The Road to Net Zero 2050

 

Today, we are at a critical juncture in time.  We are not yet on track to achieve the goal of limiting global warming to below 2°C, let alone 1.5°C. 2023 was the hottest year on record, temperatures are now 1.48 degrees Celsius higher than in the pre-industrial area. Moreover, natural disasters are costing hundreds of billions of US dollars.  Allianz estimated losses at c.0.6% of Global GDP, and even worse natural disasters took the lives of c. 12,000 people in 2023 according to Save the Children.

So where are we on our commitments and targets to #NetZero2050? In 2023, GHG emissions exceeded 58GtCo2e and the emissions gap to the 2030-target continues to increase. According to the Emissions Gap Report (UN) with current commitment and national pledges, emissions in 2030 will still be substantially higher than those needed to be consistent with the 1.5C target. There will be a gap of 14 GtCO2e for a 2°C goal and a 22 GtCO2e gap for the 1.5°C goal.

Although investments in Climate Finance have increased over the last few years, we are still far from what is needed. This was also highlighted at COP28 where it was recognised that financial pledges made during COP were far below (less than USD2bn) the trillions needed for the energy transition. 

According to McKinsey, achieving net zero by 2050 will require USD9.2 trillion of annual capital deployment across all sectors but this amount is peanuts compared to the potential losses of ecosystem, lives and economic capital that we will have if we do not act today.

At Lendable’s Impact Leaders Forum, Maite Pina and Rugi Gurrieri hosted a working group session focussed on where we are today concerning achieving #NetZero in 2050 and how we can increase the capital allocated to Climate Finance in emerging markets and developing economies (EMDE) to finance transactions that might not be bankable as stand-alone transactions.

Participants discussed and debated the pro’s and con’s of the #voluntarycarbonmarkets as a tool to scale up private capital in Climate in Emerging Markets. Although #voluntarycarbonmarkets (#VCMs) are not perfect and there is still a lot of work to do, key takeaways are:

  • Carbon credits are part of the solution but not the solution to #NetZero
  • Carbon credits should not be used as a commodity to maximize traders’ profits but as a tool to transfer wealth from emitter nations to EMDE.
  • Today carbon credits are one of the few financial tools that provide result-based finance and help some transactions to become bankable by including a value to emission avoidance/reduction.
  • While Article 6 is not fully implemented, #VCMs provide the only mechanism to transfer wealth. But should #VCMs converge with Article 6 once it is fully implemented?
  • Carbon Integrity is key but so are the additional benefits that are generated such as energy access, biodiversity protection, and pollution prevention among others.
  • Anne-Marie Chidzero from FSD Africa Investments reminded us that Africa, despite not being a major CO2 emitter, offers massive opportunities for impactful climate adaptation business models and nature-based solutions, and this requires innovations in financing solutions that un-locks domestic capital.

 

While much work remains to be done in the #voluntarycarbonmarkets to ensure the integrity and improve monitoring and verification, at Lendable we believe that VCMs can: 

  • Help corporations to decarbonize by using green energy, more efficient equipment, and decarbonizing their production value chain.
  • Increase affordability and accessibility of climate products to economically disadvantaged populations. This can be done by providing carbon-backed finance to enablers, with repayment funded by future revenues from carbon credits. These enablers are companies that subsidise the price of their products with future carbon revenues from the emission reductions made by those products.