The role of climate finance in the sustainable development of mountain landscapes. Adrian Ward, CarbonLab - University of Queensland

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1 The role of climate finance in the sustainable development of mountain landscapes Adrian Ward, CarbonLab - University of Queensland International Symposium Mountain Economy

2 A LITTLE BIT ABOUT ME Background in economics and finance 10 yrs in private sector & public carbon and energy Director of UQ s CarbonLab Initiative, lecturer at UQ CSIRO Research Fellow Postgraduate in Energy Systems, Energy Economics PhD - Ecological Economics (carbon in mountains) Australian Government GHG Auditor Carbon offset projects / methodologies Projects in China, Malaysia, Indonesia, NZ, Canada, Myanmar, Cambodia, Philippines, Vietnam, South Africa, Australia

3 A LITTLE BIT ABOUT MY ORGANISATION GCI contributes to evidence-based, progressive solutions to the problems of a rapidly changing world within the existing and projected frameworks of those problems: political, environmental, social, economic, technical. As part of the GCI, the CarbonLab is a carbon and energy management initiative, delivering innovation in research and teaching to industry & government. It is the Australian focal point for the Mountain Partnership.

4 WHERE AM I FROM? Brisbane, Queensland Not many mountains in Qld! Lived in Alaska, Japan, Canada and NZ

5 MOUNTAINS IN AUSTRALIA?

6 MY WORK

7 MY WORK & AIM OF THIS PRESENTATION What C is contained globally within mountain grasslands and shrublands? How is this accounted for in international climate policy and carbon budgets? What are the opportunities for using carbonbased incentives to support SMD?

8 AGENDA 1) CARBON IN MOUNTAINS 2) INTERNATIONAL CLIMATE POLICY 3) CARBON MARKETS & CLIMATE FINANCE 4) CARBON-BASED OPPORTUNITIES TO SUPPORT SMD

9 CARBON IN MOUNTAINS Carbon is everywhere in mountains Forests Non-forest Non-forests Above Ground TOC Soil TOC Below Ground TOC

10 CARBON IN MOUNTAINS C density in Mountain Forests (t C ha) Heather Keith, Brendan G. Mackey, and David B. Lindenmayer. Re-evaluation of forest biomass carbon stocks and lessons from the world s most carbon-dense forests. PNAS July 14, 2009 vol. 106 no. 28

11 CARBON IN MOUNTAINS National estimates of absolute C in mountain grasslands and shrublands (Top 20) Ward et al 2014 (Under Review)

12 CARBON IN MOUNTAINS There is estimated to be Pg C of carbon in mountain grasslands and shrublands To put this in perspective, globally tropical Savannas & grasslands, temperate forests and tropical peatlands are estimated to contain Pg C, Pg C and 88.6 Pg C respectively. Ward et al 2014 (Under Review)

13 CARBON IN MOUNTAINS C density in mountain grasslands & shrublands (t C ha) Adapted from Ward et al (2014, currently under review) Ward et al 2014 (Under Review)

14 CARBON IN MOUNTAINS Major stressors to mountain C pools 1. Rapid expansion of exotic animal and plant populations; 2. Climate change: less snow-cover (and protection for native vegetation), extreme rainfall events, encroachment by trees, increased temperature & UV exposure; 3. Expansion of infrastructure (ski runs, horse trails, MTB trails, walking trails, roads, accomodation); 4. High-altitude mining; 5. Hotter and more frequent fires; and 6. Pressure from agricultural intensification & expansion.

15 CARBON IN MOUNTAINS Unnatural soil erosion a key threat!!! Positive feedback

16 CARBON IN MOUNTAINS C stocks estimates unreliable when considering international climate policy Ward et al 2014 (Under Review)

17 CARBON IN MOUNTAINS There are two major issues here: 1. Not accounting for this Carbon (and that which is lost or gained) undermines the UNFCCC s objective: to stabilize greenhouse gas concentrations in the atmosphere at a level that would prevent and reduce dangerous human-induced interference with the climate system (UNFCCC 1992) which is dependent on an accurate knowledge of GHG emissions trends, and on our collective ability to alter these trends (UNFCCC 2013). 2. By not understanding the dynamics of this Carbon, we are potentially foregoing opportunities to support SMD and global efforts to mitigate GHG emissions i.e. carbon has both a market and broader economic value to society.

18 CARBON IN MOUNTAINS What does this mean? Every tonne of C lost from a mountain ecosystem: Is one tonne more of a burden to international climate change mitigation efforts. Costs society around US$108 in future damages (Stern 2006). Indicates that natural ecosystems, and the services they provide, are also being degraded i.e. it is a proxy. Has a market value

19 CARBON IN MOUNTAINS What does this mean? Every tonne of C restored in a mountain ecosystem: Contributes to climate change mitigation; and Has other benefits e.g. agricultural productivity and biodiversity. Has a market value

20 CARBON IN MOUNTAINS What does this mean? Low carbon activities that avoid carbon emissions or restore carbon in these ecosystems can be financed by carbon markets or climate funding mechanisms.

21 CARBON IN MOUNTAINS Land Management Activities that avoid and restore carbon Adapted grazing management (e.g. rotation grazing and destocking); Sustainable cropping (e.g. zero tillage farming, biochar); Ecosystem preservation (e.g. fencing-off of sensitive areas, environmental buffer zones, fire management, avoided clearance); Ecosystem restoration (e.g. revegetation of watershed headwaters and riparian areas, exotic plant and animal control); & Engineered soil conservation measures (e.g. terracing, compost geosystems and reinforced soil walls).

22 CARBON IN MOUNTAINS..and improve ecosystem services.

23 CARBON IN MOUNTAINS A consistent barrier to the implementation of these activities is access to funding.

24 CLIMATE POLICY International climate policy A new legally-binding agreement by 2015, implementation Durban Platform for Enhanced Action (ADP) Currently weak international policy in-place Loss and damage becoming more important COP 21 in Paris 2015 is critical. Huge GHG mitigation challenge (19-34Gt) - lots of incentives to avoid carbon emissions and restore carbon!!!

25 CLIMATE POLICY International climate policy & Incentives Loss & Damage MARKET 2 Green Climate Fund NON-MARKET Other funding

26 CARBON MARKETS Carbon Markets?

27 CARBON MARKETS What are carbon markets? Markets that facilitate the trading of carbon permits and carbon offsets that assist countries and organisations to reduce or balance greenhouse gas emissions, either for compliance or voluntary reasons (e.g. carbon neutral ).

28 Carbon Markets - Offsets Creates Carbon Offset Credit Accepted Standard Carbon Offset Project in a developing country 1 tonne of CO2e sequestered or avoided = 1 carbon offset. (1 tonne of C is approximately 3.67tCO2e) Carbon offset credit bought for compliance (national)/ Voluntary purpose (CSR) in industrialised country

29 CARBON MARKETS Current state of carbon markets is poor Low carbon market price does not encourage new carbon offset projects!

30 CARBON MARKETS but things could change in the medium to long term

31 CLIMATE FINANCE Climate finance?

32 CLIMATE FINANCE What is climate finance? Climate finance can be defined as the direct and usually upfront financial flows mobilized by industrialized country governments and private entities that support climate change mitigation and adaptation in developing countries (Stadelmann et al p.720). Unlike for carbon offsets, not driven by supply and demand.

33 CLIMATE FINANCE How much? There is currently at least US$330 billion per year (UN, World Bank and other bilateral, multi-lateral and private funding) available to support the implementation of lowemissions technologies & practices. This funding is awarded (via grants, subsidies and lowinterest loans) to government, non-government and private organisations to pay for research, demonstration and implementation of renewable energy, energy efficiency, fugitive emissions and carbon sequestration projects.

34 CLIMATE FINANCE Where is it going?

35 Climate finance instruments and mechanisms

36 CLIMATE FINANCE REDD+ Deforestation and forest degradation account for nearly 20% of global greenhouse gas emissions. REDD designed to use market/financial incentives in order to reduce the emissions of GHG from deforestation and forest degradation. Can also deliver "co-benefits" such as biodiversity conservation and poverty alleviation e.g. REDD+ REDD currently undertaken by national or local governments, dominant NGOs, the private sector, or any combination of these e.g. Norway $500m International Climate & Forests Initiative. Potential as a broad-ranging offset scheme, however issues with MRV and permanence.

37 CLIMATE FINANCE Green Climate Fund Launched at COP17, objective to raise $100 billion a year by To kickstart environmental projects, a Fast Start Funding of the GCF was agreed, encompassing $30 billion for the period Based in South Korea, the Fund will provide simplified and improved access to funding, including direct access, basing its activities on a countrydriven approach and will encourage the involvement of relevant stakeholders, including vulnerable groups and addressing gender aspects. The Green Climate Fund was designated as an operating entity of the financial mechanism of the UNFCCC, in accordance with Article 11 of the Convention. Administered via Nationally Appropriate Mitigation Actions (NAMAs), REDD+, buying up CERs and other schemes.

38 CLIMATE FINANCE Small to Medium Climate Funds for mountains Fund Name Organisation Incentive Available (USD) Incentive Type / Status GEF Medium & Large Project Financing Global Environment Facility Over $2m (large) Up to $2m (medium) Co-financing, grant GEF Small Grants Programme Global Environment Facility Up to $50,000 Grant BioCarbon Fund World Bank Varies / Not specified Technical assistance, grant, results-based Carbon Partnership Facility World Bank Varies / Not specified Results-based International Climate Initiative Government of Germany Varies / Not specified (total fund $900m, $165m per annum) Grant, concessional loans Enhancing Capacity for Low Emissions Development Strategies Varies e.g. United States, Japan Varies / Not specified Technical assistance

39 CLIMATE FINANCE NAMAs The Bali Action Plan called for Nationally appropriate mitigation actions (NAMAs) by developing country Parties in the context of sustainable development, supported and enabled by technology, financing and capacity building, in a measurable, reportable and verifiable manner". NAMAs are policies, programmes and projects that developing countries undertake to contribute to the global effort to reduce greenhouse gas emissions. Developed countries have committed to supporting meaningful mitigation actions in developing countries through financing, technology transfer and capacity building. The policy framework around NAMAs is still being developed but NAMAs are set to become a building block for a future climate agreement.

40 Challenges & Missed Opportunities Both Carbon Markets and Climate Finance is worth considering to support sustainable land management in mountains

41 CHALLENGES I. We need to broaden the carbon conversation for mountains

42 CHALLENGES I. We need to broaden the carbon conversation for mountains

43 CHALLENGES II. Carbon Markets - We lack the methodologies Methodologies / Protocols Projects Standard Verified Carbon Standard (VCS) China Certified Emissions Reduction (CCER) Scheme Approved (meth no.) In development (meth no.) Approved (no. projects) In development (no. projects) Clean Development Mechanism (CDM) Panda Standard Gold Standard Climate, Community & Biodiversity Alliance (CCBA) Plan-Vivo 2 Climate Action Reserve (CAR)

44 CHALLENGES III. Carbon Markets - We lack the skill and capacity In a recent survey of mountain-focused policy makers, scientists and NRM practitioners we found that one of the greatest challenges to developing carbon offsets projects was the lack of skill and capacity. To engage in carbon markets, a broad range of skills and knowledge required to get offsets to market: economics, finance, project management, policy, technical, ecology etc.

45 MISSED OPPORTUNITIES IV. Voluntary Carbon Markets often attract better prices from organisations who have an interest in the health of mountain ecosystems and the wellbeing of local communities. i.e. instead of paying $0.50 per tonne to offset, a company might pay $2 5 per tonne

46 MISSED OPPORTUNITIES V. A BIG difference between carbon markets & climate finance.

47 MISSED OPPORTUNITIES which is not well understood amongst mountain-focused natural resource managers and policy makers. In a recent survey, we found around 50% of respondents did not know the difference between carbon markets and climate finance There is a risk that these two very different types of mechanisms are associated with the same risks as carbon markets with both being discounted as potential financing opportunities Most participants signalled that they knew very little about the specific climate funds they could apply for

48 INNOVATIVE APPROACHES ~ We need to look beyond REDD+ for mountains ~ Rangeland Management Ecosystem Protection Revegetation + Ecosystem services +

49 INNOVATIVE APPROACHES ~ Carbon Farming ~ The Carbon Farming Initiative (CFI) is a carbon offset scheme established by the Australian Government to provide economic opportunities for farmers, forest growers, and landholders and help the environment by reducing carbon pollution. Credits sold to a fund and voluntary market. Projects include: Savanna burning Fertiliser and manure management Exotic herbivore management Reforestation / Revegetation Native forest and vegetation preservation (REDD and non-redd) Avoided de-vegetation Improved forest or vegetation management Reduced forest degradation, Forest or rangeland restoration, Enhanced or managed regrowth and enhanced soil carbon.

50 INNOVATIVE APPROACHES ~ Green Bonds ~ The World Bank Green Bond raises funds from fixed income investors to support World Bank lending for eligible projects that seek to mitigate climate change or help affected people adapt to it i.e. it s a AAA rated loan

51 INNOVATIVE APPROACHES ~ Mountain Climate Fund ~ Fund $ Fund Fund Fund $ $ $ Special Mountain Climate Fund Mountain Resource Management Projects New fund or Aggregator of climate finance Develop criteria for targeted disbursement of funds Focus on assisting countries to develop NAMAs

52 Top down approach WHAT IS NEEDED? 1. Recognition of C stocks in international climate policy 2. Tools, data and knowledge 3. More Information to project developers, land managers policy makers on the risks & opportunities 4. A special mountain climate fund

53 A TOP-DOWN APPROACH LEADERSHIP & COORDINATION e.g. FAO Policy, Legislation & Institutions Knowledge, Tools & Networks Communication & Training Policy Makers, NRM managers, landholders etc Carbon Funding Opportunities

54 SUMMARY There are lots of stressors for mountain ecosystems, and, lots of carbon under threat. Sustainable land management activities can be undertaken to avoid this carbon loss, and improve carbon storage. Carbon markets and climate finance are different each opportunity should be considered separately. A top-down approach is needed: Understanding risks and opportunities Setting up a mountain-specific climate fund Preparing for green bonds

55 CONCLUSION The role of climate finance in the sustainable development of mountain landscapes is potentially significant. It can help promote SMD through financially supporting land management practices that has economic, social and environmental benefits. Adrian Ward, CarbonLab - University of Queensland