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We’re halfway through December – perhaps the busiest month on our climate calendars, packed with exciting developments. COP28 has come to an end and has left us with clarifications, questions, and above all – a plethora of ambitious goals that demand strong action and collaboration across the globe. Neufin’s co-founders were at COP this year, and in this edition we will walk you through key developments from COP28 and share our perspective on the conferences’ outcome(s). We also have a few exciting updates from the Neufin stable. |
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Historic commitments towards climate finance |
COP28 showcased an unparalleled commitment to funding climate action. Over $85 billion was mobilised, underlining the global determination to address climate challenges. |
The UAE demonstrated a commitment to addressing water scarcity by pledging $150 million. Additionally, $200 million in Special Drawing Rights (SDRs) were allocated to assist vulnerable countries. Countries committed $12.8 billion to the Green Climate Fund, and $3 billion to food and agriculture. |
The World Bank has pledged to up its yearly climate spend by $9 billion annually, to reach $40 billion by 2025, which is 45% of its annual target. Furthermore, MDBs collectively pledged over $22.6 billion towards climate action. |
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On day one of COP28, we saw a landmark agreement to support vulnerable nations facing the brunt of climate change. $700 million was pledged, making the Loss and Damage Fund a historic agreement which will assist developing countries that are particularly vulnerable to the adverse effects of climate change. |
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‘Transition away’ from Fossil Fuel; phaseout is inevitable |
COP28 went into overtime on the final day of the event, as countries engaged in shuttle diplomacy to bridge deep international divisions over how to deal with fossil fuels in the summit’s final text. During the one-day extension, nations approved a roadmap for “transitioning away from fossil fuels” – a first for a UN climate conference. The deal stopped short of a long-demanded call for a “phaseout” of oil, coal and gas. UN chief António Guterres stressed that the era of fossil fuels must end with justice and equity. |
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Voluntary Carbon Market’s move towards integrity |
Several actors in the VCM came together to address concerns around integrity and carbon credit quality. Six of the most prominent non-profit organisations working towards guiding credible climate action individually, including the SBTi and ICVCM, came together with the promise of developing an end-to-end integrity framework. |
This framework would address two main activities – decarbonising operations and value chains, and secondly, addressing remaining emissions with high-integrity carbon credits. |
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This year’s COP saw several momentous commitments being made. 116 countries signed the Global Renewable Energy Efficiency Pledge, agreeing to triple worldwide installed renewable energy generation capacity by 2030. |
We also witnessed much-needed attention being paid to blue carbon, with 38 countries joining the Freshwater Challenge to ensure 300,000km of degraded rivers and 350m hectares of degraded wetlands are committed to restoration by 2030. This is a critical initial step – blue carbon projects are often expensive and prone to high degrees of risk. Nonetheless, oceans hold sequestration potential that must be harnessed. Developed nations in particular do have the risk appetite to fund projects in the space. |
Despite 2023 having been a tumultuous year for the VCM, many in the ecosystem continue to strive towards building integrity for the market. World leaders came forward to voice their support for the VCM. World Bank Group President Ajay Banga announced ambitious plans for the growth of high integrity global carbon markets, with 15 countries set to earn income from the sale of carbon credits generated from preserving their forests. This is perhaps an outcome of their acknowledgement of the size of the climate finance gap, and the VCM’s ability to bridge this gap if operationalised well. |
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Some decisions at COP, although positive, can only be seen as half-wins. For instance, while the developed nations came together and pledged $700mn to the Loss and Damage Fund, the amount is trivial for a fund that aims to assist vulnerable nations with climate adaptation. This amount falls far short of the estimated $400bn in climate-related losses developing countries face each year. In fact, this corpus covers less than 0.2% of the required amount. |
On the last day of COP28 came another partial win – for the first time, we witnessed a commitment being made to transition away from all fossil fuels. The disappointment however is that several countries, including the EU demanded a “phase out”, instead of a “transition away”. While it may appear to be a minor detail, in the world of climate diplomacy, this gives way to softer policy action instead of a solid phase-out plan. Furthermore, oil producers and developing countries were reassured by assertions that countries are free to follow their own paths to net zero, which instill little faith among observers. |
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At COP28 in Dubai countries once again failed to reach agreement on Article 6.2 and Article 6.4 meaning talks will resume next year. The Article 6.2 discussions were heavily politicised, with deep disagreements over whether and how to impose processes and controls on bilateral trading. Draft recommendations on Article 6.4 methodologies were up for approval at COP28. While these recommendations had broad support at COP28, agreement foundered on rules for carbon credits generated via removals, meaning engineered or natural processes that suck carbon dioxide (CO2) out of the atmosphere. |
Overall, negotiations on Article 6 were a failure and will now be taken up at COP29, in Azerbaijan. |
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Investing in a climate project can be daunting. There are many unknowns and variables that investors have to contend with. Risk can be difficult to ascertain. Drawing on our learnings of working with several carbon projects, we are really pleased to share the launch of our first climate risk model. This is designed to help investors assess the risk associated with all carbon projects listed on the Neufin platform. |
Our risk assessment is based on four key pillars – additionality, net emissions impact, project execution risk, and monitoring and tracking. We believe that our innovative, exhaustive and science backed approach will help de-risk project investing. We will be holistically evaluate all pre-issuance carbon projects on the Neufin platform to help investors identify projects that fit their risk profile. |
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Blue Carbon – Project Development Opportunities in India |
Our latest report discusses the environmental and investment potential that blue carbon ecosystems such as mangroves and seagrasses hold. These ecosystems sequester and store carbon dioxide at remarkable rates, offering a nature-based solution to offset carbon emissions. Blue carbon projects are strong contenders for conservation financing because they have suffered considerable historical losses and remain threatened globally. |
The report discusses opportunities and barriers to developing blue carbon projects in the voluntary carbon market along with actionable solutions. Read the executive summary to see what’s inside. |
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Carbon credit price for the past month |
Price per credit: $3.43/tCO2e (-9.7%MoM) |
Based on top 500 projects globally by volume of credits retired |
The overall price per carbon credit has gone down by 9.7% over last month ($3.80) since last month’s price reflected end of quarter retirements. Volumes were further deflated as traders keenly tracked COP28 announcements and their impact on the VCM. While prices for Nature Based Solutions continue to fluctuate around $3.8, Household Devices projects are down 22%, highlighting cooling demand for community based projects like Improved Cookstoves. Meanwhile, prices for standardised instruments plummeted most significantly, with the CBL N-GEO token down 35% compared to last month. |
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