Carbon trading from Kyoto to Paris and beyond

Carbon Markets Veteran ecosecurities Reflects on Sustainable Development Goals

Carbon markets veteran ecosecurities won three project development categories in Environmental Finance‘s Voluntary Carbon Markets rankings. CEO Pablo Fernandez reflects on a quarter century of carbon project development.

Evolution of ecosecurities

Pablo Fernandez: The company was created even before Kyoto – in January 1997. At that time, without any regulatory framework, our focus was on the voluntary market. With the creation of the Clean Development Mechanism (CDM) under the Kyoto Protocol, we thrived in that regulated market. Given our background, we are very comfortable in the voluntary market and, indeed, we played a pivotal role in shaping it, contributing to the establishment of the Verified Carbon Standard in the 2000s. Nowadays, we have been very active on the negotiations and discussions related to the Article 6 regulatory framework, processes and methodologies. We are well prepared and positioned for this new era of carbon markets.

We have essentially been doing the same thing for the last 25 years – connecting finance to the development of impactful and sustainable projects, using carbon pricing to deliver climate mitigation. While our profit-for-purpose mission is constant and guides our actions, our activities and execution plan will necessarily evolve as the market changes.

Similarities and Differences between Kyoto and Paris

PF: The Kyoto Protocol took a top-down approach. Offsets generated by the CDM were the focus of international transactions; there was essentially a single instrument. That top-down approach ran into deadlock in Copenhagen [in 2009]. So, the Paris Agreement took a revolutionary, bottom-up approach, allowing different countries to move at different speeds and develop approaches to climate mitigation in their own way.

The price we paid for that is that now we have a whole patchwork of approaches to carbon pricing: the World Bank report finds 100 carbon pricing initiatives being developed around the world, with minimal levels of connection. We have offsets, insets, local carbon markets, the EU’s Carbon Border Adjustment Mechanism: it’s a much more complex landscape, and definitely more difficult for newcomers to navigate.

Another difference worth stressing is that the CDM was very much operating at the margins, with projects here and there. Now, we are operating at a much greater scale and really at the core of the economy. Twenty years ago, there might have been one REDD+ [reducing emissions from deforestation and forest degradation] project in the whole of Latin America – now we have hundreds of projects in a single country.

Our global presence helps us, our partners and clients to navigate such a complex landscape. Moreover, we are today working closely with governments in Latin America, Africa, and Asia to develop not only individual projects, as we did during the Kyoto Protocol, but transformative programmes that can help developing countries decouple their economic growth and development from a growing emissions profile.

Inflection Point for the Voluntary Carbon Market

PF: Whilst we embrace the objective criticism of the imperfections of the market, and aim to better ourselves every day, to those naysayers who criticise for its own sake, I ask, “Show me a perfect market, a perfect system. And what have you done today about the climate emergency?” We believe acting and doing is better than doing nothing at all.

That said, the voluntary carbon market has grown rapidly in the vacuum created by the lack of international regulatory frameworks on the demand side. With more stress on the financial system, higher interest rates, war in Ukraine, etc., the fragility of that demand has been exposed.

Over recent years, the regulatory framework that has evolved around the voluntary market has very much focused on the supply side, believing that demand would grow naturally, and the priority should be to ensure high-quality supply. The Integrity Council for the Voluntary Carbon Market (ICVCM) and the Voluntary Carbon Markets Integrity Initiative (VCMI) have been doing good work in this regard, but now more work is needed on the demand side.

What buying companies want is a framework that allows them to make investments in climate mitigation and not risk facing criticism for these investments. We need standards that corporations know that they will be evaluated against. We hear all the time from companies that decide that, rather than spend lots of money and get criticised, they would rather do nothing and wait and see.

We have a climate emergency – we can’t afford to wait. At ecosecurities, we are doing our small part in contributing to these efforts to help mature the market, but a lot more work is needed by all involved.

Addressing Environmental Integrity Concerns

PF: Integrity has many aspects. A big part of the challenge is that it’s impossible to agree on a single definition of integrity that is applicable to different technologies and project types. Take a project that captures N₂0 from an industrial plant. It has integrity when it comes to carbon monitoring and accounting and, in many countries, additionality. But such a project has absolutely no sustainability co-benefits, so it’s of no interest to voluntary carbon buyers.

At the other extreme, REDD, water filter and clean cookstove projects provide massive sustainability benefits – improving health, benefiting local communities, protecting biodiversity. However, each cookstove only reduces a few tonnes of carbon dioxide a year, so standard-setters made a lot of assumptions to create a simplified carbon methodology for those projects. That means there is a trade-off between the carbon calculations and the transaction costs involved.

There’s no silver bullet to this. There are bodies like the ICVCM doing a good job of assessing the methodologies that the market is using. But the bottom line is that there is no ‘one size fits all’ approach to integrity. Our view is that when you want to bring together climate integrity, biodiversity integrity and community integrity, there are no shortcuts and no room to cut corners.

Future Plans for ecosecurities

PF: There have been a lot of newcomers in the space over the last few years, claiming that carbon projects are easy to develop. They are not. It takes a lot of effort, and experience is crucial. One of the reasons we have been around for 25 years is that we have built our reputation on doing what’s right and fair – building our projects with the highest

SDGs, Targets, and Indicators Analysis

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 7: Affordable and Clean Energy
• SDG 13: Climate Action
• SDG 15: Life on Land
• SDG 17: Partnerships for the Goals

The article discusses the evolution of the carbon markets and the role of ecosecurities in connecting finance to the development of impactful and sustainable projects. This aligns with SDG 7 (Affordable and Clean Energy) and SDG 13 (Climate Action), which focus on promoting renewable energy, mitigating climate change, and reducing greenhouse gas emissions. Additionally, the mention of REDD+ projects in Latin America relates to SDG 15 (Life on Land), which aims to protect and restore terrestrial ecosystems. Finally, the involvement of ecosecurities in negotiations and discussions related to carbon markets highlights their commitment to partnerships for achieving the goals, as outlined in SDG 17 (Partnerships for the Goals).

2. What specific targets under those SDGs can be identified based on the article’s content?

• SDG 7.2: Increase substantially the share of renewable energy in the global energy mix.
• SDG 13.2: Integrate climate change measures into national policies, strategies, and planning.
• SDG 15.2: Promote the implementation of sustainable management of all types of forests.
• SDG 17.16: Enhance the global partnership for sustainable development.

The article emphasizes the importance of renewable energy and sustainable projects, indicating a target under SDG 7.2. The involvement of ecosecurities in shaping carbon markets and their commitment to sustainability align with the target under SDG 13.2. The mention of REDD+ projects in Latin America relates to the target under SDG 15.2, which focuses on sustainable forest management. Lastly, the engagement of ecosecurities in negotiations and partnerships reflects the target under SDG 17.16, which aims to enhance global partnerships for sustainable development.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

• Percentage of renewable energy in the global energy mix
• Inclusion of climate change measures in national policies and strategies
• Number of sustainable forest management projects implemented
• Number of partnerships and collaborations established for sustainable development

While the article does not explicitly mention specific indicators, the progress towards the identified targets can be measured using indicators such as the percentage of renewable energy in the global energy mix, the inclusion of climate change measures in national policies and strategies, the number of sustainable forest management projects implemented (e.g., REDD+ projects), and the number of partnerships and collaborations established for sustainable development.

SDGs, Targets, and Indicators Table

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Source: environmental-finance.com

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