can be a way for polluting companies – such as fossil fuel, large forestry and agribusiness corporations – to claim green credentials without necessarily changing their business models or practices, shifting attention away from actions that reduce emissions at the source. Friends of the Earth International warns that NbS will lead to “greenwashing and hiding growth in fossil fuel emissions from governments and private sector actors alike”.

Global North-South power imbalances

Creating systems in international markets for natural resources – such as carbon markets – that require significant technical expertise and financial resources, much of which is based in the Global North, is risky. The complex and costly legal frameworks needed to define rights to natural resources – similar to any financial asset – could reinforce structural inequalities between the Global North and South.The financialisation of natural resources – or trading natural resources as commodities – may have similar effects, prioritising the interests of those already benefiting from capital markets and shifting focus away from addressing the underlying causes of the climate and biodiversity crises. This approach could reduce pressure on businesses and governments to confront these issues.

What is needed for NbS to provide sustainable benefits for nature and society?

In order to benefit nature and society, enable synergies and minimise the risks and trade-offs, nature-based solutions should:

Not replace the urgent need to phase out fossil fuels.
Encompass the conservation and preservation of a wide variety of terrestrial and marine ecosystems – not just forests.
Recognise land as a system of mutual relationships and responsibilities, a concept often deeply embedded in the cultural and spiritual values of many Indigenous Peoples and local communities. This approach calls for addressing the disconnect between distant financial actors’ priorities and the placed human-nature interactions.
Meet the needs of local communities, seek the full engagement and consent of Indigenous Peoples and local communities in the early stages and throughout, ensuring respect for their cultural and ecological rights.
Be intentionally designed to deliver clear, measurable benefits for biodiversity. Investing in robust monitoring and evaluation and sharing results is critical to proving the concepts behind NbS.

Financing mechanisms are essential to boosting investment in NbS. However, closing the climate and biodiversity funding gap will require diverse and complementary approaches to generating finance. For example, repurposing government subsidies or imposing taxes on environmentally damaging activities. Unconditional cash transfers or debt relief programs could ease the financial burden on developing economies, enabling them to allocate more resources towards addressing environmental and social challenges.

Decentralised nature-based solutions can help overcome issues. These solutions are founded on “ecological, autonomous management, traditional knowledge, and governance by Indigenous Peoples, local communities and peasants, of their own land and territories.” Examples of decentralised NbS include:

Community Forest Management, which safeguards forests and ecosystems that store carbon naturally, currently preserving 80% of the remaining intact and semi-intact ecosystems.

Agroecology, which helps reduce fossil fuel consumption, enhance crop yields and store soil carbon.

1
For example, “green walls, roof gardens, street trees, vegetated drainage basins”.
2
The EUROCLIMA+ Programme “supports countries in the formulation and implementation of their NDCs”. It is funded by the EU and other EU countries. This study analysed 16 countries: Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay and Peru.
3
Argentina, Chile. Colombia, Costa Rica, Guatemala, Honduras, Mexico, Paraguay, Panama and the Dominican Republic.
4
Bolivia, Brazil, Cuba, El Salvador, Nicaragua and Peru.
5
Vergara, Walter, Luciana Gallardo Lomeli, Ana Ríos, Paul Isbell, Steven Prager, and Ronnie De Camino. ‘El Argumento Económicos Para La Restauración de Paisajes En América Latina’. World Resources Institute (WRI), 2016, 5.
6
Estimated surface area of Paraguay is 40.7 million hectares.
7
It is estimated that 0.47% is based in Brazil, 10.17% in the Caribbean and 0.3% in the Eastern Tropical Pacific. This last region includes part of the Gulf of California that is not considered LAC.
8
According to FAO, the FPIC is “a specific right granted to Indigenous Peoples recognised in the UN Declaration on the Rights of Indigenous Peoples (UNDRIP), which aligns with their universal right to self-determination. It allows Indigenous Peoples to give, withhold, or withdraw consent at any time for projects that affect their lands and territories.

Understanding the bioeconomy

October 17, 2024 by ZCA Team Leave a Comment

Key points:

The term ‘bioeconomy’ refers to the use of natural resources to support economic growth, environmental health and social well-being. It includes activities that deliver finance and those that do not, such as the implementation of policies for conservation of nature.
It is a broad term with different interpretations, some focusing on developing biotechnology and scaling up bio-product value chains, and others prioritising environmental sustainability and social equity.
The bioeconomy has been positioned as a way to channel much-needed finance towards the protection of nature, while also meeting sustainable development targets. However, if the concept remains poorly defined it could be misappropriated and worsen existing inequities.
The concept has received more attention at national and international levels in recent years, as governments grapple with how to bring economic growth to biodiversity-rich but fiscally-poor regions.
Brazil is leading the charge: in December 2023 Brazil launched the Initiative on Bioeconomy (GIB) as part of their G20 presidency, which aims to create overarching principles to guide global work on the bioeconomy.
The Brazilian Bioinnovation Association (ABBI) calculates that “the implementation of new technologies linked to the bioeconomy” could generate USD 592.6 billion per year in Brazil by 2050 and reduce the country’s emissions by 29 billion tonnes CO2eq between 2020-2050 – equivalent to a 65% reduction in emissions compared to current levels.
Examples of successful initiatives give an idea of what investing in the bioeconomy could look like, such as projects to share the benefits of genetic materials and provide payment for ecosystem services, like the protection of forested areas.

What is the bioeconomy?

In its most fundamental sense, the bioeconomy is the interaction between nature and society: the dependence of people, economy and society on biodiversity, and the impacts of human activities on biodiversity. The term is used to refer to the use of natural resources to support economic growth, environmental health and social well-being, including activities delivering finance and those that do not, such as the implementation of policies for the conservation of nature.

The bioeconomy is a broad concept with varying interpretations in different contexts. A review of academic literature identified three main approaches:

The biotechnology approach aims to create economic growth and new jobs through research, innovation and commercialisation of biotechnology. ‘Biotechnology’ refers to products and services that use biological processes. For example, using genetic engineering and other biotechnological approaches to develop vaccines, pharmaceuticals, new crop varieties and other bio-based materials, such as biofuels and biodegradable materials.
The bio-resources approach aims to innovate products based on biological raw materials and scale up biomass-based value chains for economic and environmental benefit. Here, the focus is more on developing new technologies and less on positive environmental impact.
In the bio-ecology approach sustainability is the primary concern, above economic growth and job creation. This approach aims to address ecosystem health and sustainability issues by, for example, prioritising the protection of biodiversity and implementing circular systems and agroecological practices that benefit local and rural economies.

Although the concept of a bioeconomy is not new, it has recently gained more traction. Already at least 50 countries have put in place a national bioeconomy strategy or policies that are focused on developing a sustainable bioeconomy. A 2024 position paper from The World Bioeconomy Association and World BioEconomy Forum to EU Member States highlights that the area has “witnessed dynamic shifts” since 2022:

China adopted its national bioeconomy strategy in 2022, in which it aims that the bioeconomy, predominantly via innovation in biotechnology, will boost economic growth by 2025. The government reports that China’s biomedical market is expected to exceed RMB 800 billion (USD 112 billion) by 2025, with an annual growth rate of more than 20%.
The US updated its strategy through an executive order on bioeconomy that focuses on biotechnology and biomanufacturing and aims to support climate and energy targets, and improve food security while contributing to economic growth.
The Indian government released a report which found that the Indian bioeconomy grew by 14.1% from 2020 to 2021, and was valued at USD 80.12 billion in 2021. The production of medical products from biological sources (‘BioPharma’) accounts for almost half of the share of the bioeconomy in India, for example, through the development and manufacturing of vaccines.

Each country has its own interpretation of bioeconomy which translates to different strategic priorities. While the focus in China, the US and India has been on developing biotechnology, the EU’s bioeconomy strategy, which has been in place since 2012, focuses more on bioresources and bioecology, which prioritises the sustainable use of natural resources and is closely associated with the circular economy.

The global bioeconomy is currently estimated to have a total value of USD 4 trillion, according to the World Bioeconomy Forum, with some projections calculating that the value will increase to USD 30 trillion by 2050 – equivalent to “a third of the global economic value.”

The Inter-American Development Bank warns that approaches to the bioeconomy that prioritise economic growth and biotechnology, which often come from North America, Western Europe and bodies such as the OECD, are not necessarily shared with – or appropriate for – all regions. The report finds that in the Amazon region, understandings of the bioeconomy are focused on sustainability and equity, particularly for small-scale farmers, Indigenous peoples and local communities. These different interpretations between potential funders in the Global North and countries in the Global South “could impede access to vital investment, funding and support.“

Brazil is leading the bioeconomy push

Brazil has been leading much of the recent focus on bioeconomy. The Brazilian Bioinnovation Association (ABBI) calculates that “the implementation of new technologies linked to the bioeconomy” could generate USD 592.6 billion per year in Brazil by 2050 and reduce emissions by 29 billion tonnes of CO2eq between 2020 and 2050 – equivalent to a 65% reduction in emissions compared to current levels. The report also found that practices that promote bioeconomy could recover 117 million hectares of degraded land in Brazil. Achieving Brazil’s target of recovering 12 million hectares of deforested land by 2030 would create more than five million jobs “from the implementation and management of forest areas”, according to a study from Brazilian sustainable development think tank Instituto Escolhas.

For Brazil and other countries with forest-based economies, growing the bioeconomy is seen as a way to meet both sustainable development and environmental targets. Investment in the bioeconomy has also been positioned as a solution to finance the protection of nature. This potential is particularly important for those in forest-based countries who are not fairly compensated for their role as stewards of the environment and biodiversity – the countries that are home to the Amazon capture just 0.17% of the global bioeconomy market’s potential. The need for funding is becoming even more relevant as the future of other nature-based revenue streams, such as credits from carbon offsetting projects, is becoming more uncertain following increasing scrutiny.

As the 2024 president of the G20, Brazil launched the Initiative on Bioeconomy (GIB) in December 2023, which aims to agree on a set of overarching guidelines, or “High-Level Principles”, on how the bioeconomy should be implemented. The proposal will be discussed by G20 members to define what sorts of activities fall under the bioeconomy. If an agreement is reached, the principles will feature in the final declaration by G20 leaders when they meet in Rio de Janeiro in November 2024.

Brazilian President Luiz Inácio Lula da Silva aims to use the GIB initiative to attract investments into the bioeconomy. At a meeting in Belém in March 2024, Lula and French President Emmanuel Macron launched an investment plan to raise 1 billion euros (USD 1.08 billion) in public and private investments over the next four years for the Amazon, including parts of the rainforest in neighbouring French Guiana. The fund represents efforts to ramp up investment in the bioeconomy and will be financed by state-run Brazilian banks and France’s investment agency, alongside additional private resources.

Brazil also recently announced a decree to define a national Bioeconomy strategy, which defines bioeconomy as a model for production and economic development “based on values of justice, ethics and inclusion” and involving “the sustainable use, regeneration and conservation of biodiversity, guided by scientific and traditional knowledge.”¹ Priorities include encouraging activities that promote sustainable use and conservation of ecosystems, including the sustainable management of forests, regenerative agriculture and biomass production; expanding innovation, bioindustry and professional training; reducing inequalities and upholding Indigenous rights. The decree sets out the creation of a National Bioeconomy Commission, which was due to draft a National Bioeconomy Development Plan in September 2024.²

Proceeding with caution

Growing the bioeconomy could present a way to support people and nature, but the concept also has the potential to be misappropriated and exacerbate other issues, such as existing inequities and environmental degradation. Currently, the proposed High-Level Principles on Bioeconomy lack details that will need to be defined if they are to be adopted by the G20. This must be done in a way that prioritises the rights of those directly responsible for the protection of nature, including local communities and Indigenous people.

Risks of prioritising profit over people and the environment

Due to the varied interpretations of the bioeconomy, there are concerns that the concept could be used to further commodify nature for profit and perpetuate existing power imbalances. The stocktake on global bioeconomy writes that “there is no guarantee that the bioeconomy will be equally beneficial to all groups in society; and it may even reinforce or deepen existing gender and social inequalities.” For example, well-intentioned policies to promote the harvest of forest products such as Brazil nuts, açai berries and rubber could “backfire” and result in an increase in environmentally-damaging monoculture farming, while smallholder farmers struggle to keep up with bigger operations.

Research from 2023 found a misalignment in discussions on bioeconomy in Brazil between those who advocate for “new paths for national economic development based on scientific and technological advances and industrialization,” and those who “emphasize the need to prioritize social objectives, recognize traditional knowledge, and develop alternative forms of economy in which capitalist profit is not a priority.”

Additionally, competition between the production of food and biofuels could “trigger food insecurity” if there are no clear guidelines on what constitutes bioeconomy-related activities, according to a global review of bioeconomy strategies produced for the G20 GIB. Although this is currently not a problem in Brazil, large-scale biofuel production could pose risks in other countries.

An inclusive approach will ensure equitable outcomes

Growing the global bioeconomy in an inclusive way will involve taking into account existing inequalities, such as gender, ethnicity, class, religion and age, and transforming the structures that maintain these inequalities to be more equitable and sustainable. This requires the active involvement of all relevant stakeholders in decision-making processes, from Indigenous and local communities to businesses, academia and government, to ensure equitable outcomes.

To overcome the differing views on what the bioeconomy is, some scholars have suggested that the concept of ‘sociobioeconomy’ could be used instead. This term takes into account the human and biological diversity of the forest economy and prioritises equity and the protection of the rights of Indigenous people and local communities. This view is shared by the Scientific Panel for the Amazon, which writes that “Amazonian sociobioeconomies are economies based on the restoration and sustainable use of [forests and rivers] in a way that supports the well-being, knowledge, rights and territories of Indigenous Peoples and Local Communities (IPLCs), as well as all residents of the Amazon and the global community.”³ The approach avoids monoculture production, and addresses power asymmetries to ensure that the economy is not just controlled by multinational actors or domestic elites, who have profited from the clearance of forests in the past.

What could the bioeconomy look like in practice?

The concept of a bioeconomy has been applied in many countries, particularly those with a large proportion of forest coverage. Due to the breadth of its definition and the range of perspectives on what constitutes a bioeconomy, there are many approaches to implementing its principles.

Payment for the protection and sharing of genetic resources

The Nagoya Protocol, which was signed by 16 out of 20 G20 countries and came into force in October 2014, is an international agreement to share the benefits of the use of genetic resources in a fair and equitable way. It aims to ensure that those responsible for the protection of nature and owners of traditional knowledge are compensated when biological materials from plants or animals are used to develop new products, such as pharmaceuticals or foods.

Many countries have already established a legal framework for this: in Brazil, it is mandatory to register all research or product development projects that use Brazilian species in a database – the National System for the Management of Genetic Heritage and Associated Traditional Knowledge, known as SisGen. When a commercial product is developed from resources listed in the database, 1% of the annual income from retail sales must be given to the local community or paid into a National Benefit Sharing Fund. This fund “is intended to support actions and activities designed to enhance… genetic heritage and associated traditional knowledge and promote its sustainable use.” As of August 2024, access to genetic plant material has been registered on the SisGen database more than 16,000 times since the start of the year and roughly USD 1.6 million has been collected for the fund.

Sharing the benefits of digital sequence information (DSI) – genetic information stored in a digital form – is being considered at the meeting of the Convention on Biological Diversity (CBD) in October 2024, known as COP16. Currently, companies can use genetic information from online databases without paying. Representatives from the UK and Malawi, who are leading negotiations on the DSI, noted that the “sectors that depend most on DSI generate ‘one to a few trillion dollars annually’” and therefore that just 0.1% of this channelled into a global fund could yield USD 1 billion, which could be given to those who have helped preserve the species. At COP16, countries will aim to conclude negotiations on who should pay, when and how much they should pay, and whether it should be mandatory or voluntary. Wealthy countries who host many pharmaceutical companies, such as Japan and Switzerland, would prefer a deal that encourages companies to contribute to a fund, without the legal obligation to do so. Following the outcomes of the CBD, it will be up to countries to enforce it, by putting in place their own national regulations and systems to collect payments.

Payment for ecosystem services

Payment for ecosystem services programmes are schemes which enable landowners who conserve or restore nature to receive payment for their actions. For example, Mexico’s National Payments for Ecosystem Services Programme offers financial incentives for landowners to conserve forests, protect water basins and promote sustainable land practices. While the programme provides modest grants to communities – around USD 2,400 per km² of land registered, with a cap of 30 km² – a recent evaluation found that those participating took on “significantly more forest management activities”, such as patrolling against deforestation, building fire breaks and preventing soil erosion. Funding from the programme is sourced through taxes on water use, government budget allocations and private sector contributions.

In Costa Rica, the Pago de Servicios Ambientales (Payment of Environmental Services) programme, implemented by the environmental ministry, has protected 13,000 km² of forest via over 19,000 contracts with landowners since 1997. The programme helped Costa Rica become the “only tropical country in the world to have reversed deforestation” according to the World Bank, which has enabled ecotourism to boom. As of 2023, there were around 5,500 landowners involved in the programme, covering 3,500 km² of land. The programme’s annual budget of between USD 20-25 million is predominantly funded by 3.5% of a sales tax on fossil fuels, as well as from water usage fees and other initiatives.

Payment for ecosystem services programmes can also collect payments from companies who use the services. For example, Vietnam’s Payments for Forest Ecosystem Services scheme mandates that companies, primarily hydropower companies, pay into a state-managed fund for forest restoration upstream. Similarly, Ecuador has the Fondo para la protección del Agua (FONAG) scheme whereby corporations who need regulated and purified water pay land managers upstream for forest restoration and conservation via a trust fund.

International financing for the bioeconomy

Several funding mechanisms have been established or proposed in the past few years as additional measures to finance the bioeconomy. The Amazon Bioeconomy Fund, first implemented in September 2022 and worth just under USD 600 million, has allegedly already avoided 123.4 million tonnes of CO₂ emissions. The fund promotes sustainable agroforestry (tree-based agriculture), community-led nature tourism, native species cultivation and aquaculture (growing aquatic animals and plants for food). In September 2023, Banco do Brasil signed a letter of intent to launch a USD 250 million bioeconomy and climate action financing programme with the Inter-American Development Bank. This aims to “support the development of bio-enterprises and rural producers that are part of the Amazon’s bioeconomy value chains”. According to the Finance for Biodiversity Initiative, only 3-6% of overseas development assistance (ODA) provided by Multinational Development Banks, around USD 4-9 billion out of a total of USD 150 billion, was spent on activities that “directly lead to biodiversity conservation and restoration”.⁴

At COP28, Brazil shared a proposal for a Tropical Forest Finance Facility (TFFF) which aims to financially reward countries for preserving tropical forests. The facility would invest funds from rich countries, multilateral development banks and institutional investors, with the returns used to compensate countries for preserving and restoring their tropical forests. Many details still need to be ironed out, with a more detailed design set to be presented at COP29 and a formal launch foreseen at COP30.

1
Translated from original: “Para fins do disposto neste Decreto, considera-se bioeconomia o modelo de desenvolvimento produtivo e econômico baseado em valores de justiça, ética e inclusão… com base no uso sustentável, na regeneração e na conservação da biodiversidade, norteado pelos conhecimentos científicos e tradicionais e pelas suas inovações e tecnologias…”
2
The Decree, published on 5 June 2024, states that the National Bioeconomy Commission will be created within 30 days of the publishing of the Decree, and that the National Bioeconomy Development Plan will be drawn up within sixty days of the establishment of the National Bioeconomy Commission. This means the National Bioeconomy Development Plan was due to be drafted by September 2024.
3
Translated from original: “Sociobioeconomias amazônicas são economias baseadas na restauração e no uso sustentável de florestas em pé e rios fluindo saudáveis de modo a apoiar o bemestar, o conhecimento, os direitos e os territórios dos Povos Indígenas e Comunidades Locais (IPLCs, da sigla em inglês), assim como de todos os residentes da Amazônia e da comunidade global.”
4
These figures refer to expenditure between 2015-2017 sourced from the OECD.

Finding economic value in nature beyond carbon

October 4, 2024 by ZCA Team Leave a Comment

Key points:

Rates of biodiversity loss and nature degradation are alarming, with regions around the world at risk of long-term economic instability, worsened climate change and weakened natural systems.
Though hard to quantify because of the complexity of natural systems, ecosystem services – the benefits humans receive from nature, such as food and climate regulation – are estimated to be worth more than USD 150 trillion a year, or around one and a half times global GDP.
Biodiversity loss is currently costing the global economy more than USD 5 trillion a year. USD 5 trillion is roughly the same amount it would cost Europe to transition to renewable energy by 2050.
Economies around the world are highly dependent on nature. China, the EU and the US have the highest absolute GDP exposed to nature loss – a combined USD 7.2 trillion.
Conservative estimates suggest that nature loss could cost the global economy at least USD 479 billion per year by 2050.
The negative consequences or costs associated with the destruction of nature can be greater than any economic benefits or value added from activities causing the destruction.
The destruction of nature in one region can ripple across natural systems, with far-reaching consequences beyond local borders. For example, deforestation causes droughts and elevates temperatures far beyond the site of deforestation, threatening food security and economies in other regions.
Nature adds ‘free’ value to society by providing essential ecosystem services that support life and economic activity without direct costs. For example, conserving natural habitats near farms boosts production.
Fortunately, estimates suggest that conserving biodiversity and ecosystems is much more affordable than destroying them.
Restoring and preserving biodiversity is substantially less expensive than building a net-zero emissions energy system – the required annual investment in biodiversity is only 15% of that needed for energy system transition.
The funding gap for biodiversity conservation is approximately USD 830 billion per year, comparable to the size of the global tobacco market.

Human societies are fundamentally dependent on nature

Nature provides a host of valuable ‘ecosystem services’ – the benefits humans receive from natural ecosystems, such as food, medicine, resources, clean air, climate regulation, climate change mitigation and disease control. These services are essential for sustaining life.

Biodiversity – the variety of species, genes and ecosystems on earth – is key to supporting nature’s ecosystem services and the value they bring. Biodiversity helps maintain ecosystem balance by supporting species interactions that regulate nutrient cycling, water filtration and climate regulation. It ensures resilience to environmental changes, since diverse ecosystems are better able to recover from disturbances such as extreme weather events. Biodiversity is also important for preserving the genetic diversity that is crucial for the adaptation and evolution of species.

Rates of biodiversity loss and nature degradation are alarming – 50% of natural ecosystems are in decline, over 85% of wetlands are lost, and 25% of species are at risk of extinction. More than three-quarters of essential ecosystem services have decreased over the past 50 years. Additionally, there has been a significant decline in per person ‘natural capital’ – the world’s stocks of natural assets. The stock of natural capital per person declined by almost 40% between 1992 and 2014, while produced capital per person doubled over the same period.

Nature-related risks like deforestation, habitat destruction and resource depletion can lead to long-term economic instability, worsened climate change and weakened natural systems resilience. For example, the diversion of rivers for cotton farming has depleted the Aral Sea in Central Asia, causing an economic crisis as well as increased local and regional temperature extremes due to the impact on the sea’s climate regulating function.

Nature-related risks are interconnected, meaning that a disruption in one area can amplify risks in other areas. For example, moisture from the Amazon helps generate rainfall in the region and in surrounding areas. Deforestation reduces this function, causing drought in neighbouring regions and impacting agriculture, water availability and overall climate stability across most of South America.
Five human-caused drivers are responsible for 90% of nature loss over the last 50 years: land- and sea-use change, climate change, natural resource use and exploitation, pollution and alien invasive species.

It pays to protect nature

Financial value of nature

Though hard to quantify because of the complexity of natural systems, ecosystem services globally are estimated to be valued at more than USD 150 trillion a year, or at least one and a half times global GDP in 2023. The ocean economy alone has a value of up to USD 3 trillion a year, or 3% of global GDP.

The knock-on effects of current biodiversity loss are costing the global economy more than USD 5 trillion a year. USD 5 trillion is roughly the same amount of investment needed for Europe to transition to renewable energy by 2050. Conservative estimates suggest that a collapse of essential ecosystem services, including pollination, marine fisheries and timber provision in native forests, could result in annual losses to global GDP of USD 2.7 trillion by 2030.¹ Similarly, biodiversity loss is believed to be costing the global economy 10% of its output every year.

The global economic costs of eroded ecosystem services between 1997 and 2011 alone resulted in up to USD 20 trillion in annual losses to the value of these services due to land-use change, and as much as USD 11 trillion in losses due to land degradation.

A World Economic Forum (WEF) analysis suggests that USD 44 trillion of economic value generation – just under half the GDP of the world – is moderately or highly dependent on nature and its services and is therefore highly vulnerable to nature loss. Construction, agriculture, and food and beverages are the three largest sectors that are highly dependent on nature, the report said. These sectors generate a total of USD 8 trillion in gross value added (GVA) – about twice the size of the German economy.

Analysis of industry-wide GVA at national or regional levels reveals the extent to which economies depend on nature. In some of the world’s fastest-growing economies, such as India and Indonesia, around one-third of GDP is linked to nature-dependent sectors, while Africa generates 23% of its GDP from these sectors. Globally, larger economies including China, the EU and the US have the highest absolute GDP exposure to nature loss – a combined USD 7.2 trillion.

Cost of nature destruction exceeds value of exploiting it

The negative consequences or costs associated with the destruction of nature are in many cases greater than any economic benefits or value added from the activities causing the destruction. For example, deforestation for palm oil production was a key driver of fires in Indonesia in 2015, which on some days released more carbon emissions than the entire US economy. These fires cost the economy USD 16 billion – more than the value added from Indonesia’s palm oil exports in 2014 (USD 8 billion), and more than the entire value of the country’s palm oil production in 2014 (USD 12 billion).

In Europe, fertiliser runoff is one of the most pressing environmental challenges, with nitrogen pollution from agricultural runoff estimated to cost the EU between EUR 70 billion and EUR 320 billion annually. This is more than double the estimated value that fertilisers add to EU farm income.

Commodity supply and demand can trigger different environmental impacts in different regions, where extraction might lead to deforestation in one area while consumption worsens pollution in another. In the Netherlands, much of the feed for intensive livestock systems comes from soy, predominantly sourced from Brazil, including from regions linked to deforestation.

Demand for soy puts immense pressure on the Amazon’s ecosystems, driving deforestation, which leads to biodiversity loss and a reduction in the forest’s ability to capture and store carbon. This not only disrupts local ecosystems but has global consequences, as the loss of the carbon-sequestering capacity of forests accelerates climate change, while the degradation of biodiversity undermines global ecosystem stability. The environmental and health impacts of livestock farming in the Netherlands are estimated to cost EUR 9 billion a year – making the damage by the sector three times higher than its added value. This estimate does not account for environmental impacts outside of the Netherlands.

Costs of inaction

Highly conservative estimates suggest that a reduction in six essential ecosystem services – namely pollination, coastal protection, water yield, timber, fisheries and carbon sequestration – could cost the global economy at least USD 479 billion per year by 2050, or cumulatively almost USD 10 trillion,² with a 0.67% drop in global GDP every year.³ Land degradation, desertification and drought are anticipated to cost the global economy USD 23 trillion by 2050.

Global GDP could contract by USD 2.7 trillion as early as 2030 if the timber, pollination and fisheries industries partially collapse as a result of environmental destruction.⁴ Credit rating firm Moody’s also identifies eight sectors, including protein and agriculture, with ‘high’ or ‘very high’ inherent exposure to natural capital and with almost USD 1.6 trillion in rated debt. Increasing environmental pressures will erode the capacity of these sectors to pay their debts.

Companies involved in nature destruction face increasing financial risks. For instance, a palm oil company was fined USD 18.5 million for fires that destroyed forested land on its concession in Borneo in 2015. Similarly, the world’s largest meat company JBS received USD 7.7 million in fines in 2017 for sourcing cattle from deforested areas in the Amazon.

New regulations and shifts in demand as societies respond to climate change could mean that 40 of the world’s largest food and agricultural firms, together worth more than USD 2 trillion, lose up to 26% of their value by 2030. This equates to a loss to financial institutions connected to these firms of USD 150 billion – comparable to the value of financial institution losses following the 2008 financial crisis. A 2023 report found that the total financial impact of deforestation for 1,043 companies that disclosed their deforestation risks in 2022 is nearly USD 80 billion, emphasising the need for urgent and effective management of deforestation risks.

Nature has value beyond carbon

Natural systems, such as forests, are often valued primarily for their role in carbon capture and storage – global forests are estimated to be worth at least USD 150 trillion, almost twice the value of global stock markets and over 10 times the worth of all the gold on Earth. While carbon sequestration accounts for a substantial portion of this value, forests are invaluable beyond this.

Global human health is intricately tied to tropical rainforests, which host an immense variety of plant species, many with medicinal properties. Between the 1940s and 2006, almost half of anti-cancer pharmaceutical drugs originated from products of natural origin.

It is estimated that every new pharmaceutical drug discovered in tropical forests is worth USD 194 million to a pharmaceutical company and USD 927 million to society as a whole. With almost 90% of pharmaceutical drugs originating from tropical forests still yet to be discovered, the total value to society could be as much as USD 303 billion.⁵

In the cosmetics sector, the supply of shea butter, used in various topical products, comes from a tree that is threatened by deforestation and pollinator loss.

The value of nature extends beyond the extraction of goods. Mangrove forests, which are valued for their vast carbon sequestration ability, also offer significant economic benefits from flood protection, including for the US, China, India and Mexico. It is estimated that mangroves reduce damage to property from floods by more than USD 65 billion per year and protect more than 15 million people.

The costs of nature destruction transcend borders

The destruction of nature in one region can ripple across natural systems, with far-reaching consequences beyond local borders. Deforestation in the Amazon, Congo and Southeast Asia has been linked to significant reductions in both local and regional rainfall. This can negatively impact agriculture and hydropower generation, posing threats to food security and energy generation beyond local borders.

Deforestation in Brazil and Bolivia has altered regional rainfall patterns, exacerbating droughts in neighbouring regions. In Colombia, the 2015-2016 megadrought was intensified by these disruptions in moisture recycling. This drought caused a national energy crisis as hydropower – responsible for over 70% of Colombia’s energy – became unreliable due to plummeting river water levels. As a result, energy prices soared nearly tenfold, showcasing how environmental damage in one country can exacerbate economic consequences in another.

The impacts of deforestation go beyond drought. In Southeast Asia, logging and the conversion of forests to palm oil plantations causes soil erosion and results in increased soil sediment in rivers. This sediment is carried downstream and is eventually released into the ocean where it settles on coral reefs, threatening their survival. An estimated 41% of coral reefs globally are impacted by sediment export.

Coral reefs provide a wealth of ecosystem services, such as coastal protection, food and recreation. By reducing wave energy by up to 97%, they protect up to 5.3 million people on coastlines and USD 109 billion in GDP per decade from flooding and erosion impacts. Coral reefs are an important food source, with global reef-associated fisheries valued at USD 6.8 billion.⁶ Additionally, coral reef tourism is valued at USD 36 billion a year, which is more than 9% of total coastal tourism value in the world’s coral reef countries.

Forests keep people and the atmosphere cool both locally and regionally by providing shade and releasing water vapour, acting as a natural air conditioner and alleviating heat illness. In the Amazon, deforestation can increase temperatures by up to 4.4°C⁷ as far as 100 km away. Similar estimates have been made for other forested regions around the world.

Pollution, such as fertiliser and animal waste runoff from unsustainable farming, can have widespread impacts on nature. Runoff from agricultural fields flows into water bodies, leading to excessive nutrient levels, which depletes oxygen in water and harms aquatic life. The Gulf of Mexico’s dead zone – an area of low to no oxygen that can kill marine life – occurs every summer and is mostly caused by nutrient runoff from excessive fertiliser application and livestock on Midwestern US farms, carried to the gulf via the Mississippi River and its tributaries. In August 2024, the dead zone reached approximately 6,705 square miles – an area almost the size of Kuwait – potentially making 4 million acres of habitat unavailable to marine species.

The yearly costs of the dead zone to fisheries and the marine environment were estimated at up to USD 2.4 billion between 1980 and 2017. Studies have found that the dead zone reduces the size of large shrimps relative to small shrimps, with prices for large shrimps driven up as a consequence, impacting consumers, fishers and seafood markets.

Pollinators ensure our food security

The agriculture and food and beverage sectors are highly dependent on pollination – a critical ecosystem service of immense economic value that is essential for human well-being through its impact on agricultural production and food security. Pollinators impact about 35% of global crop production by volume, with 87 out of 115 major crops worldwide depending on pollination by animals, such as insects, birds and bats, to some extent. The contribution of pollinators to global agricultural production and food security is estimated at USD 235 billion to USD 577 billion annually. In the UK alone, the value of pollination services from nature is GBP 430 million.⁸

Pollinators are facing a significant threat from habitat loss, pesticide use and land-use changes. More than 40% of insect pollinators worldwide are facing extinction. In the short-term, the costs of a ‘pollinator collapse’ are valued at a mid-point range of USD 1 trillion or around 1-2% of global GDP.

Native bumblebees in North America are critical pollinators of blueberries. The value of fresh cultivated and wild blueberry exports from the US in 2023 exceeded USD 127 million, with key export markets in Canada, Taiwan, Japan and South Korea. Yet bumblebees are in decline in North America due to habitat loss, pesticide use and climate change, posing a threat to blueberry production.

Pollinator loss is anticipated to continue on an upward trend in the future, with projections indicating that pollinator decline could cause annual crop production losses of more than USD 50 million for the US, around USD 125 million for Brazil, and around USD 225 million for China by 2050.

Nature adds ‘free’ value

Nature adds ‘free’ value to society by providing essential ecosystem services that support life and economic activity without direct costs. These services are often overlooked in economic calculations, yet they are fundamental to human well-being and environmental sustainability. The destruction of these natural systems can lead to significant financial costs in the long run as humans are forced to replace or mitigate these services.

In Northern California, wild bee species were found to significantly increase tomato production both in terms of size and numbers. Tomatoes are able to self-pollinate, meaning they don’t rely on pollinators to produce fruit, but this example demonstrates the added value from pollination services in nature.

In Costa Rica, pollinators from forests increased coffee yields by 20% within 1 km of forests and improved coffee quality by reducing poor-quality berries by 27%. The study estimated that pollination services from two forest patches generated around USD 62,000 per year for a single coffee farm, representing approximately 7% of its total income. For both the coffee and tomato examples, simply being in close proximity to forested or natural habitats benefitted production on farms.

The natural flood control function of wetlands offers another example. During Hurricane Sandy in 2012, which devastated the Caribbean and east coast of the US, wetlands are estimated to have saved more than USD 625 million in avoided flood damage.

Solutions and distractions

Conserving biodiversity and ecosystems is estimated to be much more affordable than destroying them. By 2030, an estimated USD 996 billion⁹ annually will be required to sustainably manage biodiversity and maintain ecosystem integrity. This represents less than 1% (0.7-0.9%) of global GDP in 2023. It is also substantially less than the amount spent annually on subsidies that accelerate the production or use of natural resources or that undermine ecosystems, which are estimated at USD 1.8 trillion to USD 6 trillion – or around 6% of global GDP. Nature-smart policy interventions, which already have demonstrated success and could achieve further impact and value, can substantially reduce the risk of ecosystem services collapse by 2030, with economic gains of up to USD 150 billion.

Protecting and restoring biodiversity is crucial to achieving net-zero goals – it enhances ecosystem resilience, supports agricultural systems and increases carbon sequestration. At the same time, estimates suggest that restoring and preserving biodiversity is substantially less expensive than building a net-zero emissions system – the annual funding needed to protect and preserve biodiversity is only 15% of the investment needed to transition to a net-zero emissions energy system.

Biodiverse ecosystems like forests, wetlands and grasslands store significant amounts of carbon, helping to offset emissions. They also provide critical services such as regulating the water cycle, supporting pollination and improving soil health, all of which are necessary for sustainable agriculture and climate resilience. It is estimated that a transition to deforestation-free operations, entailing a 75% reduction in deforestation rates by 2025 and the restoration of 300 million hectares of forests, could result in an economic gain of USD 895 billion by 2030 through a reduction in annual environmental costs of USD 440 billion.

Closing the funding gap

The funding gap for biodiversity conservation is approximately USD 830 billion per year, comparable to the size of the global tobacco market in 2022. About 73% of the funding is needed to manage productive landscapes and seascapes, with a significant focus on transitioning agriculture to sustainable practices.

There are various financial mechanisms for closing this funding gap for biodiversity conservation. Public finance presently plays a significant role, with government budgets and tax policies supporting biodiversity projects. It is estimated that 80% of biodiversity financial flows – around USD 133 billion per year¹⁰ – are from domestic and international public finance.

The private sector contributes around USD 29 billion per year to biodiversity through various sustainable debt products. The largest contributor is payments-for-ecosystem services, where financial incentives are given to landowners or resource managers to adopt practices that conserve or enhance ecosystem services that derive value from nature. These schemes contribute around USD 9.8 billion a year. However, they are often vaguely defined and suffer from issues such as payment volatility and high project costs.

Debt-for-nature swaps allow countries to cancel portions of their foreign debt in exchange for committing to fund local conservation projects. Estimates suggest that as much as a third of the USD 2.2 trillion of developing country debt could be eligible for debt-for-nature swaps. However, the impact of this on debt levels has been very small: between 1987 and 2023, these swaps offset only around 0.11% of debt payments by low- and middle-income countries. Critics also argue that these swaps sometimes commodify nature and could undermine the sovereignty of local communities if not properly managed.Carbon offsets and credits aim to compensate for greenhouse gas emissions and environmental impacts by investing in projects that reduce or remove carbon from the atmosphere, such as reforestation or afforestation. However, they have been criticised for allowing companies to continue emitting carbon while relying on offset projects that may not always deliver long-term or verifiable climate benefits.

1
This model includes various tipping points, which are changes in an ecosystem that push it into an entirely different state, such as the transition of forests into savanna due to land degradation and climate change, with potentially catastrophic changes for global climate regulation. The model baseline is a scenario where these services do not collapse.
2
Between 2011 and 2050.
3
This is under a ‘Business-as-Usual’ scenario, which is a high-emissions scenario aligned with the RCP8.5 pathway used in the IPCC’s Sixth Assessment Report. The economic model does not include impacts from tipping points, such as the collapse of rainforests or pollination.
4
As the analysis only considered a narrow set of risks, the authors of the report warn that this estimate should be viewed as a lower bound.
5
Values have been adjusted from 1995 values to 2024 values based on the Consumer Price Index and have not taken into account any industry-specific changes such as changes in market dynamics or production costs.
6
In 2010.
7
Note that absolute temperature change can be expressed in Kelvin (K). A change of 1°C is equal to a change of 1 K.
8
In 2011.
9
In 2021 USD.
10
Value is from a 2022 report.

Asia’s booming voluntary carbon market

March 20, 2023 by ZCA Team Leave a Comment

Key points:

Asian governments and companies are trying to keep up with the global trend of developing voluntary carbon markets (VCM) by scaling up local versions. New initiatives have been set up to make buying and selling voluntary carbon credits in the region easier.
While there is no money to be made yet, market players are hoping that building the infrastructure for carbon trading will increase the size of the VCM, attracting foreign investment to the region.
However, there are a number of issues with the current VCM, including a lack of standardisation, poor quality credits, transparency and low pricing, as well as increasing scrutiny over the wider use of carbon offsets. These issues are hampering progress in the existing global markets. If they are not overcome, those looking to benefit from the booming Asian markets risk wasting resources on projects that are unproven to benefit local communities or the environment.
While initiatives are starting to address these concerns, the future of the VCM remains unpredictable.

The global VCM

Carbon markets enable the trading of carbon credits – each equivalent to one tonne of carbon dioxide (CO2) emissions – and now cover close to a fifth of global emissions. While the majority of carbon markets are compliance markets – in which governments allow the trading of emissions to meet mandatory targets – the VCM, where companies and individuals can choose to buy carbon credits to offset their carbon footprint, has exploded in recent years. Between 2020 and 2021, the value of the global VCM grew fourfold, reaching almost USD 2 billion, with some analysts estimating the market could grow to USD 50 billion by 2050. This growth is driven mainly by rising demand from companies as they face increasing pressure to develop and meet net-zero goals. Between 2021 and 2022, the number of global corporations with net-zero goals increased by 150%.

However, there are a number of issues that prevent the VCM from providing a considerable source of finance for project developers while having real climate impact. Growing scrutiny over the use of carbon offsets, uncertain regulations and global economic slowdown have seen the purchase of credits dry up in recent months, making the future of the VCM unclear.

Recent developments in the Asian VCM

While the majority of the projects that sell carbon credits are located in Asia, South America and Africa, historically the majority of trading has taken place in Europe and the US. Now market players are taking the first steps to scale up the VCM in Asia. In theory, this would increase funding for the protection of nature and low carbon technologies in the region and enable companies to offset emissions and meet net-zero goals through buying credits.

There is no money to be made yet, but companies are eager to tap into the anticipated financing opportunities. The potential funds raised by offsets generated in Asia is estimated at USD 10 billion annually by 2030. Asia is already the world’s largest producer of carbon offsets, producing 44% of global credits, and is home to some of the world’s most valuable investable carbon stock. Additionally, of the more than 1,600 companies that have committed to net-zero targets globally, nearly a quarter are from Asia, potentially increasing regional demand for credits.

Main players in the offset boom

Carbon trading platforms and voluntary domestic initiatives to facilitate the buying and selling of carbon credits have recently been set up in Singapore, Thailand, Hong Kong and Malaysia, with others planned in Japan, Indonesia, India and South Korea.

Key players and new developments in Asian carbon markets

Singapore currently dominates the Asian VCM, hosting platforms Aircarbon Exchange and the newly-launched Climate Impact X (CIX), which was founded by state investment fund Temasek and others to position Singapore as a carbon trading hub. These platforms are anticipating increased demand for credits after Singapore announced that, from 2024, companies can use VCM carbon credits to offset up to 5% of their taxable emissions. This is the first time a carbon tax scheme has allowed the use of VCM credits, and highlights the increasing overlap between voluntary and compliance markets, particularly in Asia.

Other platforms are hoping to expand investment in Asia’s VCM. For example, Hong Kong’s Core Climate is the only exchange to offer settlement for the trading of international voluntary carbon credits in Chinese currency, opening up the VCM for mainland China’s participation. Meanwhile, Malaysia’s Bursa Carbon Exchange is the first Shariah-compliant carbon exchange in the world, potentially attracting foreign Islamic finance.

Carbon exchanges in Thailand and Malaysia also aim to help companies meet import requirements and improve national industry competitiveness, especially in the face of tariffs on high-carbon imports, such as the EU’s upcoming carbon border adjustment mechanism. Both countries allow domestic offsets to be traded internationally. However, other countries, including Indonesia and India, have recently imposed restrictions on the exports of carbon credits generated from their territories to prioritise the domestic use of credits for meetingnational climate targets. While more clarity is needed on these regulations, this is raising concern among buyers.

Risks of a poorly regulated VCM

While the VCM has strong ambitions globally and in Asia, a lack of regulation and transparency means the market is currently overrun with cheap, low-quality offsets that are not funding genuine climate solutions, which is increasing the reputational risks for both sellers and buyers.

Lack of standards: The VCM is largely unregulated and lacks a standardised approach, with carbon registries, such as Verra and Gold Standard, issuing credits in line with their own standards, resulting in a highly-fragmented market in which the type and quality of credits offered vary wildly (see below). Alongside unreliable verification of credit quality and lack of transparency, this makes it difficult for buyers to determine which credits are high quality, especially as quality is not necessarily linked to price. The extensive range of private and public schemes for certifying and trading credits in Asia complicates efforts to standardise, and contrary to their goal of streamlining VCM trading, new carbon exchanges have so far created more division in the market. For example, CCER credits issued under China’s voluntary emission reduction programme and traded via domestic emissions trading schemes can also be traded internationally on the VCM, however low quality and transparency has limited this so far.

Low-quality credits: The current VCM is dominated by low-quality credits, with around 80% generated from projects that avoid emissions, rather than reduce or remove them. If a project is not actually removing CO2 from the atmosphere, it is not offsetting emissions. Determining ‘additionality’, which refers to whether or not the project would have gone ahead without the carbon credit revenue, is also difficult. Investigations have found that most renewable energy projects are not additional, making the credits worthless from a climate perspective, and that over 90% of rainforest carbon offsets issued by Verra (which is currently working with carbon exchanges in Singapore, Thailand and Malaysia to facilitate use of their standards) did not result in emissions reductions. As a result, price and demand for Verra’s rainforest credits dropped and Verra is currently revising its methodologies to verify rainforest credits, which may limit their issuance in Asia. Asian carbon credit projects are likely to be made up of forestry projects that face these same additionality concerns, as well as issues regarding the permanence of carbon stored due to land use changes and wildfire risks. Renewable energy credits are also still issued in some Asian schemes, such as via China’s CCER scheme. CIX is taking this a step further and promoting the use of a new type of credit for the protection of forests, even when there is no to low risk of deforestation. While protecting forests is important, it does not remove CO2 and should not produce credits that allow companies to continue to emit.

Consequences for local communities: Carbon offset projects have often come at the cost of local communities and indigenous peoples, who are frequently not consulted and, at times, forced off their land. This is particularly concerning as many of the carbon sinks targeted by offsetting schemes are located in areas without indigenous or local land rights – especially in Asia. Increased interest in carbon markets may drive government officials to bypass consultations and fast-track potentially harmful projects in order to capture financial benefits. For example, in 2021, Malaysian officials signed over USD 76.5 billion of carbon credits and natural capital from a state forest to a small Singaporean company without involving local communities and indigenous leaders in the decision-making process.

Cheap offsets: In part due to their low quality and oversupply, offsets have historically been very cheap. The average price of global VCM credits was USD 4 per tonne of CO2 in 2021 and fell as low as USD 1.7 per tonne in January 2023 as purchases stalled. And prices from projects based in Asia generally receive below average prices. Such low prices tempt companies to purchase credits rather than decarbonise their practices , with the World Bank estimating that, by 2030, a price of USD 50-100 per tonne is needed to limit warming to below 2^oC. While some predict that VCM pricing issues will be resolved as a preference for high-quality offsets will create a more expensive sub-market, this has not happened in practice.

Indeed a number of factors suggest supply will continue to outstrip demand:

Reputational risk: As questions grow around the legitimacy of offsets, companies are increasingly at reputational risk from the purchase of carbon credits
Article 6 uncertainty: Discussions on Article 6 of the Paris Agreement, which sets out rules for international trading of carbon credits, have so far been inconclusive, stalling progress on new carbon trading plans for both government and industry
Recession fears: Traders and analysts anticipate that polluters will reduce buying amid soaring inflation, rising energy prices and economic instability.

Firms bought 4% fewer credits in 2022 compared to 2021 and retirements of renewable energy and forestry credits declined in two consecutive quarters for the first time due to falling demand. In addition, the VCM is currently oversupplied, with a current reserve of over 683 million tonnes – over four times the total amount of credits traded in 2022. There are concerns that diminishing demand and oversupply will flood the market, further lowering the price and integrity of credits and threatening the overall functioning of the VCM.

Improving market integrity and transparency

Following calls to increase the integrity and transparency of the VCM, new initiatives have been established to develop guidelines and restore confidence in the market. The Integrity Council for the Voluntary Carbon Market (ICVCM) aims to create industry-backed standards and guidelines to establish a quality baseline for carbon credit generation and trading that is credible and transparent, while the Voluntary Carbon Markets Integrity (VCMI) Initiative has developed a code of conduct with stakeholders to ensure that standards are implemented correctly. While the guidelines released by both initiatives last year were criticised by some for being too stringent and overbearing (and by others for not being strict enough), they present a starting point for moving forward.
Additional guidance from the UN high-level expert group (HLEG) on net-zero emissions has reiterated that offsets cannot be used at the expense of genuine emissions reductions. The VCM should emphasise quality over quantity, with companies only using carbon offsets as a last resort for emissions that are very difficult to avoid, especially because, due to limited available land and resources, high-quality carbon offsets are finite.

IPCC Sixth Assessment Report: Mitigation of climate change

April 7, 2022 by ZCA Team Leave a Comment

The Intergovernmental Panel on Climate Change (IPCC) has released the third of its four-part, Sixth Assessment Report (AR6) in April 2022. The Working Group III (AR6 WGIII) report is the most comprehensive review of how we can mitigate climate change since the 5th assessment (AR5) in 2014, and the IPCC’s three recent special reports (SR1.5 in 2018 and the 2019 SRCCL and SROCC). ¹

The report has been ratified after a plenary negotiation in which governments formally approved the summary for policymakers, ensuring high credibility in both science and policy communities. The report covers a broad spectrum of topics, from mitigation pathways and in-depth sectoral analysis to finance, international cooperation, net-zero and carbon dioxide removal. For the first time in IPCC history, chapters dedicated to technology, innovation and demand-side measures are included.

This briefing covers some of the major developments in our knowledge of mitigation since the IPCC’s AR5 was published in 2014. Today, mitigation literature largely reflects the 2015 Paris Agreement, increasing net-zero commitments and the growing need for action from non-governmental stakeholders including businesses, industry and financial institutions.

1. Since AR5 greenhouse gas emissions have continued to climb

We are nowhere near on track to achieve the Paris targets of keeping warming below 2°C, and ideally 1.5°C. Current national climate plans (NDCs) will see us warm by about 2.7°C this century, or possibly even higher ².If CO₂ emissions continue at current rates, we will exhaust the remaining 1.5°C carbon budget in the early 2030s ³. The energy infrastructure from planned and current fossil fuels alone commits us to about 846 GtCO₂ (more than double what’s left in our 1.5°C carbon budget) and every year we add more carbon-intensive infrastructure than we decommission.

Of the greenhouse gases (GHGs), CO₂ causes most warming due to its high concentration and long lifetime in the atmosphere. Despite efforts to reduce emissions, our burning of fossil fuels adds more CO₂ to the atmosphere, pushing the cumulative atmospheric concentration to unsustainable highs. Between 1850-2019, coal, oil and gas accounted for ~66% of cumulative CO₂ emissions, with land-use change responsible for about 32%.

But since AR5, there has been greater recognition of increasing emissions of methane (CH₄) and nitrous oxide (N₂O). Both are potent GHGs that trap about 34 and 300 times more heat than CO₂respectively (over a 100 year period). Methane is responsible for almost a quarter of human-caused warming to date, and concentrations are increasing faster now than at any time since the 1980s. Today, methane emissions are two-and-a-half times above pre-industrial levels. The AR6 WGI SPM authors emphasised that “strong, rapid and sustained reductions” in methane emissions would have the dual impact of limiting “the warming effect resulting from declining aerosol pollution” and improving air quality.

Between 2008-2017, agriculture and waste contributed most to the rise, followed by the fossil fuel industry. However, estimating by exactly how much, and from where, methane emissions are increasing is a topic of continued research and debate. For example, some researchers have found that the role of North American shale gas (so called “fracking”) has been significantly underestimated in calculating the global methane emissions.

Emissions of N₂O have risen 20% from pre-industrial levels, with the fastest growth observed in the last 50 years, mainly due to nitrogen additions to croplands through fertilisers.

In 2018, global GHG emissions were about 57% higher than in 1990 and about 43% higher than in 2000. Emissions continued to rise in 2019, when they reached about 59 GtCO₂e. But in 2020, the COVID-19 pandemic led to a historical large drop in CO₂ emissions from fossil fuels and industry. During the height of global lockdowns, daily emissions dropped by 17% compared to 2019, levels not seen since 2006, and people around the world were allowed a short respite from deadly air pollution. Since then, emissions have rebounded, and were the highest yet last year. However, research has shown that rebuilding the economy in a more green, sustainable, just and climate-centred way represents a far greater opportunity than the short, lockdown-triggered emissions break, which will have little impact in the long run.

2. Without a drastic boost in climate ambition, our hopes of achieving the Paris Goals of 1.5°C and 2°C without “overshoot” are out of reach

We are increasingly likely to “overshoot” average global temperatures of 1.5°C and 2°C (meaning that global average temperature temporarily (on order of decades) exceeds the temperature target before reducing again. This can only occur if atmospheric GHG concentrations are lowered – and this is through carbon dioxide removal (CDR), which is by no means a given (see below)). Growing research shows that, for the same end of century temperature increase, overshooting is likely to lead to more climate damages (some of which are irreversible) – like biodiversity loss and extreme weather – than if we get there with no overshoot ⁴.

Delaying mitigation means we will have to cut more emissions each year to stay Paris-aligned by 2030. We already knew the dangers of delayed mitigation in 2014, when the IPCC stated that scenarios with high emissions through to 2030 would have higher long-term economic costs, and would “substantially increase the difficulty of the transition” and “narrow the range of options consistent with… 2°C”. Today, average annual emissions cuts needed to stay below 1.5°C are four times higher than they would have been if collective mitigation and ambition started in 2010, according to UNEP. This highlights the need to act fast.

Investment levels are also nowhere near to what we need to stay Paris aligned. The 2015 Paris Agreement recognised the key role finance plays in both mitigation and adaptation – it placed investors and financial commitments centre stage for climate policy and action. However, climate finance has only increased slightly since AR5, reaching about USD 579 billion in 2018/2017. This is about ten times less than the estimated USD 6.3 trillion needed every year by 2030 to stay Paris aligned.

Since AR5, the split between public and private climate finance has remained relatively stable (about 44% public and 56% private in 2018). Private finance has, however, outpaced public finance in the energy sector, and increasingly so in transport, reflecting a more mature renewable energy market and the fact that projects are now perceived to be less risky. The private sector is expressing increasing concern over the risks of climate impacts, but climate-related financial risks remain underestimated by financial institutions and decision makers ⁵.

3. The richest 1% emit more than twice the poorest 50%

Since AR5, there has been increased interest in the ‘national responsibility’ for climate change, as well as the links to other sustainability, development and social issues. The US is responsible for about 20% of cumulative historical emissions, followed by China, Russia, Brazil and Indonesia. Just looking at national emissions does not, however, complete the picture, as the unequal size, wealth and carbon intensity of populations need to be factored in. Looking at emissions relative to population size, developing countries tend to have lower per-capita emissions and, if emissions are normalised to population, China, Brazil and Indonesia do not even make the top 20.

The richest 1% worldwide emit more than twice the combined share of the poorest 50%, according to UNEP. Activities that emit a lot, but only benefit a few, include flying and driving SUVs. For example, if emissions from SUVs were counted as a nation, it would rank 7th in the world. As COVID-19 caused carbon emissions to fall last year, the SUV sector continued to see emissions rise. In 2018, only 2% to 4% of people got on an international flight, and 1% of the global population are responsible for about half of CO₂ emitted from all commercial flights. The aviation industry is responsible for 2.4% of global emission, as such these 1% users could be contributing about 450 million tonnes of CO₂ each year – about the same as South Africa’s annual emissions.

Research, including last month’s landmark AR6 WGII report, shows that climate change affects people differently by gender, race and ethnicity, and these all link to economic vulnerability. Marginalised groups have less access to energy, and use less. For example, women’s carbon footprints are generally lower than men’s, mostly due to reduced meat consumption and driving, though this varies across nations ⁶. But, even though women generally emit less, their inclusion in policy making can lead to better climate policy. Climate groups are now recognising that disadvantage is the result of many interacting systems of oppression.

4. But there is hope: since AR5 national and corporate net-zero commitments have exploded and renewable energy has continued to outperform forecasts

Since AR5, there has been a substantial growth in climate policy, legislation and treaties at both international, national and sub-national levels. Most importantly, in 2015, the Paris Agreement was signed. The Paris Agreement Article 4 seeks to achieve a “balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases”, which can be interpreted as net zero greenhouse gas emissions (not just CO2). Renewable energy has also continued to massively outperform forecasts, making it a post-AR5 success story. Just in 2020, the amount of new renewable electricity capacity added rose by 45% to 280 gigawatts, the largest year-on-year increase since 1999 (more in box below), while costs have fallen sharply in that time. And, more recently, the concept of ‘net-zero’ entered the policy arena in full force.

In 2014, the IPCC was not directly using net-zero language, but concluded that limiting the cumulative emissions of GHGs to zero was key to stopping climate change. In 2018, the IPCC outlined that to limit warming to 1.5°C, CO₂emissions would need to fall by about 45% in 2030 (relative to 2010 levels), and global net-zero had to be reached around 2050. WG1 of AR6 (released in August 2021) outlined the need not only for a cut in CO2 emissions, but also strong reductions in other GHGs ⁷. In 2019, the UK became the first G7 economy to legislate for net-zero. Today, 136 countries with 85% of the world’s population, covering 88% of global emissions have set net zero targets, although the targets and timing of how they are delivered remain under criticism for being too vague. This 2021 paper sets out ways that governments could begin to add clarity and accountability; issues considered key to delivering net zero GHG emissions, in pursuit of the Paris targets.

What does achieving net-zero actually look like?

There are many scenarios assessing how we can get to net-zero, and we await the IPCC’s assessment to get an up-to-date, global view. However, some of the key points likely to appear are summarised here.

Achieving the Paris goals requires rapid mitigation across the full range of GHGs. Scientists have shown that, even if CO₂ emissions are Paris-aligned, ignoring methane emissions will lead to overshooting the Paris agreed temperature goals, while abating N₂O emissions would help achieve the temperature targets as well as a suite of Sustainable Development Goals (SDGs).

Renewable electrification is key. A consistent success story since AR5 is the rapid deployment and falling costs of Renewable Energy (RE), such as solar, wind and batteries, which have massively outpaced and exceeded the expert expectations outlined in AR5. But we still need to ramp up. The amount of solar PV and wind deployment has to be twice what has already been announced globally to stay on a 1.5°C trajectory, according to the IEA. We also need to boost funding to clean energy solutions, as many of the technologies needed for hard-to-abate sectors are still in development and annual investment into clean energy needs to triple to USD 3.6 trillion through 2030.

Fossil fuel use needs to decline dramatically. Global coal emissions needed to have peaked in 2020, and all coal-fired power plants need to be shut by 2040 at the latest, a Climate Analytics analysis based on the IPCC’s 2018 report shows. For OECD nations, all coal use should be phased out by 2031. This was echoed by the IEA in 2021 – it concluded that for net-zero, all unabated coal and oil power plants need to be phased out by 2040. Increasing energy efficiency is also key. In the IEA’s net-zero compliant scenario, the energy intensity of the global economy decreases by 4% a year between 2020 and 2030 – more than double the average rate of the last decade.

Some degree of carbon removal is needed. Net-zero is achieved when the emissions going into the atmosphere are balanced by those removed. It is possible to achieve global net-zero while still allowing for emissions in some sectors – as long as these ‘hard to abate’ emissions are also being removed and permanently stored. Methods of removal range from enhancing natural carbon drawdown through reforestation, restoration and the protection of nature, to ‘negative emissions technology’ like direct air capture (DAC) and bioenergy with carbon capture and storage (BECCS). In the last few years, more attention has been paid to the ‘net’ part of net-zero, as pretty much all published scenarios that bring us within 1.5°C or 2.0°C rely on some form of CDR.

Transforming the Agriculture, Forestry and Other Land Use (AFOLU) sector is crucial. Today, it accounts for nearly a quarter of global GHG emissions and sectoral emissions have been climbing in recent years. Livestock production and rice cultivation are the main culprits. The sector is also a carbon sink, as plants and biomass draw CO₂ from the atmosphere when they grow. Transforming the sector can both reduce emissions – for example, by changing farming and livestock methods – as well as remove emissions from the atmosphere, including measures like planting more (and protecting existing) forests. However, reforestation and better land management alone will not be enough. Some estimates suggest that transforming the AFOLU sector could at most account for 30% of the mitigation needed to stay below 1.5°C. However, the recent hype that planting trees and investing in land can solve the climate crisis is risking delayed mitigation and greenwashing.

Urban planning needs to consider carbon emissions from the get go. The current scale and speed of urbanisation is unprecedented in human history, and since AR5 it has become even more clear that urban areas contribute the majority (about 70%) of the global footprint, posing an enormous challenge for climate mitigation. New urban planning presents a unique opportunity to reduce carbon lock-in.

Many more aspects of mitigation and gaps in our knowledge will be explored by the IPCC in this report. For example, the IPCC will dedicate a chapter to demand-side mitigation for the first time, which will explore how behaviour and lifestyle changes can reduce emissions, like shifts in diets, transport, buildings and the efficient use of materials and energy. In general, scientists agree that systemic infrastructural and behavioral change will be part of the transition to a low-carbon society, but the feasibility and mitigation potential of demand-side measures remain a knowledge gap.

5. Looking ahead, transparency is key

Net-zero targets should not be seen as end-points, but rather as milestones on the path to negative emissions, milestones that require detailed roadmaps as well as short-term goals. NGOs, scientists and the public continue to demand mitigation plans and net-zero targets that are clear and transparent, asking policymakers, businesses and financiers to clarify the scope, fairness and approach to decarbonisation.

Over the past years, integrated assessment models (IAMs) have been a critical tool for climate policymakers, but they have also come under intense scrutiny due to issues like the huge reliance on CDR, especially BECCS, in many scenarios. However, over reliance on IAMs have been criticised given its opaque design and economic assumptions which can result in modelling outcomes that overemphasise CDR.

In a 2020 paper, the co-chairs of the upcoming WGIII report outlined how the IPCC has taken steps to increase transparency this time around. They said the new report will contain some notable criticisms of IAMs, including the uncertainties, CDR and limits to land. It is, however, important to note that the IPCC itself is not advocating for any scenarios, including those with large amounts of CDR. Instead, the IPCC findings are a reflection of the state of climate modelling, as well as previous emissions pathways and scenario research.

Is it possible to stay Paris aligned without carbon removal?

Many of the scenarios used in earlier IPCC reports (including the special report on 1.5C) relied heavily on negative emissions in the second half of the century. Modelled negative emissions were primarily achieved by inputting a large amount of BECCS and/or forest protection/planting in the future scenarios.

The numbers for future CDR are often huge, though they vary across models and scenarios. For example, in the IPCC’s special report on 1.5°C, the cumulative carbon removal needed by the end of the century was estimated to be somewhere between 100 and 1000 billion tonnes of CO₂. For perspective, we emit more than 40 billion tonnes a year now, so even in the very lowest scenario we would have to remove more than two years’ worth of global CO₂ emissions.

Academics and NGOs have also pointed to the fact that all methods of carbon removal come with side effects and trade-offs that are context and method dependent – such as the huge land areas needed for BECCS, or energy requirements for Direct Air Capture with Carbon Storage (DACCS) (a technology which some scientist predict could remove tens of GtCO₂by the end of century). Land-based carbon removals also come with other trade-offs, such as increased competition for agricultural land and disruption of biodiversity. There has also recently been an increased recognition that unrealistically high carbon removal projections could be encouraging delayed action and greenwashing.

In this report, the IPCC intends to explain the limitations and trade-offs of carbon removal carefully, while assessing the amount of CDR in many of the scenarios. There has also been a new wave of scientific literature looking at how to achieve the Paris goals with no carbon removal whatsoever. These pathways show us that net-zero without the ‘net’ (let’s call it ‘true zero’) requires much more rapid transformations of the energy system and larger near-term emissions cuts. These scenarios also lead to multiple other benefits (so-called ‘co-benefits’) like avoiding drastic land-use change, as well as benefiting food systems, biodiversity and the environment in the long-term.