Capitalizing on the global financial interest in blue carbon

Abstract

Natural climate solutions are crucial interventions to help countries and companies achieve their net-zero carbon emissions ambitions. Blue carbon ecosystems such as mangroves, seagrasses, and tidal marshes have attracted particular attention for their ability to sequester and store carbon at densities that can far exceed other ecosystems. The science of blue carbon is now clear, and there is substantial interest from companies and individuals who wish to offset greenhouse gas emissions that they cannot otherwise reduce. We characterise the rapid recent rise in interest in blue carbon ecosystems from the corporate sector and highlight the huge scale of demand (potentially $10 billion or more) from companies and investors. We discuss why, despite this interest and demand, the supply of blue carbon credits remains small. Several market-related challenges currently limit the implementation of blue carbon projects and the sale of resulting credits, including the cost and burden of verification of blue carbon compared to verifying carbon credits in other ecosystems, the general small scale of current blue carbon projects, and double counting of credits between commercial and national institutions. To overcome these challenges, we discuss other supplementary financial instruments beyond carbon credit trading that may also be viable to fund the conservation and restoration of coastal habitats, such as bonds and ecosystem service insurance. Ultimately, a portfolio of financial instruments will be needed in order to generate funding streams that are substantial and reliable enough to realise the potential of blue carbon ecosystems as a natural climate solution.