The Promise of Blue Carbon Credits
Ocean’s potential to mitigate climate change is enormous. It is our job to finance the right projects.
Let’s assume the best case scenario. Even if all countries continue to implement the ambitious emission-reduction actions established at the Paris Agreement, global warming is still likely to exceed the 1.5°C threshold during the 21st century (1). In order to avoid the most dramatic effects of climate change, we have to not only drastically cut emissions but also deploy carbon dioxide removal (CDR) technologies, which actively capture CO2 from the atmosphere and store it somewhere safe. Right now, forests and soil carbon sequestration are the most common CDR methods. But there is a nature-based solution yet to be explored: the seas.
Oceans are Earth’s greatest carbon sink, storing more than 90% of the CO2 on the planet. (2) Coastal ecosystems such as tidal marshes, mangroves and seagrasses can capture and store carbon at a rate six times higher than mature tropical forests (3). The ocean´s potential to mitigate climate change is huge and currently still untapped. Specifically, Natural Climate Solutions (NCS) are actions that conserve, restore and improve land management including forest and marine ecosystems. That explains the growing interest in blue carbon projects that sequester and store carbon in the ocean delivering large-scale emissions reductions cost-effectively. These projects are particularly attractive because they are not only promoting climate resilience but also a variety of co-benefits including water, air and soil quality, biodiversity and food security.
For all its promise, however, blue carbon remains a largely untapped tool to help mitigate climate change. Only last year Verra, a leading certifier, released a methodology that allows wetland conservation projects to claim credits. And even more recently, a group of NGOs including Conservation International and Nature Conservancy, released a guideline to help credit purchasers distinguish between high and low quality blue carbon projects. Offering ocean-based credits in the voluntary carbon credit market at scale could be a game-changing source of finance to conserve and restore ocean ecosystems — so far major victims of human activity.
There is a reason, however, why blue carbon projects are still less common than land-based ones even though they gain traction: measurement, reporting and verification (known in the field as MRV) is more challenging. For instance, mangrove forests are evolving systems and the amount of carbon they absorb changes dramatically over time and depending on their location (4). Seaweed conservation and restoration is another great promise because it captures carbon up to 35 times faster than tropical rainforests.
“Just like in land-based projects, there are still questions regarding the permanence of carbon storage and the risk of leakage (when degradation is displaced to a neighbouring area). But we have already started piloting high-quality ocean-based projects together with our partners. That includes, of course, the use of science-based methodologies to verify the levels of capture and storage”, says Katrin Klingenberg, Co-Founder and Head of Supply at climate tech startup GreenTrade. “The problem, of course, is that these projects are by far not enough to match demand.”
Global demand for carbon credits is expected to increase by a factor of 15 by 2030 (5). The market value of all transactions amounted to $2 billion last year and could reach up to $50 billion in 2030 according to the Taskforce on Scaling Voluntary Carbon Markets, a private-sector led initiative. Paradoxically, only an estimated 3% of current climate finance is allocated to nature-based solutions, that involve the conservation or restoration of natural ecosystems that capture and store carbon (6). One of the reasons for this mismatch is the fact that project developers face high up-front costs, but their projects take years to generate carbon credits.
“What we see now is a growing number of corporate buyers competing for a fast-dropping inventory of already existing credits’’, says Frederick Leuschner, CEO at GreenTrade. “That’s precisely the problem we want to solve.”
GreenTrade is a marketplace for nature-based carbon credits bridging the gap between project developers and companies committed to reducing their environmental impact. At its core are forward contracts that pay for development costs right away and secure access to future carbon credits at a discount. Those long-term offtake projects are then turned into digital tradable assets (NFTs), bringing liquidity to carbon markets.
Several pieces of the puzzle start falling into place to make a growing number of blue carbon projects viable: from the science behind carbon processing in the oceans to the design of solid carbon markets and the incentives for project developers. Our job now is to help scale the best ones — and fast.
For more information about GreenTrade, its offer and projects:
Article: Funding Today the Forests of Tomorrow with Tokenized Carbon Credits
