Transcript: Could COP28 catapult the carbon credit market?

This is an audio transcript of the Behind the Money podcast episode: ‘Could COP28 catapult the carbon credit market?’

Michela Tindera
FT climate reporter Kenza Bryan has been keeping her eye on an interesting company recently. It’s called Blue Carbon.

Kenza Bryan
Blue Carbon is really a baby company. It was only set up last year. It’s based in Dubai. The reason it caught our attention specifically is because over the past year, since it’s been created, it struck pretty gigantic deals with Kenya, Tanzania and Zambia, Zimbabwe, all across Africa, really.

Michela Tindera
In just the one year since Blue Carbon launched as a company, it started negotiating the rights to manage millions of acres of African forest land.

Kenza Bryan
One of the questions I have is why this has all been done in such a rush, why this company that’s been around for a year has signed deals all across Africa.

Michela Tindera
For decades, wealthy nations have targeted Africa for its rich natural resources — things like timber, palm oil and gold. But Blue Carbon doesn’t want to extract anything from these forests. It actually wants to preserve them. And the reason Blue Carbon wants to preserve all this land is because it’s trying to get ahead in a market that’s suddenly relevant again. It’s called the carbon credit market. You see, carbon credits are essentially like permission slips for releasing greenhouse gases.

Kenza Bryan
Each carbon credit is equivalent to 1 tonne of carbon being removed from the atmosphere. So the key thing is a tonne. And in theory, companies can use the representation of that tonne of carbon that’s been removed to cancel out a tonne of carbon dioxide that they’ve emitted.

Michela Tindera
And the idea of trading carbon credits has been around for a while, but it’s been limited to only private buyers like companies and individuals. And soon countries could get in on this too. The United Nations climate conference COP28 is happening in Dubai right now, and officials there are talking about how to make it happen.

Kenza Bryan
If you think of the difference between a project developer in Tanzania buying up a hundred hectares of land and issuing carbon credits in return for protecting the forest on that land, versus a country saying that entire swathes of its forests will be protected and issuing carbon credits against that, it could sell hundreds of thousands, maybe even millions. So the market, many people think, is about to explode.

Michela Tindera
From this vantage point, this market sounds like it could be a win-win for everyone involved.

Kenza Bryan
Scientists say that we do need carbon removals to help hit our climate goals. And while scientists have laid that out, developing countries have added another layer to that, which is: why not do the carbon removals in the places that are already heavily forested, that have contributed fewer emissions than the richer countries have and who need more money right now to deal with the effects of climate change? So the idea with the carbon markets is that they could act as a funnel of money from richer countries to poorer countries in exchange for this service of nature protection.

Michela Tindera
Now, this is where things get tricky. It’s a pretty unregulated market. And the fact that it might soon explode raises questions around things like accountability and human rights issues.

Kenza Bryan
The purpose is to conserve, which should be a good thing. But the methods of doing that can be extractive. They can be violent in some cases if the country’s military gets involved or if villagers are kicked off their land, as was recently alleged in Kenya. So it’s not the protection of the forests and issuance of carbon credits that’s the problem. The problem is who profits from the sale of the carbon credits and what measures are in place to protect the existing land rights of local communities.

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Michela Tindera
I’m Michela Tindera from the Financial Times. Today on Behind the Money, governments trading carbon credits could become a massive climate development as details shake out at COP28. But what are the risks as more land in developing countries gets gobbled up into this market?

Right now, many countries are feeling the pressure to meet some pretty ambitious binding targets to reduce their carbon emissions as part of the Paris climate accord.

Kenza Bryan
Some countries say that they will use carbon offsetting to hit their climate goals.

Michela Tindera
And that’s where carbon credits come in.

Kenza Bryan
If you can pay a country that’s doing better than you at cutting emissions, maybe because it’s covered almost entirely in rainforest, then why not channel the money to that country, help it adapt to increasingly extreme weather events, to rising temperatures and buy the service of emission reduction? Ideally, this would only be done for the purpose of channelling climate finance to developing countries and also helping high-emitting countries cut the emissions that are really hard to cut.

Michela Tindera
So these credits can really have some benefits. But the system is controversial.

Kenza Bryan
The fear is that the offsetting happens for other stuff, like continuing to drill for oil and gas and that it becomes a get-out-of-jail card.

Michela Tindera
Critics take issue with the logic at the heart of this system that carbon credits aren’t reliable enough to make up for real-world emissions.

Kenza Bryan
The problem that scientists and activists and some business people have with carbon credits is just the accounting. It’s this constant question: is it the case that one carbon credit guarantees that 1 tonne of carbon has been removed from the atmosphere? And if it is the case, how long should we trust that guarantee for? Is it 10 years? Is that 100 years? There can be mistakes made in the kind of biology of how much carbon does a tree absorb if it’s in a savannah, if it’s in a tropical rainforest. But when you start to sell hundreds of thousands of credits in one go, questions start to be asked about whether that tonnage question has really been resolved.

Michela Tindera
Right now, the marketplace is pretty small. It’s valued at around $2bn and it’s pretty much unregulated. But decisions made at COP could totally change that. It could mean this market could get a lot bigger and eventually companies and countries could swap credits freely.

So jumping back to the Dubai-based company Blue Carbon, in a hypothetical scenario, Blue Carbon could sell its credits for this land it bought in Africa to the UAE. And then that would offset the UAE’s carbon footprint. Is that the right idea?

Kenza Bryan
Exactly. So all of the deals, they’re all forward-looking because it hasn’t actually issued any carbon credits yet. It’s just bought up the right to do so in future. So we don’t know exactly what Blue Carbon wants to do with these future hypothetical carbon credits. The big question is whether Blue Carbon would then sell those credits to other countries or other companies, or whether it’s actually intending to sell those credits to its own government, to the UAE.

Michela Tindera
So being able to buy carbon credits seems like it would be helpful for an oil-rich country like the Emirates to meet its goals. Is that fair to say?

Kenza Bryan
We don’t know for sure that the UAE intends to use offsets as a big part of its own climate strategy, but it’s certainly making positive sounds about offsets and the benefit of them for the world as a whole. And in all these different ways, its own companies and financial institutions are pushing the space quite hard.

News clips
We can’t just switch off oil and gas . . . Making a dent in the climate crisis is not just about decarbonising oil and gas operations . . . Because we’re always gonna be an energy exporter.

Michela Tindera
Those were a couple of Emirati climate officials driving home how important fossil fuels are right now to their country.

Kenza Bryan
Even if carbon credits were just a sideshow for the UAE, just a kind of fun climate experiment that makes them look good and can make some money along the way, the sheer size of the capital they have at their disposal means that they can have a really outsized impact on carbon markets internationally, on the taxation revenues of these various African governments and on local communities, because they’ve got the dollar power.

Michela Tindera
Like Kenza said, we can’t know for sure if Blue Carbon will sell these credits to the UAE to help cancel out the country’s emissions. But it is a possibility and not an entirely outrageous one. Blue Carbon is headed by a Dubai prince, so it’s pretty interconnected with the country’s royalty and government.

Kenza Bryan
We don’t know much about the relationship between the UAE and this Dubai prince, and we don’t know much about the relationship between the UAE and this Dubai-based private company. We just know that the UAE has made very positive sounds on the carbon markets.

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Michela Tindera
What Blue Carbon has been doing, buying up land, it’s not really unheard of, right? Like, other countries have done this. Could you compare some other places where we’ve seen this happening?

Kenza Bryan
Yeah. So Switzerland has been particularly active with deals, including with Ghana at the start of the year. Singapore’s also been active. But what they’ve done is slightly different to what Blue Carbon has been doing and they’ve been doing it for longer. 

Michela Tindera
Mmm. So how are companies from Switzerland and Singapore doing things differently?

Kenza Bryan
So they’ve also been signing these memoranda of understanding with foreign governments to work out how exactly the carbon will be sold. But they haven’t been buying up rights for decades to the carbon credits. They haven’t been buying up rights to vast swathes of land. Blue Carbon has been going into countries that don’t have a long experience of selling carbon credits. So, in Liberia specifically, one of the things that local communities have been telling me is that there isn’t any kind of legal framework to govern the issuance of carbon credits, the sale of carbon credits, the taxation of carbon credits. There’s been decades to think about how this should be done for other extractive industries like timber. But for this new burgeoning extractive industry, communities say that there hasn’t been enough work done by the government to build a framework.

Michela Tindera
Kenza’s been taking a closer look at a deal that Blue Carbon is looking to strike with Liberia. She says it would give the Emirati company the exclusive rights to sell carbon credits using Liberian forest land for the next three decades. In this potential deal, every time a credit is sold, Blue Carbon would take home most of the profit.

Kenza Bryan
Either way, Blue Carbon makes a lot of money because it gets about 70 per cent of the proceeds once credits have been sold, and the government gets 30 per cent and local communities get a fraction of that. When the government gives Blue Carbon a green light to develop carbon credits on this land and gives it the right to access and monitor and essentially put up fences around bits of the forest to prevent it from being cut down, that could have significant knock-on effects on the ability of local people to use the forest in ways that they would be used to doing.

Michela Tindera
Things like cutting down small amounts of wood for shelter or simply just roaming freely on the land that they call home. Blue Carbon has said it will follow all local laws and regulations when it comes to owning this land.

I wanted to hear indigenous communities’ perspective on this, so I spoke with a campaigner named Andrew Zeleman. He grew up in the heart of one of Liberia’s forests.

Andrew Zeleman
And my father happens to be a hunter. So I grew up in a forest and lived all my life there. I used to walk like three hours every day to school in a nearby community.

Michela Tindera
Andrew spent the last decade of his life working to protect Liberia’s indigenous communities from extractive industries like timber and palm oil. He runs crash courses for the villagers on what their rights to the land are. And when it comes to carbon credits, he thinks that the people indigenous to this land should be taking home the bulk of the profit earned from these future carbon credit sales.

Andrew Zeleman
Well, I don’t see where a company from another polluting country would want to be the one to trade carbon credit for another country. Can’t we as Liberians find a way to be the one to trade our carbon credits? Why should we have a company of different country come in to do it in Liberia?

Michela Tindera
Andrew recently travelled into the Liberian tropical forest. He went there to talk with some of those local communities that would be affected by the Blue Carbon deal.

Kenza Bryan
Well, he told me it was so interesting because the communities he spoke to, not only did many of the village leaders not know who Blue Carbon was. Many of them didn’t know what a carbon credit was because this is a new industry, right. It hasn’t been done at scale yet. So the message he was trying to get across was a real lack of knowledge and understanding by local communities.

Michela Tindera
Kenza, you saw a draft of the agreement between the Liberian government and Blue Carbon. Now, both parties say that nothing’s final and that they’re working with the local communities on this before signing a deal officially. But what if local communities told you — did the document you’ve seen say if they’ve been consulted at all?

Kenza Bryan
Yes. In that document, it actually makes very clear that the process of consent, like of obtaining consent from local communities hadn’t been done yet, that actually all of that consent seeking, which is typically done before a deal is struck, all of that is still in the future. And that’s a classic red flag for big corporate players in extractive industries.

Michela Tindera
What can vulnerable countries like Liberia do to safeguard themselves as carbon credits become a more popular thing?

Kenza Bryan
There’s a couple of interesting things that countries can do to establish their sovereignty over carbon credits, which they’ve already started doing. One of those things is just controlling the flow of money around the sale of carbon credits. So a bunch of countries, including Kenya and Zimbabwe, have over the past year or so, brought in legislative structures specifically designed for carbon credits, with specific taxation regimes, ownership regimes. And some of them have brought in taxation models that really do benefit local communities and government much more than potential foreign buyers or developers. Tanzania, for example, has brought in a 61 per cent tax on the revenues from carbon credits.

Michela Tindera
Are there any long-term negative impacts that we should be considering? Is this a situation where we could see more companies and countries becoming more blasé about their emissions? Or like, could this even encourage more emissions?

Kenza Bryan
Yes. Some international carbon negotiators are really worried about taking this problematic, controversial voluntary carbon market and making it a whole lot bigger and letting countries wade into it. The risk is that countries continue to pump oil and gas and that they use carbon offsets to justify that, in the same way that some companies have been doing. The other risk is that it simply doesn’t channel the climate finance to developing countries who issue the credits in the way that it was intended to. The point was always two-fold. You compensate the countries that have preserved their nature, that are on the front lines of climate change, and you provide a mechanism for higher-emitting countries to abate the small proportion of their remaining emissions that they’re struggling to cut. But the idea wasn’t that you create an excuse to continue emitting at high rates.

Michela Tindera
What are you planning to watch for in this space in the future?

Kenza Bryan
One thing I’ll be watching is this continuing trend among countries like Zimbabwe and Kenya to toughen up their own national regulatory systems around carbon credits, increasingly tax them, really start to see them as a big source of future income. And then the other thing I look for is for negotiators at COP28 and at the UN to iron out some of these nitty-gritty details around the marketplace for carbon credits, because we anticipate that national governments are really gonna get quite heavily involved in buying and selling these. So if done well, it could solve quite a few of the climate conundrums that the international community is facing, which is: how do you transfer that money from richer countries to poorer countries? How do you monetise nature conservation in a way that will make it happen?

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Michela Tindera
Behind the Money is hosted by me, Michela Tindera. Saffeya Ahmed is our producer. Topher Forhecz is our executive producer. Sound design and mixing by Sam Giovinco. Special thanks to Dan Stewart. Cheryl Brumley is the global head of audio. Thanks for listening. See you next week.

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