Carbon markets could represent opportunity for sustainable development for the region and must be strengthened, claim experts at international panel organized by CAF and Argentina’s BICE with the participation of IICA
San Jose, 6 September 2023 (IICA) - The development of carbon markets could be a useful tool not only for achieving global climate change mitigation and adaptation goals, but also for contributing to the sustainable and inclusive development of Latin America and the Caribbean.
These were the conclusions of experts from international organizations and public and private financial institutions at a forum held in Buenos Aires, where the discussion centered on the prospects posed by carbon markets for the region. The forum also featured the participation of the Inter-American Institute for Cooperation on Agriculture (IICA).
The event was organized by the Development Bank of Latin America and the Caribbean (CAF) and Argentina’s Bank for Investment and Foreign Trade (BICE), and spotlighted the opportunities set out in Article 6 of the Paris Agreement—the framework that sets the standard for carbon markets, both regulatory and voluntary, which are presented as an opportunity to mobilize financing for the countries of Latin America and the Caribbean thanks to their contribution to mitigating climate change, ensuring the integrity and transparency of operations.
“Given the global challenge posed by climate change, it is often said that our region is not a problem but a solution. Indeed, we are from many perspectives, but to transform the potential into reality, one of the issues is financing and carbon markets represent an opportunity in this sense”, asserted Jorge Srur, Southern Regional Manager at CAF.
For his part, Mariano de Miguel, BICE President, explained that “until a few years ago, development could dispense with caring for the environment and even see it as a hurdle. Today that is no longer the case. On the contrary, caring for the environment can be a tool for development and the carbon markets can be very important”.
Cecilia Nicolini, Argentina’s Secretary of Climate Change, also participated in the forum, where she claimed that a focus on climate change adaptation meant attending to the needs of the most vulnerable.
“In climate management, there are opportunities for sustainable development”, she explained. “The first is to find savings where today there are losses. This year Argentina’s agriculture sector suffered a drought that cost more than $20 billion. These phenomena will tend to repeat themselves and that is why what we invest in climate action today will bring savings in the future”.
Nicolini explained that the use of carbon markets is being negotiated internationally and warned that they must be fair, “so that they can be a mechanism to balance out and compensate the historical injustices of a climate situation that the countries of Latin America and the Caribbean have not caused, but of which we are victims”.
The role of agriculture
Kelly Witkowski, Manager of IICA’s Agricultural Climate Action and Sustainability Program, referred to the challenges that face the agriculture sector to achieve a more effective participation in the carbon markets.
“It is very important to ensure that agriculture is represented in all national and international discussions on carbon markets. To be part of the solution to climate change, we must be present and make ourselves heard in decision-making spaces. Agriculture has a fundamental role to play not only in terms of resilience in the face of natural disasters, but also in reducing greenhouse gas emissions”, she maintained.
Witkowski explained that the AFOLU sector (Agriculture, Forestry, and Other Land Use) represents almost 50% of emissions in Latin America, of which agriculture contributes a quarter. “We see today that agriculture is not a significant part of carbon markets and we believe that the sector can expand its credit offering if it can overcome several challenges”.
She further explained that “agricultural producers live in a context of constant risk and it is difficult to determine if the carbon markets offer an opportunity or if the risks outweigh the incentive. There is a lot of uncertainty given the number of project developers presenting different proposals, and that fragmentation erodes confidence. Producers have doubts as to why they should share so much information about their production, who is going to use it, and for what”.
IICA’s specialist also affirmed that the price of carbon in Latin America and the Caribbean must rise significantly in order to create a true incentive for producers, and specified that the countries in the region can still work to give greater importance to voluntary markets in agriculture.
Along these lines, Alejandra Mazariegos, specialist in carbon markets at the World Bank, presented a survey indicating that prices in the region remain below the levels necessary to meet the objectives of the Paris Agreement.
“In the region, all prices are below the recommended range, with the exception of Uruguay’s carbon tax, which is applied to gasoline”, explained Mazariegos, who informed that, while the markets were regulated at COP 26 in Glasgow, there are still a number of questions that must be resolved in terms of the voluntary markets.
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Institutional Communication Division.
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