For Asia to meet both near and long-term decarbonisation goals, nature-based solutions (NbS) and the carbon credits generated from low-carbon projects and technologies must be part of the picture.
With the region responsible for over half of all global carbon emissions yet home to some of the most significant natural resources on the planet, focusing on NbS could potentially provide 37 per cent of the emissions reductions needed until 2030 to achieve the targets of the Paris Agreement.
NbS refers to actions that protect, manage, and restore natural or modified ecosystems, benefitting society and biodiversity.
The method has gained considerable recognition in recent years as an effective way of sequestering emissions, with the 2023 Intergovernmental Panel on Climate Change (IPCC) report emphasising the protection of natural areas as one of the most effective strategies to reduce global greenhouse gas emissions.
“From a medium to long-term perspective, forest conservation, forest and mangrove restoration, and regenerative agriculture, are vital in achieving cost-effective reductions in greenhouse gas emissions, which are necessary for reaching net zero targets,” notes Pablo Fernandez, chief executive officer of ecosecurities, an environmental services provider.
Asia’s rich biodiversity also makes NbS a viable solution. Covering 30 per cent of the planet’s land area, the region is home to 500 million hectares of tropical forest, 25 million hectares of peatland, and the highest blue carbon content globally, which is the carbon captured and stored by coastal and marine ecosystems.
Since NbS projects sequester carbon or avoid emissions, these can be quantified and converted into carbon credits and traded on carbon markets, which can finance the protection of ecosystems and natural resources, and generate funding for other low-carbon tools and solutions.
Leveraging carbon markets
The region’s NbS potential may explain why Asia’s carbon markets and related emissions trading systems (ETS) – which cap total emissions and allow companies to buy and sell emission allowances – have made some progress in recent years.
That, combined with a stronger regulatory push for climate action, increased investor interest, and growing voluntary and compliance carbon markets, has led to some developments in the region.
Countries such as China, Indonesia, Japan, Singapore, and South Korea already have an ETS in place. South Korea has made marked headway in particular, with its ETS being the second-largest emissions trading scheme in scale, covering close to three-quarters of its national greenhouse gas emissions.
Progress, however, remains fragmented with some countries – such as India, Malaysia, Vietnam, and Thailand – still developing an ETS. Other nations, such as the Philippines, have yet to announce one.
Despite patchy developments in the region and a slowly growing number of companies with net zero goals, Asia appears to be moving in the right direction with its carbon markets, fuelling hopes of stoking increasing global demand for carbon credits: the voluntary carbon market was valued at US$2 billion in 2021 and projected to reach up to US$50 billion by 2030.
This, in turn, will present opportunities for companies that specialise in climate mitigation projects and ones that can potentially generate carbon credits.
One of these companies is ecosecurities, which operates in both compliance and voluntary carbon markets, and works with clients to source, develop and finance climate mitigation projects, such as those in renewable energy and NbS.
While the company aims to expand its reach within countries such as Japan and South Korea in light of more advanced ETSs, it hopes to tap into solutions beyond NbS with the hope of using advanced carbon-absorbing tools to reduce emissions and generate credits.
“Several Asia Pacific countries are implementing or developing carbon pricing mechanisms. But to meet the Paris Agreement goals, these efforts must accelerate and broaden to include sectors such as land use [emissions], the [heavy] industry, and the buildings sector,” Fernandez explains.
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Our approach emphasises a ‘reduce and invest’ strategy. We encourage companies to integrate carbon credits and investments in projects as part of a broader, long-term net zero or sustainability strategy in alignment with the Science Based Targets initiative.
Pablo Fernandez
Ensuring credibility
To meet the increasing demand for carbon credits, projects that generate such credits must be credible.
For instance, a credible project must provide carbon reductions that would not have occurred without the carbon credit funding; ensure permanence by leading to long-term emissions reductions; must be verifiable by third parties; and align with recognised standards. This is in light of recent controversies that have shone the spotlight on carbon credits and raised questions about their legitimacy.
Fernandez is cognisant of this, noting that the company takes steps to certify the authenticity of the credits its projects generate.
“Through extensive monitoring, reporting, and verification systems that often use technology, combined with ‘boots on the ground’ verification, we ensure projects are performing as expected. This helps us to transparently and accurately track our carbon reductions or removals,” he said.
Companies should responsibly view carbon credits as a “catalyst” for climate action, Fernandez adds, and not merely as a mechanism to offset emissions. This is because carbon credits generate revenue that can be reinvested into projects aimed at reducing emissions, such as renewable energy, energy efficiency, and reforestation projects.
“Carbon credits can help accelerate the transition to low carbon pathways, providing the vital finance that sectors need to scale up their decarbonisation activities,” he says.
“Our approach emphasises a ‘reduce and invest’ strategy. We encourage companies to integrate carbon credits and investments in projects as part of a broader, long-term net zero or sustainability strategy in alignment with the Science Based Targets initiative.”
A new kind of carbon credit?
Beyond emissions reductions and credits generated from restoring land, there are hopes that another method, dubbed “technology-based solutions (TbS)”, can also create carbon credits from emissions removed from the atmosphere.
This would, for example, see solutions such as carbon capture and storage (CCS) technology used to trap emissions from industrial processes and then storing them underground.
Other forms of TbS include direct air capture (DAC) tools, which capture carbon directly from the ambient air using chemical processes, or “bioenergy storage” via biochar, which is a form of charcoal that can potentially store carbon for longer periods when added to soil. Another is “enhanced weathering”, or when carbon dioxide is removed from the atmosphere by speeding up the natural weathering process of rock.
These approaches currently boast longer carbon storage durations, from 100 to 1,000 years but are also more expensive to develop, which may lead to higher carbon credit prices.
TbS currently represents a small fraction of the carbon credit market, but Fernandez notes that there is potential for much growth and emissions cuts this decade, especially if used in tandem with NbS. He adds that ecosecurities aims to expand its focus on TbS because of its near and long-term carbon capture potential.
“From a 2030 perspective, certain types of NbS, energy transition-related solutions, and TbS can be particularly helpful in delivering rapid cuts in greenhouse gas emissions,” he said.
While TbS could potentially benefit carbon-intensive economies the most, such as those in engineering, manufacturing, and technology-based industries, many will require financing in light of high costs – an issue the company aims to address.
“Innovations such as CCS and DAC often have high abatement costs, sometimes ranging from US$400 to US$500 per tonne of CO2. Our focus is on using our local, regional, and international networks to accelerate the deployment of new decarbonisation technologies, aiming to flatten the cost curve and make these solutions more accessible to corporations looking to inset or offset emissions within their value chains.”
In a bid to expand into TbS, ecosecurities announced a partnership with SK Group in December 2023 – a South Korean conglomerate that operates across sectors including energy, semiconductors, telecommunications, and life sciences.
The collaboration is the conglomerate’s largest investment into the carbon market and will allow ecosecurities to access SK Group’s carbon reduction solutions and technologies.
“By providing incentives and support to companies with innovative solutions, we aim to catalyse the emergence of technology-based carbon reduction initiatives,” said Moohwan Kim, executive vice president of SK Inc., adding that the expansion of technology-based solutions could generate carbon credits and, in turn, also grow the voluntary carbon credit market.
“Our short-term goals are to connect potential climate investors from Singapore, Japan and South Korea with high-impact carbon project development opportunities in host countries,” Fernandez added.
While NbS and TbS may provide some impetus for near- and long-term decarbonisation within Asia, governments must create favourable conditions for carbon markets to function effectively and grow, concludes Fernandez.
“This means strong demand signals from companies, as well as national, regional and international ETSs, clear policy frameworks and rules of engagement,” he says.
“Without these, the market is likely to remain fragmented and regionalised, and the catalysing potential of carbon finance in supporting a low carbon transition globally and in the APAC region will be limited.”
