For Asia to satisfy each close to and long-term decarbonisation targets, nature-based options (NbS) and the carbon credit generated from low-carbon initiatives and applied sciences should be a part of the image.
With the area answerable for over half of all international carbon emissions but residence to among the most vital pure sources on the planet, specializing in NbS may doubtlessly present 37 per cent of the emissions reductions wanted till 2030 to attain the targets of the Paris Settlement.
NbS refers to actions that shield, handle, and restore pure or modified ecosystems, benefitting society and biodiversity.
The tactic has gained appreciable recognition in recent times as an efficient means of sequestering emissions, with the 2023 Intergovernmental Panel on Local weather Change (IPCC) report emphasising the safety of pure areas as probably the most efficient methods to scale back international greenhouse gasoline emissions.
“From a medium to long-term perspective, forest conservation, forest and mangrove restoration, and regenerative agriculture, are very important in reaching cost-effective reductions in greenhouse gasoline emissions, that are obligatory for reaching internet zero targets,” notes Pablo Fernandez, chief government officer of ecosecurities, an environmental providers supplier.
Asia’s wealthy biodiversity additionally makes NbS a viable answer. Overlaying 30 per cent of the planet’s land space, the area is residence to 500 million hectares of tropical forest, 25 million hectares of peatland, and the very best blue carbon content material globally, which is the carbon captured and saved by coastal and marine ecosystems.
Since NbS initiatives sequester carbon or keep away from emissions, these may be quantified and transformed into carbon credit and traded on carbon markets, which may finance the safety of ecosystems and pure sources, and generate funding for different low-carbon instruments and options.
Leveraging carbon markets
The area’s NbS potential could clarify why Asia’s carbon markets and associated emissions buying and selling methods (ETS) – which cap complete emissions and permit corporations to purchase and promote emission allowances – have made some progress in recent times.
That, mixed with a stronger regulatory push for local weather motion, elevated investor curiosity, and rising voluntary and compliance carbon markets, has led to some developments within the area.
International locations akin to China, Indonesia, Japan, Singapore, and South Korea have already got an ETS in place. South Korea has made marked headway particularly, with its ETS being the second-largest emissions buying and selling scheme in scale, masking near three-quarters of its nationwide greenhouse gasoline emissions.
Progress, nonetheless, stays fragmented with some nations – akin to India, Malaysia, Vietnam, and Thailand – nonetheless creating an ETS. Different nations, such because the Philippines, have but to announce one.
Regardless of patchy developments within the area and a slowly rising quantity of corporations with internet zero targets, Asia seems to be shifting in the fitting route with its carbon markets, fuelling hopes of stoking rising international demand for carbon credit: the voluntary carbon market was valued at US$2 billion in 2021 and projected to attain as much as US$50 billion by 2030.
This, in flip, will current alternatives for corporations that concentrate on local weather mitigation initiatives and ones that may doubtlessly generate carbon credit.
One in all these corporations is ecosecurities, which operates in each compliance and voluntary carbon markets, and works with purchasers to supply, develop and finance local weather mitigation initiatives, akin to these in renewable vitality and NbS.
Whereas the corporate goals to develop its attain inside nations akin to Japan and South Korea in gentle of extra superior ETSs, it hopes to faucet into options past NbS with the hope of utilizing superior carbon-absorbing instruments to scale back emissions and generate credit.
“A number of Asia Pacific nations are implementing or creating carbon pricing mechanisms. However to satisfy the Paris Settlement targets, these efforts should speed up and broaden to incorporate sectors akin to land use [emissions], the [heavy] business, and the buildings sector,” Fernandez explains.
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Our method emphasises a ‘cut back and make investments’ technique. We encourage corporations to combine carbon credit and investments in initiatives as a part of a broader, long-term internet zero or sustainability technique in alignment with the Science Based mostly Targets initiative.
Pablo Fernandez
Guaranteeing credibility
To satisfy the rising demand for carbon credit, initiatives that generate such credit should be credible.
As an example, a reputable venture should present carbon reductions that might not have occurred with out the carbon credit score funding; guarantee permanence by resulting in long-term emissions reductions; should be verifiable by third events; and align with recognised requirements. That is in gentle of current controversies which have shone the highlight on carbon credit and raised questions on their legitimacy.
Fernandez is cognisant of this, noting that the corporate takes steps to certify the authenticity of the credit its initiatives generate.
“By means of intensive monitoring, reporting, and verification methods that always use expertise, mixed with ‘boots on the bottom’ verification, we guarantee initiatives are performing as anticipated. This helps us to transparently and precisely monitor our carbon reductions or removals,” he mentioned.
Corporations ought to responsibly view carbon credit as a “catalyst” for local weather motion, Fernandez provides, and never merely as a mechanism to offset emissions. It is because carbon credit generate income that may be reinvested into initiatives geared toward decreasing emissions, akin to renewable vitality, vitality effectivity, and reforestation initiatives.
“Carbon credit will help speed up the transition to low carbon pathways, offering the very important finance that sectors have to scale up their decarbonisation actions,” he says.
“Our method emphasises a ‘cut back and make investments’ technique. We encourage corporations to combine carbon credit and investments in initiatives as a part of a broader, long-term internet zero or sustainability technique in alignment with the Science Based mostly Targets initiative.”
A brand new form of carbon credit score?
Past emissions reductions and credit generated from restoring land, there are hopes that one other methodology, dubbed “technology-based options (TbS)”, may also create carbon credit from emissions faraway from the ambiance.
This may, for instance, see options akin to carbon seize and storage (CCS) expertise used to entice emissions from industrial processes after which storing them underground.
Different types of TbS embody direct air seize (DAC) instruments, which seize carbon immediately from the ambient air utilizing chemical processes, or “bioenergy storage” by way of biochar, which is a type of charcoal that may doubtlessly retailer carbon for longer durations when added to soil. One other is “enhanced weathering”, or when carbon dioxide is faraway from the ambiance by dashing up the pure weathering technique of rock.
These approaches at present boast longer carbon storage durations, from 100 to 1,000 years however are additionally dearer to develop, which can result in greater carbon credit score costs.
TbS at present represents a small fraction of the carbon credit score market, however Fernandez notes that there’s potential for a lot progress and emissions cuts this decade, particularly if utilized in tandem with NbS. He provides that ecosecurities goals to develop its deal with TbS due to its close to and long-term carbon seize potential.
“From a 2030 perspective, sure forms of NbS, vitality transition-related options, and TbS may be notably useful in delivering fast cuts in greenhouse gasoline emissions,” he mentioned.
Whereas TbS may doubtlessly profit carbon-intensive economies essentially the most, akin to these in engineering, manufacturing, and technology-based industries, many would require financing in gentle of excessive prices – a difficulty the corporate goals to deal with.
“Improvements akin to CCS and DAC typically have excessive abatement prices, typically starting from US$400 to US$500 per tonne of CO2. Our focus is on utilizing our native, regional, and worldwide networks to speed up the deployment of recent decarbonisation applied sciences, aiming to flatten the associated fee curve and make these options extra accessible to companies seeking to inset or offset emissions inside their worth chains.”
In a bid to develop into TbS, ecosecurities introduced a partnership with SK Group in December 2023 – a South Korean conglomerate that operates throughout sectors together with vitality, semiconductors, telecommunications, and life sciences.
The collaboration is the conglomerate’s largest funding into the carbon market and can permit ecosecurities to entry SK Group’s carbon discount options and applied sciences.
“By offering incentives and help to corporations with modern options, we goal to catalyse the emergence of technology-based carbon discount initiatives,” mentioned Moohwan Kim, government vice chairman of SK Inc., including that the growth of technology-based options may generate carbon credit and, in flip, additionally develop the voluntary carbon credit score market.
“Our short-term targets are to attach potential local weather buyers from Singapore, Japan and South Korea with high-impact carbon venture improvement alternatives in host nations,” Fernandez added.
Whereas NbS and TbS could present some impetus for near- and long-term decarbonisation inside Asia, governments should create beneficial circumstances for carbon markets to perform successfully and develop, concludes Fernandez.
“This implies sturdy demand alerts from corporations, in addition to nationwide, regional and worldwide ETSs, clear coverage frameworks and guidelines of engagement,” he says.
“With out these, the market is more likely to stay fragmented and regionalised, and the catalysing potential of carbon finance in supporting a low carbon transition globally and within the APAC area can be restricted.”
