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Your monthly update from the world of climate finance is back. |
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India becomes world’s third-largest solar power generator |
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India has surpassed Japan to become the world’s third-largest solar power generator in 2023, driven by significant growth in solar generation. The country’s ranking has improved from ninth place in 2015. |
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India saw the world’s fourth-largest increase in solar generation in 2023 (+18 terawatt hour or TWh), behind China (+156 TWh), the United States (+33 TWh), and Brazil (+22 TWh). |
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Japan’s ETS to accept carbon removal credits |
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The Japanese government will accept the use of durable carbon dioxide removal (CDR) voluntary carbon credits in its national emissions trading system. |
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The move came amid growing national carbon mechanisms in Asia that are working on creating space for high-quality voluntary credits to be used for compliance obligations. |
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ICVCM confirms Verra and ART meet its high-integrity benchmark |
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The Integrity Council for the Voluntary Carbon Market has recently granted approval to the world’s largest carbon registry, Verra’s Verified Carbon Standard, along with Winrock International’s Architecture for REDD+ Transactions (ART TREES), for Core Carbon Principle (CCP). Previously only ACR, CAR, and Gold Standard were CCP eligible. Collectively these registries 98% of all market issuances. |
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Credits issued by these approved programs and generated through approved methodologies will receive the CCP label. |
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A case for Debt for Nature swaps |
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What’s happening: Debt-for-nature swaps are increasingly hitting headlines as a form of climate finance that reduces countries’ debts in return for environmental commitments. In May 2023, Ecuador sealed a landmark deal that will help protect the endangered ecosystem of the Galapagos Islands through the sale of a blue bond that will mature in 2041. |
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What’s the background: Debt-for-nature swaps has emerged as a significant strategy within the realm of climate finance, garnering attention for its potential to alleviate countries’ debts while fostering environmental stewardship. Through a debt-for-nature swap, a debtor country reduces its total outstanding external debt. The debtor country is able to buy back part of its debt in more favorable terms and pay for conservation initiatives rather than debt service. This leads to higher international purchasing power for the debtor country. These agreements, which have been in existence since the 1980s, offer a unique avenue for nations to balance their fiscal responsibilities with ecological preservation. |
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What demands attention: While Ecuador’s deal with Credit Suisse has brought attention to the efficacy of such swaps, it represents just one aspect of a broader global trend. Countries across the spectrum, from small island states to emerging economies, are exploring debt-for-nature swaps as a means to tackle environmental challenges while addressing financial constraints. For instance, Costa Rica, the Philippines, Belize, Barbados, and Seychelles have all participated in similar agreements, with approximately 140 such swaps executed worldwide. |
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What are the challenges: Despite their potential, challenges persist in scaling up these swaps to meet the escalating demands of climate action. Negotiating the terms of such agreements can be complex and time-consuming, while financial risks must be carefully managed to ensure successful implementation. Moreover, while some countries have embraced debt-for-nature swaps as a viable strategy, others remain hesitant, highlighting the need for enhanced awareness and capacity-building efforts. |
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Our take: To fully harness the transformative potential of debt-for-nature swaps, concerted effort is required at both the national and international level. Governments, financial institutions, and environmental organisations must collaborate to streamline the process and enhance the accessibility of these agreements. Furthermore, innovative financing mechanisms such as social or environmental impact bonds and Conservation Trust Funds can incentivise greater participation and ensure the equitable distribution of benefits. |
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By aligning financial interests with environmental imperatives, these agreements hold the promise of forging a more sustainable and resilient future for both people and planet. As momentum continues to build, the global community must seize this opportunity to catalyse meaningful change and chart a course towards a more equitable and sustainable world. |
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Carbon credit price for the past month |
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Price per credit: $3.25/tCO2e (-7.89%MoM) |
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Based on top 500 projects globally by volume of credits retired. |
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The overall average price per credit has seen a slight decline, dropping from last month’s $3.60 to $3.27. Nature-based solutions are now priced at $3.15 per credit, seeing a decrease of 10.7% month on month. Household devices also saw a decline, down by 20.6% compared to last month, currently at $4.23 per credit. Puro biochar projects witnessed a notable decrease of 23.2%, now priced at $132.10 per credit. |
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On a positive note, Carbon Pulse reporting reveals a 15.8% increase in the number of credits retired across major registries, with 66.1 million credits retired since the beginning of 2024. April alone witnessed 14 million credits retired, up from March’s 13 million, showcasing a robust market momentum with an average weekly credit retirement 23% higher than last year. If retirements keep with the current pace, 2024 will be a record year for the Voluntary Carbon Market. The VCM is on track to see 190 million retirements by the end of the year, a 22% increase from 2023 retirements. |
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Renewable energy development in the Asia Pacific (APAC) region is growing strongly. In this landscape, India shines as a leader in solar energy while the US banks face scrutiny for fossil fuel financing. Many forces are driving the boom in APAC renewables, including low cost of producing energy, national commitments, and private sector decarbonisation. With a steep growth trajectory, it is not surprising that international investors want a piece of the action. To succeed in APAC renewables, stakeholders must prioritise strategic focus, local partnerships, diverse financing options, proactive supply chain management, and offtake expertise. These factors are critical for navigating the region’s diverse markets and seizing the abundant opportunities offered by the burgeoning renewable energy sector. |
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We’ll be back with more interesting updates next month. Team Neufin |
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