Landmark authorisation a critical step towards higher-integrity carbon markets

A landmark authorisation has been issued by the Government of Pakistan for the world’s largest mangrove restoration project, marking a new level of integrity and transparency for internationally-traded carbon credits.

The authorisation, provided by the Pakistani Government’s Economic Coordination Committee on May 24, grants the Delta Blue Carbon project – which is restoring degraded mangroves across 600,000Ha of the Indus River Delta – the ability to sell carbon credits in international markets through to 2043.

The authorisation ensures credits related to the Delta Blue Carbon restoration project will not be ‘double counted.’ Pakistan will refrain from including the emissions reductions created by the project when calculating progress towards its commitments under the Paris Agreement, known as Nationally Determined Contributions (NDC). Instead, emissions reductions from the project will receive a ‘corresponding adjustment’, ensuring that buyers of the carbon credits have full, unencumbered use rights.

The Delta Blue Carbon project is being implemented through a public private partnership between the Government of Sindh Department of Forests and Wildlife, project developers Indus Delta Capital and Caelum Environmental Solutions, and global climate change solutions firm Pollination.

“This new mechanism represents a crucial stage in the development of future global carbon markets that operate with full integrity and transparency,” Pollination CEO Martijn Wilder said.

“It’s vital that the credits we are offering in the market can be absolutely trusted by those who are purchasing them. The appetite from buyers for such certainty is only growing and the demand for best-in-class credits will be a key force in expanding the positive impact carbon trading can have on the global race towards net zero.”

Pakistan’s NDC commits the country to a 15% reduction in emissions by 2030, with additional emissions reductions subject to the provision of international finance.

The authorisation of the Delta Blue carbon project is an early example of mechanisms outlined in Article 6 of the Paris Agreement that aim to increase the integrity of carbon markets by requiring national governments to approve the transfer of offsets involved in international transactions. Balancing the responsibility to meet NDCs with the need to attract international investment to speed decarbonisation has been a key challenge for many developing nations, including Pakistan.

“The amount of global capital searching for high quality carbon credit projects is rising rapidly,” Indus Delta Capital CEO Nadeem Khan said. “To decarbonise as fast as net-zero targets require we need to make sure that investment finds its way to nations in the developing world where the majority of nature-based solutions will need to be deployed.”

“These countries can and will benefit by reducing their emissions in line with their NDC. But to succeed at scale they also need to benefit from projects that are connected to international carbon markets.”

“Projects such as Delta Blue Carbon are a vital source of revenue for the regional government as well as creating jobs and opportunities for local people and leaving behind a transformed natural environment.”

Under the public private partnership, a significant portion of revenues derived from carbon credit sales will be returned to the Government of Sindh to be reinvested directly in building local resilience to climate change, as well as improving living standards and infrastructure.

Creating the future market

The authorisation granted to Delta Blue Carbon is expected to be among the first of many that work together to create a market for internationally traded carbon credits, Mr Wilder said.

The Paris Agreement, under Article 6, makes clear that steps must be taken to avoid double counting in all international credit trading whether it is done using bi-lateral or multi-lateral mechanisms. That means credits transacted across national borders should be authorised by the country of origin and a corresponding adjustment made in that country’s national accounts.

“In the future we expect credits arising from authorised projects of this kind will attract higher prices in the market because they will be more desirable for purchasers and because they will need to include adequate compensation for host governments who allow such credits to be exported rather than making them part of their national contribution,” Mr Wilder said.

About the project

Delta Blue Carbon (DBC) is the world’s largest mangrove restoration project. Over two phases the project will restore degraded mangroves across 600,000Ha of the Indus River Delta in Pakistan’s Sindh Province, resulting in over 250 million tonnes of CO2 sequestered over the project’s lifetime.

The project is being implemented through a public private partnership between the Government of Sindh Department of Forests and Wildlife, Indus Delta Capital, Caelum Environmental Solutions and Pollination.

Since starting planting activities in 2015, DBC has restored more than 90,000Ha of mangroves, employing over 20,000 local people in its operations. The project is restoring vital coastal habitat, supporting recovery of biodiversity and local fisheries and building resilience to climate change.

Phase 1 of the project is one of the first projects to use Verra’s blue carbon tidal wetland methodology and issued its first tranche of carbon credits in late 2022. These initial credits were sold to international voluntary market buyers including Microsoft, Carbon Growth Partners, Respira and Trafigura.

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