The emergence of natural climate solutions: who and how?
The concepts around nature-based solutions (NbS) can seem intricate and sometimes even daunting for non-experts. This is no reason to turn our back on them, considering they will provide a fair proportion of the cost-effective mitigation required by 2030 to limit global warming to below 2°C. Economic development has driven the significant destruction of nature and biodiversity loss worldwide. The subsequent excessive greenhouse gas emissions that occur with this economic development contributes to significant changes in the climate and contributes to more extreme weather, further compounding this destruction[1]. To break out of this vicious circle, scientists and policymakers are seriously encouraging land restoration at a large scale[2].
NbS, also called natural climate solutions, are increasingly considered a credible mitigation tool and when used for offsetting may also be profitable. As climate change awareness grows, an increasing number of companies are making carbon neutral pledges and are willing to support NbS, whether by sponsoring tree planting, sustainable agriculture practices or avoiding deforestation efforts.
In this article, we review the technical foundations of NbS, present an overview of the global situation and map out the actors currently at play in the sector.
Scientific basis and techniques
As defined by the International Union for Conservation of Nature (IUCN), NbS are “actions to protect, sustainably manage and restore natural or modified ecosystems, which address societal challenges […] effectively and adaptively, while simultaneously providing human well-being and biodiversity benefits”[3]. IUCN has also developed a list of 8 principles intending to set up a common framework for NbS[4]. Under this umbrella term, NbS gather a broad range of actions and activities resulting in improving nature conservation, contributing to sustainable land management, restoring natural ecosystem resilience, and helping mitigate climate change.
Whilst restoration and conservation techniques have been known and used for decades, the concept has gained more traction over the past five years. In practice, NbS are applicable to different types of ecosystems as exemplified below.
Forests and tree related NbS
About 30% of the world's land area are covered by forests[5]. They play a crucial role in acting as a carbon sink, however man-made deforestation contributes to 20% of greenhouse gas emissions. NbS related to forests include:
Reforestation, the act of replanting an area with trees after it was cleared by human activities or a natural disaster such as a storm or wildfire, and afforestation, a similar process applied to lands previously unforested such as grazing lands.
Enhancing forests state of conservation through improving logging practices, encouraging sustainable forest management and avoiding rainforest degradation.
Beyond forests, under certain conditions, tree planting schemes might be considered as a NbS, wherever it takes place (e.g. in cities), given its potential positive effects such as moderating the impact of high temperatures, abating pollution, enhancing biodiversity, reducing the risks of landslides and floods, filtering water and removing carbon from the atmosphere.
Farmlands
According to the FAO, farmlands cover around 40% of the world's land area. Most of this is permanent pastures and arable land. NbS related to agriculture include:
Sustainable farming, production practices and innovative planning of agricultural landscapes that increase multi-functionality and ecosystem services. Organic farming is a form of sustainable farming of which principles are defined by standards.
Conservation agriculture is a sustainable and resource saving agriculture production system where farming and soil management techniques are implemented to avoid soil disturbance, preserve land, biodiversity, and the natural resources[6]. A well-known example is the reduction of ploughing.
Agroforestry, a land-use system where the spatial arrangement enables trees and shrubs to grow among or around crops or pastures. This allows for both ecological and economic interactions and benefits.
Wetlands
Wetlands are areas where water permanently or seasonally covers the soil. Inland and coastal wetlands are highly efficient carbon sinks and support a specific biological diversity. Tidal marshes, swamps or peatlands are all forms of wetlands. NbS related to wetlands include:
Wetlands restoration, protection, and management which can provide a multitude of services of great social, economic and environmental value[7].
Coastal ecosystems
Coastal ecosystems provide habitat for an important variety of marine species as well as resources for humans. NbS related to coasts include:
Replanting and protecting mangrove belts, which mitigate the impact of waves and wind on coastal settlements, control coastal erosion and sequester CO2. Mangrove belts also provide nurseries for marine life which may results in increases in local populations’ livelihood.
Reef belts restoring, which enhances the resilience to sea level rise and coastal flooding and provide valuable environmental and economic services.
Conserving seagrass meadows, a group of flowering plants adapted to live in salt water, and one of the most threatened natural ecosystems which contains a significant amount of carbon stored underneath.
The diagram below[8] shows where some NbS can be implemented.
The implementation and monitoring of the impacts of NbS can be complex[9] as the approaches and techniques used must be specific to the type of soil, location, climate, ecosystems, biodiversity and human needs.
Beyond the urgency around the loss of natural habitat, of biodiversity and climate change, the emerging of new approaches and financing tools is fuelling interest for NbS. Investing in NbS can be considered an “umbrella approach” in terms of impacts. It often contributes simultaneously to the storage of carbon, preservation and protection of biodiversity and often generate social and economic benefits for local communities. Conserving 30% of the land and water on Earth could create up to 650,000 jobs in nature conservation and NbS can address many of the Sustainable Development Goals simultaneously[10].
Facing the challenges posed by climate change, NbS is expected to help mitigation and adaptation efforts globally. As a result, 66% of Paris Agreement signatories mentioned NbS in the first iteration of their Nationally Determined Contribution as illustrated in the map below[11] (countries in green).
State of play and financial instruments
The financing of NbS is based on the recognition of the services natural ecosystems provide, particularly in terms of risk reduction; biodiversity and resources protection; carbon capture and storage. In this context, the different financial instruments and vehicles presented below can be mobilised.
Payments for ecosystem services (PES) is a well-established market-based concept considered to be an efficient policy tool for coordinating socioeconomic development and environmental protection and has the ability of encouraging the development of NbS. The payments provide incentives for people managing and using natural resources, typically forest owners or farmers, to manage their resources sustainably and implement good practices, generating monitored and valuable benefits.
Carbon finance is a PES system based on the monetisation of greenhouse gas emissions reduction or avoidance. Many carbon finance projects are registered to third-party certification schemes that issue carbon credits for each tonne of CO2e avoided or reduced, such as the Gold Standard or the Verified Carbon Standard. Funding NbS with the sale of carbon credits is well suited for various reasons, as it does not require a sophisticated knowledge of financial markets; it provides the sponsor with a product or a service that has a tangible value; and it is an indicator of performance by itself. However, other instruments can be used to finance activities to be implemented, such as:
Grants
Grants have been the most popular financial instrument for NbS activities until now. Public subsidies, charity funds or even individuals’ donations often take the form of grants. Funding is generally channelled through intermediaries such as public funds or NGOs to local organisations implementing projects.
Example: Conservation International is one of the largest NGOs dedicated to the protection and restoration of natural ecosystems, protecting nature to halt climate change, protecting oceans and promoting sustainable lands and water. Most of the financial support is received and used in the form of grants for project implementation.
Debts and equity
NbS may have reliable business models which generate revenues and help to set projects and ventures on an independent and financially sustainable path. While lending funds results in the issuance of debt, equity is capital from investors in return for share ownership. As the measurement of risk and return on investment is not always obvious in the NbS field, this type of financing is still in its infancy and tend to be directed towards companies rather than projects.
Example: The Dutch Fund for Climate and Development is endowed with €160 million and invest in agroforestry, sustainable land use and climate resilience food production. Part of this funding is provided as development grant to develop viable business cases and the rest in the form of debts or equity to finance the businesses originated and set up.
Even though climate finance was in excess of 500 billion USD per year in 2017 for the first time, only 1% of this amount was directed to NbS[12]. Despite their significant potential, NbS remain complex for investors and present numerous challenges for policymakers to provide frameworks for. Whilst this is currently only a small proportion of all climate finance, there are a number of project holders, developers and key investors already active in this industry, which are highlighted below.
Project holders and developers
To undertake NbS requires land and resources. Therefore, one or several organisations are required to implement and finance these. NbS activities involve a broad variety of stakeholders which interact with one another: landowners, local communities, non-governmental organisations and private companies. In developing countries, authorities may also get involved, since issues around land tenure and ownership can result in conflicts[13] when implementing NbS and sharing the benefits of activities.
Landowners
Be they individuals (private landowners), private companies or public institutions (states, municipalities), landowners have a close relationship with nature. NbS often implies that they change their current land management practices. Certain practices such as agroforestry or natural forest regeneration could lead to significant additional costs with little benefits over the first years. Payments for ecosystem services could then be leveraged to rewards landowners and trigger additional investment.
Examples:
In France, individual forest landowners[14] gathered in an association have benefited from voluntary carbon offsetting funding (through the national Label Bas Carbone standard) to rebuild forests destroyed by a storm.
In Cambodia, Wildlife Alliance has enabled the Southern Cardamom forest conservation and agricultural project to directly supports the livelihoods of 21 villages and benefits to the municipalities owning the forest lands[15].
The brewery company Brewdog[16], has purchased 2,000 acres of land in Scotland and has pledged to plant over one million trees over the next few years to offset their scope 3 carbon emissions with the Woodland Carbon Code accreditation.
Local communities
Whether activities involve avoiding deforestation, conserving coastal ecosystem or changing agricultural practices, NbS have an impact on the communities living both inside and outside project boundaries. Usually gathered, mobilised, and educated by local associations, villagers and forest dwellers may be impacted by activities, on land they may have customary rights on. Local communities often take part in activities with different levels of engagement. Not only do they participate in the work (e.g. tree planting), but they must be the first to benefit from the social and economic benefits of activities implemented, to ensure a high level of acceptability.
Example: in Kenya, the Mikoko Pamoja project[17], world's first blue carbon project, is a mangrove conservation and restoration project led by a local community benefiting from nursery habitat for fish, improved biodiversity, beekeeping and ecotourism. The project is certified to the Plan Vivo carbon standard and coordinated by the Association for Coastal Ecosystem Services.
Source: Hamerkop supports a REDD project in Sudan involving local communities (photo: Hamerkop & Etifor).
Global non-governmental organisations
Non-for-profit and NGOs have been operating globally in reforestation, land restoration and conservation for many years, long before the concept of NbS emerged. They have been doing so because agriculture and natural ecosystems hold the key to poverty alleviation, reducing the impacts of disasters (e.g. storms, droughts) and preserving biodiversity. Most of them collect donations from individuals or companies in Europe and North America and fund projects in developing countries, usually without resorting to market-based mechanisms but in collaboration with local NGOs, communities or institutions.
Example: Eden Reforestation Projects, a US-based NGO planted more than 480 million trees in many developing countries. They are supported by philanthropic donations, including from organisations willing to balance out their own emissions. Their main motivation is the provision of fair wage employment to impoverished villagers as agents of global forest restoration.
Private companies
Private companies have often been on the opposing side to NbS, having practices leading to deforestation, land degradation, use of chemical fertilisers for agriculture or destruction of ecosystem for building resorts and housing. The emergence of NbS and the growth of public awareness around climate change have brought private companies a reason and tools to tackle environmental degradation and is leading to the development of new opportunities. New needs are emerging, and a growing number of companies are now offering financial and technical services related to NbS or offering to support NbS financially.
Examples:
CHOOOSE, a Norwegian company help individuals and organisations address their carbon footprint by removing barriers to support climate change mitigation projects, including reforestation and deforestation avoidance, around the globe through a range of API and IT tools.
Wildlife Works, a forest conservation project developer conceives, structures, implements and facilitates financing for a range of projects located in hotspots of deforestation in Africa, Asia and South America.
Nori, a carbon removals marketplace, supports farmers in North America to changes their practices to enhance the carbon stored in farmland, through the creation of carbon assets that can be purchased by companies and individuals willing to support climate action.
Funders and investors
Addressing the climate emergency requires collective action and mobilization of significant funding. Both the public and the private sectors have a role to play.
Public funds
As NbS is a relatively new concept, the use of public funds is often required to initiate their implementation, reduce risks and leverage additional funding from the private sector. While advanced economies have pledged a yearly $100 million in climate finance for developing nations, France has recently announced that 30% of its contribution would be going to NbS. The funding is usually directed to large multilateral specialised funds, technical facilities, distributed as bilateral development aid or used as guarantees for the private sector.
Example: the Green Climate Fund is the largest financing mechanism of the Paris Agreement. It is offering grants, loans, equity, guarantees and result-based payments and fund both the private and the public sector. It has been actively financing NbS, notably forests and land use as well as ecosystems and ecosystem services.
Private funds
In their yearly Emissions Gap Report, UN Environment has kept highlighting the gap between the 2°C temperature target and the pledges made by governments. It is believed that this gap could be financed by the private sector voluntarily. The increasing consumers awareness is pushing some companies to finance this gap. Most of them do it by planting trees or funding more complex ecosystem restoration through carbon finance.
Examples:
Mirova Natural Capital is pioneering the asset management NbS space with US$400 million currently invested on ecosystem conservation and sustainable agroforestry. Mirova aims to reach a billion euros by 2022. Financial returns are generated through the production and sale of commodities (e.g. certified cocoa, FSC wood, etc.) and carbon emission reductions.
Total launched Total Nature Based Solutions in 2019, a new unit endowed with a budget of $US100 million, to fund and develop projects dedicated to natural carbon sinks (planting activities, sustainable forest management, agroforestry, agriculture and the conservation of remarkable species), which intends to generate biodiversity benefits.
Challenges to address
While the interest and knowledge of the global community around NbS to address climate change is growing, activities and funding sources remain highly fragmented. Moreover, NbS present a challenging investment profile for many, with high risks and uncertain returns. Insufficient collaboration between scientists, corporates and policymakers also hampers the expansion of NbS.
Carbon finance presents a fantastic financing tool for NbS, even though there remains uncertainty around carbon sequestration in natural ecosystems, and the impact of climate change on the carbon stock changes, that requires improving our scientific understanding of NbS impacts. The Oxford Offsetting Principles[18] notably considers NbS as a credible way for companies to offset their emissions.
Finally, progress remains to be done in the definition of operational schemes that could guide applications of NbS effectively on the ground. Several initiatives are working in this direction. For instance, Nature4Climate, an alliance of nature conservation associations, multilateral and business organisations founded in 2017 to promote action and investment in NbS. International and national agreements and frameworks are being shaped and propositions of standards are being released, this is notably the case of the IUCN Global Standard for Nature-based Solutions[19].
Conclusion
Even though NbS rely on engineering techniques and land management principles that have been known for a long time, the concept as it is known in the context of climate change is relatively recent and its scientific definition and financing mechanisms are still being clarified and improved. To uptake this challenge, a wide range of stakeholders, from both the public and the private sector, are committing to work together in order to leverage the benefits of NbS to address the climate change.
HAMERKOP works with private landowners to determine the potential for them to implement NbS funded by carbon finance. Experts at HAMERKOP have been working on NbS for more than 15 years and can help you assess the potential of your NbS activities to benefit from carbon finance, help you structure NbS or support companies to make sense of this new landscape.
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[1] Source: Malhi Y, Franklin J, Seddon N, Solan M, Turner MG, Field CB, Knowlton N.2020 Climate change and ecosystems: threats, opportunities and solutions. Phil. Trans. R. Soc.B375: April 2019
[2] Source: The UN Environment Programme and the nine tracks of the Climate Action Summit. Link: https://www.unenvironment.org/unga/our-position/unep-and-nine-tracks-climate-action-summit
[3] Source: Cohen-Shacham E., Walters, G., Janzen, C. and Maginnis, S. (eds.) (2016). Nature-based Solutions to address global societal challenges. Gland, Switzerland: IUCN. xiii + 97pp.
[4] Source: Cohen-Shacham E et al., Core principles for successfully implementing and upscaling nature-based Solutions, Environmental Science & Policy Volume 98, August 2019, Pages 20-29
[5] Under the UN Food and Agriculture Organisation (FAO) definition
[6] as defined by the United Kingdom’s Conservation Agriculture Association
[7] Source: Thorslund J. et al., Wetlands as large-scale nature-based solutions: Status and challenges for research, engineering and management, Ecological Engineering, Volume 108, Part B, November 2017, Pages 489-497
[8] Source: Graphic: Natasha de Sena, Wageningen University & Research
[9] Source: Core principles for successfully implementing and upscaling Nature-based Solutions (Cohen-Shachamab et al., 2019)
[10] Source: Valuing nature conservation, a methodology to evaluate where safeguarding natural capital could have the biggest impact on climate, economies and health. Link: https://www.mckinsey.com/business-functions/sustainability/our-insights/valuing-nature-conservation
[11] Source: Nature-based Solutions Policy Platform, University of Oxford. Link: https://www.nbspolicyplatform.org/adaptation-planning/adaptation-action-types/nature-based-actions/
[12] Source: CPI, 2019. Global Landscape of Climate Finance 2019 [Barbara Buchner, Alex Clark, Angela Falconer, Rob Macquarie, Chavi Meattle, Rowena Tolentino, Cooper Wetherbee]. Climate Policy Initiative, London.
[13] Source: Secure indigenous peoples and community land rights as a nature-based solution to climate change: https://wedocs.unep.org/bitstream/handle/20.500.11822/28942/SecureIP.pdf?sequence=1&isAllowed=y
[14] Source: Le carbone au CNPF, un savoir-faire au service des forestiers et des entreprises responsables. Link: https://www.foretpriveefrancaise.com/data/fe245_7_15.pdf
[15] Source: The Southern Cardamom REDD+ project. Link: https://registry.verra.org/app/projectDetail/VCS/1748
[16] Source: Brewdowg. Link: https://www.brewdog.com/uk/tomorrow
[17] Source: Mikoko Pamoja project. Link: https://www.planvivo.org/mikoko-pamoja
[18] Source: Principles for credible carbon offsetting. Link: https://www.ox.ac.uk/news/2020-09-29-oxford-launches-new-principles-credible-carbon-offsetting
[19] Source: IUCN Global Standard for Nature-based Solutions: first edition. Link: https://portals.iucn.org/library/node/49070