Carbon credits are a ‘catalyst’ for climate action, not just a method of offsetting emissions: eco-securities boss | News | Eco-business

For Asia to achieve both its short- and long-term decarbonisation goals, nature-based solutions (NbS) and carbon credits generated from low-carbon projects and technologies must be part of the approach.

Responsible for the region over half of all global CO2 emissions Although NbS is home to some of the planet’s most significant natural resources, focusing on NbS could potentially 37 percent the emission reductions needed by 2030 to achieve the goals of the Paris Agreement.

NbS refers to actions to protect, manage and restore natural or modified ecosystems that benefit society and biodiversity.

The method has gained considerable recognition in recent years as an effective method of capturing emissions.The Intergovernmental Panel on Climate Change (IPCC) 2023 report Emphasis on protecting natural areas as one of the most effective strategies to reduce global greenhouse gas emissions.

“From a medium to long-term perspective, forest protection, forest and mangrove restoration, and regenerative agriculture are critical to achieving the cost-effective greenhouse gas emission reductions needed to achieve net-zero targets,” notes Pablo Fernandez, CEO of Ecosecurities, an environmental services provider.

Asia’s rich biodiversity also makes NbS a viable solution. The region covers 30 percent of the planet’s land area, is home to 500 million hectares of tropical forest, 25 million hectares of peatland and the world’s highest levels of blue carbon, the carbon absorbed and stored by coastal and marine ecosystems.

As NbS projects sequester carbon or avoid emissions, these can be quantified, converted into emission rights and traded on carbon markets. This can finance the protection of ecosystems and natural resources and generate funds for other low-carbon instruments and solutions.

Use of carbon markets

The region’s NbS potential may explain why Asia’s carbon markets and associated emissions trading systems (ETS) – which cap overall emissions and allow companies to buy and sell emission allowances – have made some progress in recent years.

This, together with increased regulatory pressure on climate protection, increased investor interest and growing voluntary and compliant carbon markets, has led to some developments in the region.

Countries such as China, Indonesia, Japan, Singapore and South Korea have already introduced an emissions trading system. South Korea in particular has made great progress: the emissions trading system is the second largest and covers almost three quarters of national greenhouse gas emissions.

However, progress remains patchy. Some countries – such as India, Malaysia, Vietnam and Thailand – are still in the process of developing an emissions trading system. Other countries, such as the Philippines, have not yet announced one.

Despite uneven developments in the region and a slowly growing number of companies with net zero targets, Asia seems to be moving in the right direction with its carbon markets, fuelling hopes of boosting global demand for emission allowances: The voluntary carbon market has been worth $2 billion in 2021 and projected onto grow to 50 billion US dollars by 2030.

This in turn will provide opportunities for companies that specialize in climate change mitigation projects and can potentially generate carbon credits.

One such company is Ecosecurities, which operates in both the compliance and voluntary carbon markets and works with clients to source, develop and finance climate mitigation projects, for example in the renewable energy and NbS sectors.

As the company looks to expand its reach into countries like Japan and South Korea in light of more advanced emissions trading systems, it hopes to explore solutions beyond NbS in the hopes of using advanced carbon absorption tools to reduce emissions and generate credits.

“Several countries in the Asia-Pacific region are currently implementing or developing carbon pricing mechanisms. However, to achieve the goals of the Paris Agreement, these efforts need to be accelerated and expanded to sectors such as land use (emissions), (heavy) industry and the building sector,” explains Fernandez.

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Our approach emphasizes a “reduce and invest” strategy. We encourage companies to integrate carbon credits and investment in projects as part of a broader, long-term net zero or sustainability strategy in line with the Science Based Targets initiative.

Pablo Fernandez

Ensure credibility

In order to meet the increasing demand for emission certificates, the projects that generate such certificates must be credible.

For example, a credible project must lead to a CO2 reduction that would not have occurred without the financing through carbon credits; it must ensure durability by leading to long-term emission reductions; it must be verifiable by third parties and meet recognised standards. This is important in light of current controversies which have focused on CO2 certificates and raised questions about their legitimacy.

Fernandez is aware of this and points out that the company takes steps to certify the authenticity of the credits generated by its projects.

“Through comprehensive monitoring, reporting and verification systems, often using technology, combined with on-site verification, we ensure that projects are performing as expected. This helps us track our carbon reductions or removals transparently and accurately,” he said.

Companies should responsibly view carbon credits as a “catalyst” for climate action, Fernandez adds, rather than just a mechanism to offset emissions. Carbon credits generate revenue that can be reinvested in emissions reduction projects, such as renewable energy, energy efficiency and reforestation projects.

“Carbon credits can help accelerate the transition to low-carbon solutions by providing the finance industries need to scale up their decarbonisation activities,” he says.

“Our approach emphasizes a ‘reduce and invest’ strategy. We encourage companies to integrate carbon credits and investment in projects as part of a broader, long-term net zero or sustainability strategy in line with the Science Based Targets initiative.”

A new type of CO2 credit?

Beyond emissions reductions and credits from land restoration, there is hope that another method, called “technology-based solutions” (TbS), could also create carbon credits from emissions removed from the atmosphere.

These could include solutions such as carbon capture and storage (CCS) technology, which captures emissions from industrial processes and stores them underground.

Other forms of TbS include Direct Air Capture (DAC) tools, which capture carbon directly from the surrounding air using chemical processes, or “bioenergy storage” through biochar, a form of charcoal that can potentially store carbon for longer periods when added to the soil. Another example is “enhanced weathering,” which removes carbon dioxide from the atmosphere by accelerating the natural weathering process of rock.

These approaches currently boast longer carbon storage timefrom 100 to 1,000 years, but their development is also more expensive, which can lead to higher prices for emission certificates.

TbS currently represents a small part of the carbon credit market, but Fernandez points out that there is great potential for growth and emissions reduction this decade, especially when used in conjunction with NbS. He adds: ecosecurities would like to expand its focus on TbS because of its potential for short and long-term carbon sequestration.

“From a 2030 perspective, certain types of NBS, energy transition solutions and TBS can be particularly helpful in achieving rapid reductions in greenhouse gas emissions,” he said.

While carbon-intensive economies such as engineering, manufacturing and technology-based industries could potentially benefit the most from TbS, many of them will require financing given the high costs – a problem the company aims to address.

“Innovations such as CCS and DAC often come with high costs, sometimes ranging between $400 and $500 per tonne of CO2. We are focused on leveraging our local, regional and international networks to accelerate the adoption of new decarbonisation technologies, aiming to flatten the cost curve and make these solutions more accessible to companies looking to introduce or offset emissions in their value chains.”

In an effort to expand into the TbS space, Ecosecurities announced a partnership with SK Group – a South Korean conglomerate operating in sectors such as energy, semiconductors, telecommunications and life sciences – in December 2023.

The collaboration marks the conglomerate’s largest investment in the carbon market and will provide green securities with access to SK Group’s carbon reduction solutions and technologies.

“By providing incentives and support to companies with innovative solutions, we aim to accelerate the emergence of technology-based carbon reduction initiatives,” said Moohwan Kim, executive vice president of SK Inc. He added that the proliferation of technology-based solutions could lead to carbon credits, thereby also growing the market for voluntary carbon credits.

“Our short-term goals are to connect potential climate investors from Singapore, Japan and South Korea with high-impact opportunities to develop carbon projects in host countries,” added Fernandez.

While NbS and TbS could provide some impetus for short- and long-term decarbonisation in Asia, governments need to create favourable conditions for carbon markets to function and grow effectively, Fernandez concluded.

“This requires strong demand signals from companies, national, regional and international emissions trading systems, and clear political frameworks and rules of engagement,” he explains.

“Without these measures, the market is likely to remain fragmented and regionalised, and the catalytic potential of carbon finance to support a transition to a low-carbon economy globally and in the Asia-Pacific region will be limited.”