Climate finance in Colombia remains in limbo as a drop in the carbon price is hindering the voluntary market needed to develop the country’s low-carbon emission projects.
In an annual report released on 26th May by Forest Trends/Ecosystem Marketplace, the price fell by 14 percent to US$3.3 per tonne in 2015 due to oversupply. As a result, the voluntary market’s value shrank by 7 percent to a record low of around US$278 million.
The change spells a long wait for some of Colombia’s vital low-carbon initiatives to get off the ground. Colombia was among the 195 nations to sign the COP21 Agreement in Paris in 2015, which sets out to reduce global temperatures to well below 2 degrees Celsius by 2030.
Josḗ Luis Gṓmez, Executive Director of private sustainable development organisation Fondo Accion, said carbon pricing since the agreement has acted as a damper on Colombia’s ambitions for indigenous projects. Its effect on the voluntary market further adds to the barrier.
“In very sensitive regions for development and mitigation in Colombia, the credits that will be verified have to be sold in the voluntary market,” he said.
The voluntary market is an unregulated market open to all willing participants. Participants are not obligated to meet compliance standards, volunteering to enter the market in order to reduce their carbon footprint. Many of Colombia’s forest communities in the Pacific region of the country currently look to voluntary buyers of carbon credits to generate financial support to help them meet their carbon emissions targets.
“From our conversations with communities that own these credits, and that will directly benefit from the sale of them, the price is not what will keep them from selling,” Gṓmez added.
Much of the climate finance emerging from Colombia aims at tackling the country’s critical deforestation problem. Colombia takes in around 10 percent of the world’s plant and animal species, though loses around 2000 square kilometres of natural forestry each year to carbon-intensive logging practices, according to non-governmental organisation the World Wide Fund for Nature (WWF).
It remains early for the current carbon price to set clear expectations for Colombia’s national target success in 2020, though Gṓmez said the market leaves limited room for optimism in the short-term.
“We expected [with COP21] binding agreements and faster progress on carbon pricing,” he said.
Some of Colombia’s most anticipated carbon emissions programmes are due to roll out in the next six months. The Amazon is a region of Colombia in which climate finance has seen more development. The current carbon price for Amazonian projects is pegged at between eight to twelve dollars per tonne of CO2. UK, Norway and Germany are already helping the region to implement results based climate financing (RBCF), which pays for projects demonstrating results, and which measures payment by each tonne of CO2 the project successfully eliminates.
Speaking at the Carbon Expo in Cologne Germany on 26th May, Ellysar Baroudy of the World Bank Group’s Forest Carbon Partnership Facility and BioCarbon Fund, said a different approach to Colombia’s land management could tip the odds for the Pacific region to succeed. The area could attract climate financing from more innovative sources than just the voluntary market, she said.
“There is a lot of money available in the land use space. I think it is understanding how to capture it, how to leverage existing funding that is out there,” Baroudy said.
One example of RBCF is the REDD+ portfolio programme, which specifically targets the degrading effects of carbon intensive practices on large forest areas.
The Colombian government needs to ensure that programmes for smaller forest communities pay within a maximum of three to five years, according to Gṓmez. Biodiverse areas like the Pacific region, where communities have dwelt for over 5000 years, cannot afford to wait longer for a secure source of revenue.
“When you are not getting decent income form the provision of eco-system services or mitigation services, communities will resort to bringing down the forest, bringing cattle in, and going into illegal mining practices. That will be a very perverse effect for the entire planet,” Gṓmez said.