More Than a Drop in the Ocean?

Blue carbon markets to support ocean and coastal system targets of COP27 Adaptation Agenda. 

The Sharm El Sheikh Adaptation Agenda put a lot of promises in writing – not least commitments to protect coastal zones and oceans from the physical impacts of climate change. 

Alongside targets for four other systems, it sets a 2030 deadline for state and non-state actors to invest US$4 billion to protect and restore 15 million hectares of mangroves, halt loss and restore coral reefs, seagrass, marshes and kelp forests, and protect urban coastlines through grey and hybrid solutions 

“Investment into oceans and coastal areas is critical not only for the protection of coastal communities from physical climate impacts and extreme weather events, but also to prevent negative changes to the state of ocean ecosystems and biodiversity,” says Gemma James, Senior Manager of Biodiversity and Nature at specialist advisory firm Chronos Sustainability.  

The Adaptation Agenda follows the Ocean and Climate Change Dialogue, which was held in June, during which the UN Climate Change Secretariat published a report underscoring the importance of ocean-related adaptation at COP27. 

The impact of climate change goes beyond rising sea levels and coastal flooding, which could cost US$1 trillion a year in damages and loss of land by 2050. The report noted the important role oceans play in regulating the Earth’s temperature and sequestering carbon. Oceans absorbed around 30% of anthropogenic CO2 emissions between the beginning of the industrial revolution and the mid-1990s. However, doing so causes ocean acidification, making oceans increasingly uninhabitable for many living organisms and altering food webs.  

The promises made in the Adaptation Agenda have been supported by a number of independent initiatives and pledges announced at the summit, notably an ambitious plan for upscaling a high-quality blue carbon market, but experts aren’t fully satisfied with progress made in Egypt. 

“We can’t just look at the issues facing energy, water, food, agriculture in siloes,” says Dr Alison Baker, Fund Manager for the Water for Women Fund. “We need to be looking at potential solutions more holistically.” 

The negative impacts of ocean acidification and sea level rises will reach far beyond coastlines, and yet this was the first ever COP with an ocean-focused pavilion. The world can’t afford for oceans and coastal zones to “remain an afterthought” in adaptation efforts, says Karen Sack, Executive Director of the Ocean Risk and Resilience Action Alliance (ORRAA). 

“Adaptation finance is crucial for coastal areas and the maritime environments upon which they rely economically,” adds Lian Michelson, Investment Director at UK-based and sustainability-focused Vala Capital, pointing to the “biblical flooding” in Pakistan as an example of the damage that could be wrought. 

The UN report emphasised the importance of upscaling ocean-based measures for climate change mitigation and adaptation, calling for integrated ocean solutions to be reflected in national climate policies and strategies. It also noted that funding for ocean climate action needs to increase through innovative and multidisciplinary solutions.  

But Sustainable Development Goal (SDG) 14 – life below water – remains the most underfunded of the 17 global targets, says ORRAA’s Sack.  

“COP27 was a mixed bag. While there was some progress raising awareness and making new commitments, it’s the 27th summit, and oceans is only now a central theme,” she says. 

“At some point, we have to actually start taking action. US$4 billion for mangroves is a drop in the ocean. We’ve got to mobilise trillions in capital as quickly and possible, which means utilising the private sector.”  

A positive sea change  

Many are encouraged by the publication at COP27 of principles and guidance for high-quality blue carbon credits, jointly developed by Salesforce, Conservation International, The Nature Conservancy, ORRAA, the Meridian Institute, and the World Economic Forum’s Friends of the Ocean Action and Ocean Action Agenda 

The idea is that, by contributing to climate mitigation through blue-themed solutions, more capital can be invested in ocean and coastal zone adaptation. And the ‘blue planet‘ has some very effective carbon sinks.  

Water-related ecosystems, whether they’re freshwater wetlands, coastal areas or oceans, are very strong contributors to climate change mitigation, due to their capacity for carbon sequestration,” says Ruth Mathews, Senior Manager and Coordinator of the Action Platform for Source-to-Sea Management at the Stockholm International Water Institute (SIWI). 

Mangrove forests, for example, store up to four times more carbon than tropical forests and can play a hugely effective role in coastal resilience, serving as a natural barrier against flooding. 

Expected to reach US$50 billion by 2030, voluntary carbon markets (VCMs) offer a scalable market through which private investors can target investments in adaptation for oceans and coastal zones, such as mangrove reforestation or salt marsh protection projects.  

“A blue carbon market is seen as the panacea for all kinds of investments into coastal and ocean resilience,” says ORRAA’s Sack. 

If scaled, it could massively contribute to climate change mitigation efforts while simultaneously securing finance to bolster ocean and coastal zone resilience, potentially cancelling out between 0.4 to 1.2 metric gigatonnes of CO2 a year, the equivalent of 1-3% of total current annual emissions, according to research by consultancy firm McKinsey.  

However, VCMs have historically been dominated by projects focused on reversing deforestation and upscaling renewable energy capacity. The new guidance is attempting to turn the tide and encourage capital flows into blue-themed projects, while building on emerging frameworks that are attempting to address ongoing challenges in voluntary markets around transparency, regulation and double counting. 

Developed over the last eight months, the initial report has identified five core principles to underpin blue carbon market activity: safeguard nature, empower people, employ the best information and carbon accounting principles, operate contextually and locally, and mobilise high integrity capital.  

“It’s very important that the blue carbon market is built on these high-quality principles and standards to ensure its integrity,” says Dr Amal-Lee Amin, Managing Director for Climate, Diversity and Advisory at British International Investment (BII). 

The blue carbon guidance currently covers projects involving mangrove forests, seagrass meadows and salt marshes. The document noted that other project types – like seaweed conservation and kelp farming – require additional research and the development of new carbon methodologies “which are under development”.  

The principles will help to ensure “blue ecosystems are not monetised for business as usual”, says Sack, adding that “there’s now recognition of the blue economy’s intrinsic value and importance” to net zero and long-lasting sustainability.  

Notably at COP27, the Article 6.4 supervisory body, which is working on a multilateral carbon credit market under the conditions of the Paris Agreement, published its recommendations for what should count as a carbon removal and when this could generate carbon credits for sale. It noted that, as well as geological, terrestrial and engineered products, ocean reservoirs count as credible carbon removals. 

“While this document does not discuss blue carbon credits in the context of the compliance market, the application of these principles and guidance to the VCM will provide a useful precedent for high-quality blue carbon in compliance markets in the future,” the blue carbon market guidance said. 

Also at COP27, the US National Oceanic and Atmospheric Administration (NOAA) announced the expansion of its Blue Carbon Inventory Project. NOAA will be working with partner countries, such as Costa Rica, to develop data tools to assess and track the quantity and quality of soil and biomass blue carbon data, as well as an interface allowing stakeholders access to blue carbon data based on country-specific needs.  

“We’re now heading into COP15 in Montreal, hopefully finalising the global target of protecting 30% of sea areas by 2030. Could the blue carbon market incentivise protection of these areas and serve as a credible sustainable financing mechanism to realise that pledge?” posits ORRAA’s Sack. 

Holding back the tide  

The possibility of an upscaled and high-quality blue carbon market wasn’t the only piece of good news for those focused on ocean and coastal resilience at COP27. 

The Global Mangrove Alliance (GMA) in collaboration with the UN Climate Change High-Level Champions, launched the Mangrove Breakthrough to support the goals outlined in the Adaptation Agenda, including those aimed at conserving coastal mangrove ecosystems. 

Its other goals include restoring 50% of the 818,300 hectares of recoverable mangrove forests lost since 1995 and increasing the share of mangrove forests currently under long-term protection from 41% to 80% by 2030.  

If these targets are achieved, GMA has estimated that more than 43.5 million tonnes of CO2 could be captured by mangroves themselves and 189 million tonnes by the surrounding soils. Further, the subsequent coastal resilience provided by the mangroves could reduce flooding risks for over 15 million people and protect an annual US$65 billion worth of property. 

“It’s far more cost-effective to invest in a mangrove forest than the construction of a seawall. While the latter requires concrete and degrades, mangroves grow in height and depth, sequestering more carbon over time and shoring up flood defences,” says Sack. 

The UAE and Indonesia also co-launched the Mangrove Alliance for Climate (MAS), with India, Sri Lanka, Australia, Japan and Spain joining as members.  

Following a voluntary approach, the alliance’s members will determine their own commitments towards planting and restoring mangrove forests and promoting multilateral cooperation, taking part in annual MAS meetings to track progress.  

The US, UK and Canada each announced further funding into ORRAA-led coastal and ocean resilience projects, including a US$350,000 investment in the MAR Fund, in partnership with investment consultancy firm WTW, which will help to extend parametric hurricane insurance coverage to reef sites in Colombia and additional exploration for insurance linked to coral bleaching and rainfall-driven runoff across Belize and Costa Rica. 

“This level of support should have been happening decades ago,” says Sack. “We see it as a confluence of the biodiversity crisis and the climate crisis coming together – and I can only hope that we can act quickly enough to drive investments into nature-focused solutions.” 

Words like ‘integration’ and ‘coordination’ were consistently used by policymakers, investors and companies taking part in COP27 discussions. This suggests a growing understanding that effectively tackling climate change adaptation and mitigation requires multi-stakeholder coordination underpinned by multi-faceted solutions that take account of climate, nature and wider society. 

A globalised framework like the Sharm El Sheikh Adaptation Agenda could provide a solid foundation for coordinated action.  

Failure to cooperate and invest in oceans and coastal zone resilience will result in huge financial-related impacts, as well as loss of life, loss of homes, and loss of land, warns SIWI’s Mathews. 

If oceans stop doing what they do so well – in terms of cooling the planet and capturing CO2 – that won’t just impact coastal communities, it will impact everybody. It’s not appropriate anymore to simply think about sea level rise and the damages that can do to coastal communities and infrastructure investments.” 

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