Australian Emissions Reduction Investors Set Their Eyes On Asia-Pacific Climate Action

Carbon Market Institute

THURSDAY, JUNE 24 2021: Protecting and restoring Asia-Pacific ecosystems such as forests, mangroves and coral reefs will support regional communities while helping to keep global warming below 1.5 degrees – and corporate Australia has the expertise and appetite to invest, according to a scoping study.

The study by the Carbon Market Institute charts growing corporate and investor interest in carbon markets, and gauges the increasing business appetite for investing in ‘nature-based solutions’ to climate change in the Asia-Pacific.

John Connor, CEO of the CMI says: “Nature-based solutions – such as avoided deforestation and repairing damaged ecosystems – successfully prevent or drawdown large amounts of greenhouse gasses and could provide up to a third of the effort needed to achieve net-zero emissions before 2050.

“Governments and industry need decarbonisation plans, but nature-based drawdown investments are a crucial complement that also provide additional benefits to Pacific communities.”

The study finds the pace of growth and sophistication of carbon markets is now at its highest historical levels, and expanding:

  • This year at least 21.5%, or 11.65 gigatonnes, of global greenhouse gas emissions are covered by 65 carbon market instruments worldwide (including Australia’s Emissions Reduction Fund) compared to 15.1% last year
  • Credits issued from forestry projects have grown by 908% from 2016 to 2021
  • Interest in nature-based solutions is much stronger in the Asia-Pacific compared to elsewhere, with 31% of the 271 million nature-based credits issued worldwide coming from this region.

“What this tells us is that there’s a high concentration of carbon market expertise and technical capacity in the region – and notably in Australia,” says Mr Connor. “This includes CMI members who are eager to leverage and share their expertise with the broader Pacific region.”

Also of interest to private sector investors is the Federal government’s recent announcement of a $59.9 million commitments to developing a high-integrity carbon offset scheme in the Indo-Pacific.

After consulting with institutional investors, banks, emissions intensive, trade-exposed companies, other corporates with strong climate targets, and carbon project developers over their key drivers for investment, the scoping study’s authors found strong agreement that Asia-Pacific nations had significantly untapped potential for natural carbon sequestration and other co-benefits.

The authors then shortlisted seven Pacific nations as representing some of the strongest opportunities: Fiji, PNG, the Solomon Islands, Vanuatu, Timor-Leste, New Caledonia and Samoa.

They noted that the 12.5 million people in these countries hold custody over a higher ratio of carbon sequestration potential per capita than any other region of comparable size.

“They have significant forests, mangroves, coral reefs, and seagrasses that all have huge potential for carbon sequestration and the good news is, the Australian business community sees significant potential for financial investment,” Mr Connor says.

“This would also bring additional social and economic benefits to communities already feeling the impacts of climate change, as conserving and restoring mangroves and reefs can help slow down flooding, salt-water intrusion and sea level rise, while regenerating forests results in employment, species protection, better soil for growing food and water source protection.

“It’s a win for the locals, a win for the environment and a win for investors.”

The study found strong interest in the seven shortlisted nations even though those consulted were aware of potential investment barriers – political, regulatory, institutional, or otherwise.

“I’m not surprised by this,” says John Connor. “While these barriers need to be addressed we are still seeing, year on year, significantly more private investment being funnelled into nature-based solutions than ever before.

“In voluntary carbon markets globally, investment in these projects now far outstrips the nearest renewable project competitors.

“Corporate net zero commitments, growing public and shareholder pressure, increased awareness of climate risk, and interest in climate-related financial disclosures means the private sector is seeing the long-term strategic value in investing in this sector.”

The scoping study concludes that in order to leverage private sector investment, key enabling environment factors must be overcome, and further investor and government engagement is needed.

“It’s critical that governments set policy direction for markets and economies to follow and support early-stage finance and development,” says Mr Connor.

The study was funded by the Department of Agriculture, Water and the Environment to better understand pathways for increased private sector investment in the context of the International Partnership for Blue Carbon.

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