Carbon markets in Latin America and the Caribbean need more integrity
December 07, 2023
Latin America and the Caribbean is rich in natural resources, has enormous carbon sinks and has enormous potential for solutions based on nature and technologies. This represents added value to lead carbon markets, but first new regulations are needed to guarantee integrity, transparency and efficiency in the measurement of carbon capture.
Carbon markets in Latin America need more integrity. These are the main conclusions of a study by CAF -development bank of Latin America and the Caribbean-, the Integrity Council for the Voluntary Carbon Market (IC-VCM), the Voluntary Carbon Markets Integrity Initiative (VCMI) and the Institute of International Finance (IIF), which proposes recommendations to create Voluntary Carbon Markets (MVC) with high integrity criteria.
The document, presented at COP28, is structured in three parts, covering the evolution and state of carbon markets in Latin America and the Caribbean; opportunities to build integrity; and recommendations for governments to develop high-integrity MVCs. According to the report, the current carbon market landscape in the region includes both voluntary and compliance approaches, and are the second largest source of greenhouse gas emissions reductions in the world, generating approximately 20% of all carbon credits in 2020 and 2021.
“The expansion of Voluntary Carbon Markets and other Environmental Assets requires an inter-institutional and coordinated effort between regulators and market participants, and it will be essential to unite the environmental, economic and financial spheres. Only in this way will we achieve carbon markets that are fair, efficient and that fulfill their main function: contributing to a world of zero emissions and preserving strategic ecosystems for environmental stability,” said Alicia Montalvo, manager of Climate Action and Positive Biodiversity at CAF.
According to the study, the work of governments is essential to build a solid institutional framework by defining roles, expertise and authority of national institutions, applying standardized regulations for carbon credits, and ensuring that national regulation is consistent with the evolution and implementation implementation of the Paris Agreement.
On the other hand, the document indicates that integrity is essential to generate trust in MVCs. Private companies are the main users of carbon credits traded in these markets and are therefore primarily responsible for ensuring their integrity.
CAF, as a green bank in Latin America and the Caribbean, is committed to collaborating with all countries in the region and with relevant actors in Voluntary Carbon Markets to close existing gaps and enable conditions to mobilize resources in projects that contribute to compliance. of the mitigation, adaptation and restoration goals established in the NDCs.