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Everything You Need to Know From COP28.

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After an eventful 13 days, COP28 wraps up today with many groundbreaking news headlines and the usual flurry of announcements.

Most notably, major science-based and voluntary carbon credit standard setters announce that they will work together for the first time to deliver an End to End Integrity Framework for Voluntary Corporate Climate Action.

And remember the mention of the COP Presidency’s roundtable event on the voluntary carbon markets that was a closed event? We’ve managed to find a copy of Exec Sec Stiell’s remarks, which are a bit eye-opening in light of the many other things that have been said and done at COP. Take a look and see what you think.

Here’s the top COP28 headlines & takeaways for Carbon Finance and the VCM.

Regulators Are Stepping into the VCM with New Proposed Rules from the U.S. Commodities Futures Trading Commission and Good Practice Guidance from IOSCO.

  • The Chairman of the CFTC, Russ Benham, announced the release of draft guidance for public consultation on new rules for exchange-listed and -traded VCM credits.
  • IOSCO issued 21 principles for consultation on good practice for “financial market integrity” i.e., sound market structures, sound and orderly trading, and transparency and data availability and accessibility.
  • Both of these announcements represent critically important milestones in integrating carbon markets into regulated financial markets, which is essential for traditional capital markets actors to enter the market and to scale.

10 Leading Philanthropies Step Up to Support High Integrity Carbon Finance Through Markets with Joint Statement

  • Leading climate philanthropies came together to send a clear signal that they support high integrity carbon credits and programs. They pledged to work more closely together to ensure their grant-making includes work focused on increasing access and accessibility for Indigenous Peoples and Local Communities (IPs & LCs) and systems to deliver high environmental integrity.
  • Carbon finance is a highly politicized issue so this degree of alignment across leading philanthropies represents an important vote of support for the ongoing reform work underway in the market through the ICVCM and VCMI and the continued role of carbon finance.

18 Leading Non-Profit Organizations Send Clear Signal in Support of High Integrity Markets and the new VCMI/ICVCM End to End Integrity Framework with Joint Statement

  • A wide range of diverse non-profit organizations from around the globe signed a strong statement of support for voluntary corporate action.
  • The statement notes: “The scale and urgency of the climate challenge cannot be overstated and will require the deployment of every credible tool at our disposal.  While voluntary carbon markets have faced rightful scrutiny, advances from the VCMI and ICVCM are charting a new, high-integrity pathway forward based on transparency and accountability. We need more frameworks and standards to follow suit, creating a clear set of guidelines to incentivize the private sector to invest today in carbon markets as a transparent, high integrity part of their broader climate action efforts.”

Carbon Credits will be Eligible to Use Towards Scope 3 Targets Under New VCMI Rules

  • VCMI released its final guidance on new claims tiers and beta guidance on a “Scope 3 flexibility” claim, which would allow companies to use qualified carbon credits (CCP label or equivalent level of rigor) to “…permit a company to make limited use of high-quality carbon credits to close the gap between its estimated scope 3 greenhouse gas (GHG) emission reduction target level and its current scope 3 emissions in a given year, as long as it has already taken other steps to reduce its current emissions.”
  • The new claim (which has not yet been named yet) and the accounting rules to go with it, will be designed in 2024.
  • If properly designed, the new claims tier will unleash billions of additional capital and mitigation that would otherwise have just gone undelivered when companies continue to struggle with poor data and weak influence pathways with suppliers across their vast and globally distributed supply chains.
  • Read our take on the announcement here.

The Alphabet Soup Announced it Will Work Together to Deliver “End to End Integrity Frameworks” for Voluntary Corporate Climate Action

  • The COP 28 Presidency convened an event with The Voluntary Carbon Markets Integrity Initiative (VCMI), Greenhouse Gas Protocol (GHG P), the Integrity Council for Voluntary Carbon Markets (ICVCM), The Climate Disclosure Project (CDP), and the Science Based Targets Initiative (SBTi) to announce an aligned framework that includes clear information on which part of the “ecosystem” covers what part of the voluntary corporate decarbonization journey.
  • This important announcement should help clarify roles and responsibilities and enable companies wishing to use carbon finance and credits as part of their net zero strategy do so with confidence in the environmental impact and integrity of their claims.

Voluntary Standard Setting Bodies Announce New Partnership to Align on Key Quality Requirements and Align with Emerging IC VCM requirements

  • The CORSIA-approved standards – Verra, Gold Standard, Climate Action Reserve, ACR at Winrock International, ART Trees, and Global Carbon Council announced that they will collaborate to establish consistent standards on quantification, verification, permanence and to ensure that the existing standards are aligned with ICVCM CCP label requirements.
  • This announcement marks an important step forward for increased harmonization and standardization across the VCM market, which is desperately needed.

Coal Fired Power Phase Out Through Markets Continues to Build Momentum

  • Two major initiatives reported significant progress at the COP, including the Energy Transition Accelerator (ETA) and the Coal to Clean Initiative; both seek to deliver credits for leading companies and countries respectively from early retirement of coal plants in emerging economies.
  • The ETA is supported by State Department, Bezos and the Rockefeller Foundation and the Coal to Clean Initiative is sponsored by Rockefeller Foundation.

Article 6 Negotiations Continue Amidst Deep Divides

  • TBD on where we get to with Article 6 at COP28. Contentious issues remain and emotions are running high among the negotiating teams. It’s generally expected that 6.4- the new centralized crediting mechanism that will be administered by the UNFCCC- will conclude, but parties reopened the text on key issues related to permanence and removals, so we’ll have to wait and see where this lands.
  • Parties agreed to send both texts to the SBSTA plenary for adoption and further discussion next week under the CMA, but our observers heard unusually heated comments in the 6.2 discussions from the Like-Minded Developing Countries group and the United States.

The last 2 weeks at COP28 were just as busy for industry announcements. Here’s some of the headlines & key takeaways.

IDB Invest, member of the IDB Group, and IFC, member of the World Bank Group, announced the launch of the Amazon Finance Network, an alliance that brings together financial institutions with the aim of increasing investment flows, mobilizing capital, sharing knowledge on innovative financial solutions, and generating synergies with the public sector. This network is composed of 24 founding signatories from Bolivia, Brazil, Colombia, Ecuador, Guyana, Peru, Suriname, Spain, Switzerland, and the U.S.

The LEAF Coalition announced with the Brazilian state of Acre the signing of a Term Sheet Agreement for up to 10 million high integrity forest carbon credits. This step paves the way for a binding Emissions Reduction Purchase Agreement (ERPA) to supply up to 10 million high-integrity forest carbon credits to the LEAF Coalition for years 2023 – 2026.

The Honduran government unveiled an initiative to rescue and conserve the country’s largest forest, the Moskitia, which is one of Mesoamerica’s Five Great Forests and Central America’s second largest rainforest. The new initiative aims, in part, to put an end to deforestation and illegal cattle ranching in the Moskitia forest.

Social enterprise One Acre Fund launched a new reinsurance fund called ‘One Acre Fund Re’ which will provide a financial safety net for 1 million smallholder farmers in 2024, scaling steadily thereafter. One Acre Fund has developed this in partnership with the International Finance Corporation, U.S. International Development Finance Corporation and the African Risk Capacity. Disasters have caused about $3.8tn worth of lost crops and livestock production over the past three decades globally, yet only 3% of African farmers have insurance coverage.

The World Economic Forum launched a new guide covering some of how companies could support value creation through the use of biodiversity credits. Specifically, this report identifies a set of interrelated use cases for biodiversity credits: to enhance carbon credits for better nature outcomes.

A coalition of 17 countries – Commonwealth of Australia, Canada, Republic of Congo, Republic of Costa Rica, Republic of Fiji, Republic of Finland, Republic of France, Federal Republic of Germany, Republic of Ghana, Japan, Republic of Kenya, Republic of Korea, Kingdom of Norway, Islamic Republic of Pakistan, Kingdom of Sweden, United Kingdom of Great Britain and Northern Ireland, United States of America – launched the “Initiative for Greening Construction with Sustainable Wood” under the auspices of the Forest & Climate Leaders’ Partnership (FCLP).

The Clean Cooking Alliance announced the publication of two new reports launched during COP28: “Clean Cooking as a Catalyst for Sustainable Food Systems” and “The Future of Africa’s Sustainable Cities: Why Clean Cooking Matters.” 

The TNFD published additional guidance to help organisations with business models or value chains in the forestry and paper sectors to apply the LEAP approach to their context.

That’s a wrap on COP28!

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Andre Fernandez Co-CEO Invert leads the Carbon Team

About the Author

Andre Fernandez

As Co-CEO, Andre leads the internal Carbon team and spearheads Invert’s investment and development of carbon reduction and removal projects as a means to conserve and restore our natural environment. Throughout their careers, the work of the Invert team has resulted in the generation of 55 million carbon credits and the protection of 2 million acres across 25 countries.