Climate change presents tangible and transitional risks that affect every investor, business owner and philanthropist on the planet. And every one needs to get on board with collaborating on solutions to avert climate calamity.
Addressing the climate change challenge and realising the UN’s 17 Sustainable Development Goals will require trillions of dollars annually to be poured into sustainable lending, investment and insurance. This sum is vast but achievable thanks to the key mechanism of carbon credits (permits that authorise the holder to emit a specified amount of carbon dioxide), which play a vital role in channelling critical financing to decarbonisation projects around the world.
Carbon credits are essential financial instruments for ensuring that we meet our international climate targets and support those communities that are most badly affected by climate change yet contribute least to it. Other advantages to those local communities include climate adaptation and resilience, sustainable development through the creation of green jobs, renewable energy generation, and the preservation of the environment and biodiversity.
Emissions elimination is simply not feasible for many companies
Business contribution
Given the urgency of the climate crisis, companies are rightly coming under public and institutional pressure to make net-zero commitments. Those commitments are pledges to eliminate, cut or offset the amount of carbon they emit throughout their operations.
While some companies can reduce their greenhouse gas emissions by modifying their business practices, the complete elimination of emissions is simply not feasible for many. That, however, does not render any kind of meaningful climate action impossible for them.
Companies can compensate for the inability to completely eradicate their own emissions by buying carbon credits. The credits generate the finance that funds activities – planting trees, conserving natural habitats, building renewable energy plants – that will cut emissions elsewhere. Allowed a certain number of carbon credits by the United Nations, each country then allocates or sells them to domestic businesses and other organisations.
Global market
At the country level, those that have signed up to the Paris Agreement must meet their nationally determined contributions to climate change mitigation by the year 2030. For this to happen, all possible policy and financing mechanisms, as well as opportunities for international cooperation, must be effectively and promptly utilised. Pakistan has set itself the bold target of halving its projected emissions by 2030, with a 15% cut achieved through its own resources and a further 35% reduction if international financial support is forthcoming.
The new international carbon market created by Article 6 of the Paris Agreement makes carbon credits tradable between countries. Pakistan could earn between US$2bn and US$5bn from this carbon market by the year 2030 – money that would be invested in climate change mitigation – so long as it establishes a supportive regulatory and policy framework, and ensures that the benefits reach the communities impacted by climate change.
Delta Blue Carbon is expected to generate US$12bn in carbon credits
Blue carbon
One major carbon credit generator in Pakistan lies on the south-east coast of Sindh province. Here, the Delta Blue Carbon project, which started in 2015 and will run for 60 years, involves planting and restoring nearly half a million hectares of degraded mangrove forest in the Indus River Delta. The Indus Delta is home to the world’s seventh largest mangrove forest and its largest arid-climate mangroves. With mangroves sequestering 10 times more carbon annually than mature tropical forests do, Delta Blue offers an enormous carbon-offsetting potential of 240 million metric tons of carbon dioxide equivalent. As a result, the project is expected to have generated a total of US$12bn in carbon credits by the time it completes, in 2075, and represents a critical component of Pakistan’s ecology and economy.
Delta Blue is an example of how carbon credits work best, funnelling emissions-reducing funds from the global North to the global South, where climate mitigation initiatives may not otherwise happen. By enabling developing economies to embark on mitigation measures to achieve their Paris Agreement target, carbon credits accelerate climate action and improve national climate ambition. Delta Blue will help the planet and all its businesses and people, not just those in Pakistan.
Disclaimer: the views expressed by the writer do not necessarily reflect those of ACCA or any other person or organisation
