Davos Agenda

Six ways to unleash the potential of natural climate solutions

We won't beat climate change without nature's help

We won't beat climate change without nature's help Image: Pexels / Pixabay

Claire O'Neill
Managing Director of Climate and Energy, World Business Council for Sustainable Development
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Davos Agenda

This article is part of: The Davos Agenda
  • There is growing private sector interest in managing our twin environmental crises: the accelerating destruction of nature and climate change.
  • Natural climate solutions are fundamental to solving both challenges – but they are being held back in various ways.
  • A new report by the World Economic Forum and McKinsey proposes six actions to enable natural climate solutions to deliver on their potential.

Climate change is having a substantial impact across the world. Rising temperatures, disrupted water supplies and flooding have already displaced tens of millions of people. Drought and extreme weather events threaten food production and supply chains. At the same time, our exploitation of nature has lead to the destruction of 32% of the world’s forests, 40% of invertebrate pollinators face extinction, and land surface productivity has shrunk by 23% due to land degradation. Without unprecedented action, global warming is set to reach 4.1-4.8°C above pre-industrial levels with 50% percent of species facing extinction by the end of the century.

There is no clear path to mitigating climate change without investing in nature

Natural climate solutions (NCS) play a critical role in supporting the future of both climate and nature. NCS enable the avoidance/reduction of emissions, and the removal/sequestration of CO2 from the atmosphere, through conservation, restoration and improved land management. While NCS are no substitute for rapid, direct decarbonization, they are a critical part of the net-zero transition.

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NCS are garnering more and more attention as an integral component of ambitious climate action. While undersized overall, carbon markets provide an important indication of demand. In 2010, NCS accounted for 5% of carbon credits; they now account for around 40%.

Research conducted for a new consultation report – Nature and Net Zero – confirms estimates that NCS can provide one-third (7 Gt CO2) of the climate mitigation needed to reach a 1.5-2˚C pathway by 2030 – and at a lower-cost than other forms of CO2 removal. In most cases, costs are between $10-40 per tonne of CO2 with variations between geographies and project types. This is significantly lower than technology-based removal, highlighting the major benefit of NCS; they are available to be deployed immediately without technological breakthroughs.

Figure 1: The majority of NCS can be delivered at a low cost
Figure 1: The majority of NCS can be delivered at a low cost Image: McKinsey Nature Analytics

Deployed in the right way, NCS offer significant co-benefits to nature and communities. The three largest types of NCS by potential have high co-benefits including sequestering carbon, biodiversity, soil health and water quality. Therefore, scaling-up NCS is essential to closing the biodiversity finance gap, recently estimated at $722-$967 billion per year over the next 10 years. In addition, scaling NCS could create opportunities for more resilient rural development models and important innovation and learning opportunities for a nature-positive food and land use sector, a critical task for world governments in the next decade.

Six actions to unlock the potential of NCS

The Nature and Net Zero consultation report sets out six actions to accelerate the scale up of high-quality NCS implementation and unlock markets through the combined efforts of business leaders, policy-makers and civil society. We are conducting a public consultation to collect feedback from experts across business, government and civil society. The purpose of this consultation is to refine, validate and adjust the recommended actions (outlined below) to ensure that they are comprehensive and accurately frame the challenges to NCS.

Please submit your feedback through our consultation form.

1. Define net zero and corporate claims

There is no universal consensus on how to translate global CO2 reduction targets into company-specific claims. Today, companies claim carbon neutrality, climate neutrality, climate positive and carbon negative performance, as well as zero-emission products based on different labels and standards.

To truly scale demand, corporates need greater clarity on the type of claims they can expect to make based on a combination of reduction and compensation measures. This requires alignment of net-zero certification for companies under one commonly accepted international standards body, underpinned by scientifically reviewed sectoral trajectories. Further, the emerging consensus of the role NCS can play needs to be strengthened.

2. Highlight good practice for supply

In recent years, concerns about the validity of NCS credits (additionality, permeance and potential leakage) have been raised repeatedly. To expand quality supply, participants need to better communicate the benefits of projects that have successfully used methodological and technological advances to mitigate environmental and social risks, setting a course for others to follow. This could be done by elevating large-scale ‘lighthouse’ projects to ensure the amplification and acceleration of promising practices, and adoption at scale, while also addressing some challenges that have been overcome . There is also a need to highlight good practice and progress among local and regional administrations with local spokespeople.

3. Send a (louder) demand signal

Carbon markets in general and NCS markets in particular have experienced a number of years of oversupply and low prices, resulting from inflated baselines and integrity issues in the early days of emissions trading. Creating a demand signal could solidify pricing across carbon markets and build confidence in new and improved methodologies. Today, a demand signal would unlock the supply pipelines needed to meet global net-zero announcements and build confidence with policy-makers to allow NCS into national carbon markets. This would require emitters coming together to prioritize NCS credits with high co-benefits over other types of credits. Multistakeholder communities, like the NCS Alliance, support the development of a high-quality demand signal that enables market confidence to scale NCS.

4. Improve market architecture

A lack of appropriate market infrastructure is restricting the trade of NCS credits. Unless these structural barriers are addressed, NCS cannot reach their full potential to help solve the net-zero equation.

In January 2021, the Taskforce for Scaling Voluntary Carbon Markets released recommendations to increase the depth, liquidity and efficiency of markets. These recommendations represent the first and most comprehensive blueprint of carbon market architecture and product definition that will allow voluntary market trading to scale in a transparent, fungible way.

To unlock more efficient markets for NCS we need to:

  • Create a unified carbon unit that can capture the value of the underlying credit source, region and co-benefit.
  • Increase the abundance and quality of market data on NCS.
  • Build or leverage existing high volume trade infrastructure for NCS.
  • Improve liquidity and financing for NCS.
  • Support project and financial intermediaries that can aggregate NCS projects to enable scale.
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Accelerating Climate Action

5. Create regulatory clarity

While many of the barriers to scaling NCS are technical and can be addressed through monitoring frameworks, certification and financial architecture, others are political in nature and require stakeholder collaboration, international consensus-building and the formulation of coherent policy frameworks in line with international climate goals.

There are several strands to advancing regulatory clarity including:

  • Governments turning country commitments into actionable policy plans and binding regulation at a national level.
  • Connecting voluntary and compliance markets.
  • Resolving differences on Article 6 of the Paris Agreement to build international markets.

6. Build trust

Beyond the technical hurdles addressed in earlier recommendations, there is a need for greater collaboration and shared problem solving in the space, in particular to overcome prejudices and historical credibility issues of NCS. The World Business Council for Sustainable Development's new series, Accelerating Solutions for Climate & Nature, aims to clarify NCS and nature-based solution (NBS) best practice to increase business’ capacity to scale investments in nature

To ensure high-quality NCS are used to achieve global net-zero goals, it has become mission critical to build trust among actors and convene likeminded stakeholders. A coalition of high-level champions, and communities of businesses, NGOs and solution providers – such as the NCS Alliance – can help amplify the call for high-quality, high-ambition NCS while committing to ratchet ambition over time.

For more information please read the Nature and Net Zero Report and the TSVCM recommendations.

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The views expressed in this article are those of the author alone and not the World Economic Forum.

Related topics:
Davos AgendaClimate CrisisFuture of the Environment
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