A Back-to-Back Launch at COP27

November 12, 2022

A Back-to-Back Launch at COP27

Since COP27 started this week, carbon credits and payment for the “loss and damage” by the biggest polluters are the focus of the talks.

At the same time, Bloomberg’s charitable organization announced a new initiative to help scale the VCM. 

Also within COP27 radar, foreign debt restructuring in exchange for funding conservation projects is gaining traction among developing countries. 

All these COP27 roundup stories and more! So, let’s get started.

$1.7T for “Loss & Damage”

Concerns about tackling the catastrophic effects of climate change have never been more urgent. During COP27, the payment for the “loss and damage” experienced by poor nations because of climate disasters took center stage.

The amount needed for such compensation varies; one study estimated it to be worth up to $580 billion annually by 2030, growing to $1.7 trillion by 2050. 

Also at the COP27 limelight is John Kerry’s revelation of the U.S. plan to unlock ‘tens of billions' of cash to fund the energy transition via carbon credits. This, of course, gained both praise and criticism from tens of thousands of delegates. 

Bloomberg’s Trust in Carbon

As carbon credits are at the center of climate talks, Bloomberg Philanthropies unveiled its new initiative with Three Cairns Group to supplement the VCM growth.

The firms will establish the Global Carbon Trust (GCT) and the Carbon Storage Governing Council, hoping to drive innovation, transparency, and reliable data in the carbon markets. 

In particular, GCT seeks to (1) address the need for fungible carbon credits, (2) create standardized carbon credit contracts, and (3) increase the supply of carbon credits.

 

Can their philanthropy help attract supporters within and outside the COP27 summit? We can only hope so, especially if their new platform will indeed scale up the VCM. 

Swapping Debts for Nature

Another way for developing countries to join the decarbonization movement is through debt relief in the form of debt-for-nature or debt-for-climate swaps. 

These deals allow a country to restructure its debt at a lower interest rate or for longer repayment periods, in exchange for the debtor’s commitment to fund conservation or climate-related projects.

They started to gain more interest once again following the deals made by the Nature Conservancy, converting over $500 million of debt into $230 million of money for conservation. The NGO also sees a $10 billion market opportunity that can turn $2 billion into conservation.

If that becomes a reality and all statements of interest turn into action after COP27, then nature might have another chance for payback. 

Teachers Paying Billions to go Green

Even outside the COP27 radar, billions of dollars are being invested to cut carbon emissions. Ontario Teachers’ Pension Plan (OTPP) is one of the world's largest pension funds, and they are speeding up their net zero 2050 commitments.

OTPP green investments in 2021 reached over $33 billion. And since the announcement of this plan, the Fund was able to reduce its portfolio emissions intensity by 32% (vs. 2019 baseline).

Ontario Teachers’ plan to cut their emissions intensity down to 45% by 2025 and 67% by 2030. 

Should other large pension plans follow suit and be ambitious with their climate goals, we would see even more billions paid to save the earth from getting warmer.

Carbon Fact of the Week

In the early 1990s, the U.S. initiated a program called the Enterprise for the Americas Initiative (EAI), involving debt-for-nature swaps.

The country restructured, and in one case sold, debt equivalent to a face value of over $1 billion owed by Latin American countries. 

To date, the total value of debt treated by these swaps globally amounts to $3.7 billion and has funded nature-related spending of over $1.2 billion.

Source: https://carboncredits.com/