Nature-based solutions (NBS) are activities that harness the power of nature to reduce the accumulation of greenhouse gases (GHGs) in the atmosphere and provide benefits for adaptation, biodiversity, and human well-being. Although it cannot substitute for or delay implementation of significant abatement of fossil fuel emissions, they have a key role to play in society’s transition to net zero. While estimates vary, NBS could provide approximately one third of the cost effective climate mitigation needed to deliver on the 1.5°C target1. Nature-based solutions cannot substitute for or delay implementing significant abatement of fossil fuel emissions.
Many companies are beginning to incorporate nature- based solutions (NBS) in their climate mitigation strategies to offset fossil fuel emissions. The financing of NBS is an essential and urgently needed component of society’s transition to net-zero emissions. Companies can take steps now to build confidence in the use of NBS as offsets by implementing ambitious strategies for abating their own fossil fuel emissions as well as signalling demand for high-quality NBS emissions reductions and removals credits.
NBS finance is dwarfed by financial flows to agriculture and other sectors that can lead to the conversion and degradation of natural ecosystems. Efforts to fight tropical deforestation have received less than 3 per cent of international climate mitigation finance: roughly USD20 billion since 2010. In comparison, other components of the land sector have received roughly USD777 billion in ‘grey finance’—that is, finance that is not linked to improving environmental outcomes—over the same period. Finance to stop deforestation is small compared to subsidies to sectors that can drive it2.
Compliance markets could generate hundreds of billions of dollars of NBS finance annually3. However, few compliance regimes currently allow NBS as offsets. For example, California’s Cap and Trade Program allows for a capped percentage of domestic NBS offsets to count against compliance obligations and ICAO CORSIA recently approved the eligibility of jurisdictional scale REDD+ credits.
This working paper, by the World Resources Institute supported by HSBC, reviews the prospective roles of NBS as offsets in corporate mitigation strategies and as a source of finance for NBS to combat climate change. It briefly describes the enormous potential benefits of NBS, summarizes the risks associated with the use of offsets, and offers strategies for managing those risks. The paper also identifies issues that are unresolved as well as relevant policy arenas and initiatives in which the standards and norms for using NBS as offsets in voluntary and compliance-based schemes are under discussion. Finally, the paper suggests ‘no regrets’ actions that companies can take now.
1 Griscom et al. 2017 and Roe et al. 2019
2 Climate Focus 2017
3 Vivid Economics 2020