As the world gathers in Azerbaijan for this year’s annual UN climate conference (COP29), the urgency to act on climate change has never been greater.
The stakes in Baku are high with 2024 on track to be the hottest year recorded, the first to potentially break the 1.5 C Paris Agreement threshold, and Canada experiencing warming rates twice the global average.
Most governments, including here in Canada, are looking to options to mitigate the effects of climate change through regulations or funding new technologies. To this end, nature-based solutions (NbS) offer the most promising path forward.
There are three key strategies for governments to maximize the growth (and impact) of NbS. From removing harmful subsidies to integrating natural assets into financial systems and promoting biodiversity credits, policymakers have a number of tools at their disposal. World leaders in Baku should take notice.
What is a nature-based solution?
Nature-based solutions (NbS) use nature, rather than human-made infrastructure, to mitigate climate change. They can include wildlife corridors, cover cropping, natural water retention measures, wetland restoration and buffer strips.
Such measures sequester carbon and foster biodiversity. They also enhance human health and well-being. What’s more, NbS can help protect human made infrastructure from the effects of climate change, such as floods, storm surges and erosion.
And all these benefits can come at a fraction of the cost of traditional infrastructure.
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A recent meta-study of 155 peer-reviewed articles showed that NbS were more effective than engineering solutions in attenuating hazards in 65 per cent of studies and more cost-effective in 71 per cent.
According to the United Nations Environment Programme, the total global finance for NbS in 2022 reached USD $200 billion. Approximately USD $600 billion will be needed to reach climate, biodiversity and land degradation targets by 2030. Of that total investment, only 18 per cent or USD $35 billion is from the private sector.
In addition to investing directly in nature-based solutions, governments can unlock private sector capital for nature-positive outcomes by providing incentives for private sector investment in NbS.
Enabling nature-based solutions
In 2022, the United Nations Environment Programme estimated that nearly USD $7 trillion was invested annually in activities that harm nature. Of that total, USD $5 trillion was from the private sector. Approximately 69 per cent of the public sector investments subsidize the fossil fuel industry and 20 per cent subsidize agriculture.
Diverting even just a fraction of the public funds used to subsidize carbon-intensive industries to the USD $600 billion needed to fund NbS could help governments make real meaningful change.
Such advances in funding NbS are, however, politically difficult for governments, as nature does not appear on national accounting ledgers. In contrast, the extraction of natural resources is included in the calculation of gross domestic product, which is an important indicator of the effectiveness of government. This must change.
Conventional approaches to accounting do not allow nature-based assets to appear on government or corporate balance sheets because, unlike engineered assets, they are not bought or sold. This discrepancy disincentivizes economic actors and governments from investing in forests, wetlands and watersheds because the investments cannot be capitalized, or yield measurable financial returns.
It is critical, then, that governments enable accounting for natural assets.
Frameworks exist for doing just that. Indeed, the Capital Coalition and the Natural Assets Initiative have developed excellent examples. In May 2022, the International Public Sector Accounting Standards Board even released a consultation paper on natural resources reporting.
Authorizing the valuation of natural assets in conventional accounting would be a decision that could unlock significant investments in NbS, while still being light on public finances.
Offer biodiversity credits
Although imperfect, carbon markets have been helpful in attracting capital to fund low-carbon technologies. This capital is, however, often directed at human-made technologies, such as innovations in battery technologies needed for electrification — rather than more cost- and carbon-effective NbS.
Carbon credits motivate decarbonization through human-made infrastructure, such as through energy systems. Biodiversity credits, on the other hand, serve to enhance biodiversity, which is more far-reaching and grounded in NbS.
Such credits can work in several ways. First, companies that reduce biodiversity could offer payments to companies improving biodiversity, such as investments in nature-based infrastructure or landowners who manage their land responsibly. Alternatively, investing in certification bodies can create standards for responsibly produced products, such as wood, concrete or steel.
(AP Photo/Rafiq Maqbool)
On Oct. 28, the International Advisory Panel on Biodiversity Credits (2024) introduced the Framework for High-Integrity Biodiversity Credit Markets to help guide the creation of a biodiversity credits market.
The framework aims to attract significant investments to conserve and restore ecosystems and biodiversity by establishing standards and monitoring systems, which should have the added bonus of tackling greenwashing.
Valuing nature
Valuing nature is not straightforward. There are no clear measures of biodiversity.
Any measure of biodiversity must be sensitive to local ecosystems and local communities. It needs to build on local knowledge, especially from people who live on the land in question, such as Indigenous Peoples.
Yet, people with deep local knowledge are often excluded from such conversations, because corporations and governments generally favour Western science-based knowledge over community-based knowledge. It is critical to engage in inclusive multi-party dialogue for NbS to reach the ambition of sustainable development.
Governments must build on the progress made on carbon markets in Baku and develop an international biodiversity credit system that is based on an inclusive approach before it is too late.
As the world comes together to tackle climate change at the COP29 meeting, civil society, businesses and governments should be looking not for big solutions, but for the cheaper, quicker and often more effective nature-based alternatives.
With just a few key measures, governments can lead the way.