Written by Ronal Cubeo, Climate Change Mitigation Consultant
Out of the issues that trouble us as humanity, the most visible one nowadays is the COVID 19 pandemic. Certainly, the expansion, magnitude, and impact that it has had on countries at different stages of industrial and technological development have created great challenges, perhaps one of the most important being communication.
I was asked to write a short piece on “The importance of communication in the time of COVID” and relate it to the concept of MALOCA. In this sense, it is necessary to specify the concept and meaning of MALOCA in the indigenous populations of the Colombian Amazon. The MALOCA has at least three functions: first, as a physical space where families live; second, as a vital space for culture and worldview of the indigenous community, it represents par excellence the space for transmission of knowledge through orality —from the origins of each living being, the relationship between man and the creatures around him, as well as the relationship with creative entities who live in other spaces healing rituals and traditional dances are performed in this space—; third, as a political space, it is also a space for discussion on issues that affect the community organization and lifestyle.
Regarding communication, it is worth mentioning that the indigenous peoples of the Amazon, although they present particularities in their worldview, also present common elements. One of them is that in order to communicate among themselves and with others, the first thing that must be done is to “order one’ s thoughts” in order to be able to transmit words that have real content, life content.
How can indigenous communities contribute to communication in the face of the current pandemic crisis? The first thing we should mention is that, in the worldview of indigenous peoples, the land and the living beings and other elements that constitute it are intimately related. In the beginning, when the Creator Being assigned each element a function, it was up to man to “administer” those elements in a harmonious manner in order to maintain the order that was given to him. Diseases are a consequence of the human transgression to those principles: when men look at nature as resources and resources as commodities that can be exploited, this rationality disturbs the indigenous world’s principles of life, and therefore changes are produced, along with its consequences.
In this sense, what indigenous peoples can contribute in terms of communication is linked to life itself, and refers to the principles of life, to retake the channels of communication with nature and other elements that compose it, in a holistic manner and under the principle of responsibility on behalf of the preservation of humanity. This is based on the principle that the earth and its entire composition was given to us by the Creator Being to be “managed” in a responsible manner, without altering its natural cycles.
ALLCOT, which aims to contribute through environmentally responsible projects to the reduction of GHGs, is expected to explore channels of communication with local communities, aware of the challenges involved in carrying out projects with diverse local actors, in a country whose territorial realities make up what Uribe de Hincapié (1999) calls “mixed sovereignty”, that is, the practice of local governance as a confluence of different actors.
Approaching indigenous peoples will allow us to explore other forms of organizations specific to each people, other ways of understanding the world, of understanding nature and, above all, other ways of communicating and relating to the land, to life itself. Understanding the principles of the life of each society is the unavoidable step to assume the challenge of assertive communication.
The invitation is to learn these “other” forms of understanding life, to seek this knowledge in the “other” that will enable spaces for discussion and decision-making regarding the environmental aspects. For indigenous communities, “what is not in the indigenous knowledge is in the other knowledge” (Palma, 2019), the other knowledge is outside the indigenous world, but it is not beyond their understanding, the discoveries should be complementary, not excluded. Exploring and comprehending these “other” ways of understanding life can contribute a great deal to the environmental agenda, national and global.
Written by Ginna Castillo, Climate Change Mitigation Consultant
Historically speaking, cities emerged as places of encounter and agglomeration. Nowadays, according to the United Nations Department of Economic and Social Affairs, 55% of the world’s population lives in those places, a proportion that is expected to increase to 68% by 2050. With the ongoing COVID-19 pandemic, the most effective strategy to avoid exposure to the virus has been social distancing which means that 55% of the population must rethink their way of living in order to avoid Coronavirus. In terms of transportation, new questions are arising on how to move through the city while remaining healthy or even if it is necessary to move on a daily basis at all.
So far, even under strict lockdown people working in essential occupations had to commute every day. Now, as some sectors of the economy are gradually re-opening in some countries, the possibility of social contact is getting higher, thus citizens are drastically migrating to individual yet affordable means of transportation. Governments are also being part of this shift by encouraging the use of non-powered vehicles or walking. There are around 250 local actions around the world to support walking and cycling during social distancing (Dataset from the Pedestrian and Bicycle Information Center).
There is no doubt cycling is rising as the most resilient mean of transportation during the pandemic since it allows longer distances than walking on a small or cero daily budget. According to the World Economic Forum, most of the local initiatives have to do with free rides on shared bicycle services and offering more kilometers of bike lanes by adapting space from local roads or even highways in cities like Bogota, Milan, Barcelona or Brussels, to name a few. Meanwhile, community collaboration efforts are also taking part in transforming urban mobility through projects such as Lend-A-Bike in Manila.
These governmental or community initiatives have the potential of keeping ongoing after the COVID 19 pandemic is over, even if most of them are only taking place as temporal measures during the confinement. The first step in this direction is being taken by the government of the Ile-de-France region who is now considering cycling as the main mean of transport after deconfinement (LeParisien). But that is just the tip of the iceberg, discussions about mobility are happening everywhere and new questions are arising on unnecessary car trips, home office and proximity to jobs and services, among others.
It is well known that climate change is one of the most urgent environmental challenges of our time, so if all cities were to pay attention to these new questions and initiatives instead of following the business as usual scenario before the pandemic, wonderful things would happen simply because we are now capable of changing habits on a global scale. For starters, and just by cycling, greenhouse gas emissions would drastically drop. According to the ranking of urban transport modes made by travelandmobility.tech, moving by a gasoline car generates around 96% more emissions than moving by bicycle (gram per passenger kilometers). That is during the whole life cycle of each vehicle: manufacture, operation, maintenance, and disposal.
Still, this seems to be the first step of a very long path. From this point forward, cities will have the challenge of redistributing public space and perhaps redefine street hierarchy by putting people before cars. Land use will have to be even more diverse in order to guarantee proximity between homes, services, and jobs so that the distances for commuting are either walkable or suitable for cycling. Last but not least, public transport will get more relevant on long distances and intermodality would have to become a reality. All these changes will ultimately lead to a more sustainable way of life and a more sustainable future.
Written by Enrique Lendo, Business Development Mexico Advisor.
Back in January, 2020 promised to be the “Super Year” of sustainable development. A growing number of companies, with assets close to $40 trillion dollars, committed to transit towards low emission and sustainable production and financing systems. For the first time, the World Economic Forum’s Global Risk Report ranked environmental and climate risk at the top of its tables, over economic and geopolitical risk. In the framework of the United Nations, fundamental decisions for the climate change, biodiversity and oceans agendas have been postponed due to the pandemic.
COVID 19 has exposed our vulnerability, as human species, before biological and natural phenomena as well as how fragile our economic and political systems are to global emergencies. The irrational management of biodiversity and ecosystems has triggered the evolution of viruses as climate change boosts its geographical reach and hastens its spread with massive consequences to human lives.
On the other hand, social distancing and isolation measures recommended to contain the pandemic fosters significant changes in the scale and the structure of the global economy. 2020 will face one of the largest recessions in modern history with contractions of 13% in trade and 1% of global GDP and impact to 1.6 billion jobs throughout the world. The GDP contraction in México will be the range of 6 to 10% by the end of 2020.
However, the current crisis also provides an unprecedented opportunity to restructure our economic system towards more sustainable consumption and production patterns in the framework of the environmental, financial and social agendas. At macro level, governments are able to decide whether incentives considered in their economic recovery policies will be directed to traditional, less competitive and more polluting industries or towards sectors that will create economic gains and social welfare in the long term.
For instance, investment in renewable energy would bring gains of $100 trillion dollars by 2050, or returns of $3 to $8 dollars per unit invested. Such investment could also create 42 million new jobs and reduce green house gas emissions in the energy sector by 70%. In contrast, fossil fuels are responsible for 70% of global CO2 emissions, receive subsidies up to $5 trillion dollars a year and, in the case of oil, have experienced negative returns in the last days. Today, Mexico’s Pemex costs 24 billion dollars in losses to taxpayers and the auctions to allocate clean energy certificates have been postponed.
At the micro level, manufacturers will have to adapt to the new trends in the value chains of a less interconnected world and find input providers closer to their production centers. In the service sector, digitalization and virtualization has expanded like never before, fostering innovation and the development of new products and processes. Only these companies and sectors able to adapt with creativity and speed will survive in the post-Covid world. However, sustainable consumption and production patterns will only be attained if policies and incentives are crafted properly. In the framework of economic recovery plans, environmental standards should not be downgraded, and support tools must not be directed towards polluting industries over more sustainable ones, otherwise inefficiencies will prevail and opportunities to boost green and sustainable growth will be lost.
Written by Alexis Leroy, CEO ALLCOT
The coronavirus pandemic has been a huge wake-up call for the world. In one short month, large swathes of the economy have either closed or been forced to scale back significantly. Air travel is virtually non-existent, private transport has shrunk to a shadow of its former self, and retail has almost entirely closed its doors.
And while we have been self-isolating at home, it’s given us all a chance to consider what we’re giving up, what choices we can’t make, and even whether we’d choose the same things again whenever restrictions are lifted. The lockdown has also turned into a fountain of ideas; ideas on how we can take this opportunity to rebuild our economies in a more sustainable way.
To be fair, some blueprints for a sustainable future are already on the table. In the US, the Green New Deal harkened back to President Roosevelt’s plan to bring the country back from the Great Depression of the 1920s. The 21st century version focused on climate change, the biggest challenge of our times, as well as social and economic inequality.
In Europe, the newly-elected Commission brought forward its own Green Deal last year, which is even more ambitious than its US counterpart. The EU plan seeks to turn the bloc’s entire economy upside down, refocusing on sustainability, climate, transitional measures to diversify and modernize the economy and offer opportunities for all. The proposals on both sides of the Atlantic are fortunate in their timing, as we grapple with “the fastest, deepest economic shock in history”. A lot of thinking has already been done.
For Asia, too, the pandemic represents an opportunity to embark upon the same shift, away from mimicking the West and towards a more sustainable, self-reliant economic model. Indeed, it may be the east’s only hope, if the kind of proposals that we read today are put into action elsewhere.
The liberal market-based economic model has been around for around 300 years. Globalization was the last great leap forward for the neoliberal interpretation, and coronavirus’ rapid expansion around the world is the warning that we cannot continue as we have done. The economy that evolved in the 18th century took the world as it saw it. It did not experience, as we do today, the immense impact of industry and business on our earth and our climate.
Pollution and resource scarcity were not considered problems 300 years ago, and all our efforts since then have been too modest, too piecemeal, and have been largely shrugged aside by the interests of old-world business models.
Yet today, we understand how our economic model impacts our health, our well-being. We can quantify the harmful effects of air pollution, just as we can quantify the cost of natural disasters.
With all this knowledge and understanding, gained through the immense technological advances of just the last 50 years, we have an opportunity to set a new course for the coming decades.
What must be done?
At a macroeconomic level, the world needs to commit, again and with greater force, to the purpose of the Paris Agreement and the Sustainable Development Goals. We need governments to line up behind these aims, to make pledges that are ambitious, believable and achievable, and develop the pathway towards achieving the ultimate prize.
The Sustainable Development Goals (SDGs) have a simple target: “a shared blueprint for peace and prosperity for people and the planet, now and into the future. They consist of 17 ambitions including reducing inequality, clean water and sanitation, climate action, responsible consumption and production, and zero hunger. All of these goals can be achieved with a thoughtful approach to re-building our shared economy.
And thanks to technology and understanding, progress towards the SDGs can now be quantified. Health, education, economic opportunity, stable societies, and even gender equality can be measured and assessed. And this quantification of achievement can now be rewarded. For the first time in our economic history, intangible impacts are now becoming tangible items on balance sheets. Efforts such as the Task Force on Climate-Related Financial Disclosure are slowly moving the needle on bringing externalities like greenhouse gases into the realm of real costs. And in the same way, improving our collective health, safety and prosperity can also be rewarded, in lower external costs (like carbon emissions and businesses losses) as well as in lower human costs.
The Paris Agreement has one, just one, simple goal: to ensure that by the middle of the century all our emissions of greenhouse gases are balanced by sinks that absorb those same gases. Again, this is a target that we can achieve if we plan carefully and put in the work, the investment, and the research to make it happen.
What will we gain? We will begin to return our climate to a state where catastrophic weather events are not “normal”, where deforestation does not rob peoples and species of their home, where water stress does not force mass migrations.
At a national or even multinational level, how can we make the changes that the future requires of us?
A Green Rebuilding
As we eventually emerge from the shadow of Covid-19, economies will need government help to re-start. Already we have seen billions of dollars, or euros, of pounds, spent to assist businesses and people to get through the lockdown. And we will see billions more spent to assist businesses to rebuild and restart their operations. We should make sure that we do not focus on short-term survival but on long term sustainability.
While we defend the independence of the private sector, when it comes to receiving publicly-financed assistance, the private sector should be required to follow public policy. Instead of spending 90% of the assistance on propping up existing business models, shouldn’t our leaders be looking at making our economy more resilient?
Financial assistance should come with conditions. Industrial companies should be required to make improvements and changes to their processes that match the SDGs. Where a factory now buys power from a gas-fired plant, any government assistance should require that it buys renewable power – a simple and achievable solution that comes at no additional cost.
Manufacturers should be required to use recyclable packaging, ensure the products are recyclable or reusable, and that their processes are as clean as possible. Regulations could be stiffened to require those producers to take legal responsibility for all lifetime waste associated with their products.
Commercial businesses should re-examine their practices and see what flexibility they can build into their operations. During the pandemic, we have seen an explosion in the use of video conferencing to maintain social links. Millions of people have been working effectively from home, rather than commuting to offices. Do we all, as employers *and* employees, need to commute to offices that use even more resources?
Instead of global supply chains, the business should be encouraged to look locally for materials and supplies, thereby reducing transportation emissions and pollution, and supporting the local community and its economy. And do we need to travel quite so much for business or for pleasure? There already is a growing awareness of the impact our travel habits have on the environment and climate, but the recovery from this global shutdown offers a real opportunity to wean ourselves off needless travel.
Lastly, how can you and I as individuals translate these goals into action on the ground?
As consumers, we can make more responsible choices and look after our outputs. When we buy, we should buy responsibly: are products reusable, recyclable and re-purposeable? Do our products even need packaging?
When we do consume, are we consuming more than we need? Are the electricity, gas, and resources that we use going from renewable sources or are we drawing on finite resources like oil or coal? Do we need to drive all the kilometers that we do? Is our flight necessary? Are we lighting and heating our houses responsibly?
Alternative products already exist for many of us, as we all know. But, critically, alternative choices exist too. It’s time we began to exercise more robustly our power of choice and, as individuals and consumers, ramp up pressure on business, on policy-makers, and on each other to think about the impact we have on our home.
The free-market economic model that was born in the heart of the Industrial Revolution, and which has lasted 300 years, is not fit for the 21st Century and the challenges it presents. We must not insist on a return to business-as-usual.
We, therefore, call on business around the world to acknowledge that the rebuilding of our economies in the wake of this pandemic cannot merely return us to the way things were before. The private sector must accept its historic role in bringing us to this point, and take on both the responsibility as well as the opportunity to fix our problems, even where the government is slow to act.
Written by Natalia Rodrigo, Group Sustainability Technical Manager.
Recent studies on the fashion industry state that this sector highly needs to improve sustainability performance. Although it is true that most fashion brands are aware of their environmental and social impact, only less than half of them have started to take real action. In addition to this, fashion companies are not yet implementing sustainable solutions fast enough to effectively counteract all the negative impacts this hastily growing industry has.
Current patterns of production and consumption in the fashion industry endanger natural resources and generate a loss of biodiversity. Furthermore, it cannot be discarded increasing rates of carbon emissions, water consumption, chemical use, and waste generation. Considering that, our planet has already overcome its safe operating boundaries, restrictions on one or more of its key input factors cannot be discarded, making it difficult to grow at the projected rate of a predicted increase of 60% by 2030.
In addition to this, other non-environmental challenging issues such as animal welfare, lack of transparency and negative image, for instance, pressuring society to live up to body ideals, cannot be consigned to oblivion.
It is a universally acknowledged truth that the fashion industry is regarded as a powerhouse for global development. This point can be illustrated by the position it has as one of the world’s largest consumer industries. As a result, this sector imperatively needs to perform differently. Far away from integrating profit and growth, fashion can provide additional value towards its products, resulting in tangible benefits across society as well as the world economy.
Fashion, talent, and creativity always go hand in hand. This means that fashion has a far-reaching savoir-faire, is active on social media and counts with enough leverage to successfully work on its own transformation.
Positively surprisingly, the fashion industry has already embarked on the challenging target of raising consumers ´awareness, undertaking for real and effective improvements, conforming wide networks dedicated to environmental, social, and transparent goals.
In addition to all of this, targeted investments made on technology as well as labor conditions and productivity, achievable heretofore will allow fashion brands to counterbalance current pressure. This point can be illustrated by current initiatives on converting textile waste into raw materials using advanced recycling techniques; reduce water and energy consumption due to innovative technology implementation as well as to integrate waste management techniques across production and distribution operations.
Taking all these new specialized strategies into account, a sneaking suspicion that acting differently nowadays as well as eagle eyeing for innovative solutions will provide these companies with a unique opportunity to manage and make certainly profitable growth forge ahead.
On the other hand, if no prompt action is taken, fashion brands will strain themselves to downgrade average unitary prices, deeper depreciation levels, rising costs, as well as resource shortage among the value chain. Undoubtedly, this industry is nowadays based on a linear ‘one-way street’ of take, make, and waste.
As a result, chain reactions across fashion are quite predictable. Considering current projections for growth in energy prices and salaries by 2030, fashion brands will suffer a decline in benefits if they still opt for business, as usual, consequently pledging their long-term resourcefulness.
In order to effectively address the rising environmental and social pressure, as well as to strike with the continuous industry boost, this sector is called to assess its footprint. In order to determine the industry’s environmental, social, and ethical gaps, ALLCOT helps the fashion industry to successfully identify the level of sustainability at each stage of the value chain. This strategy empowers companies to identify KPI´s and raise red flags for the weakest of them. The main objective of this effort is to build-up knowledge, transparency, and overall sustainability.
Without any doubt, this challenge in patterns ‘turnover also aims to establish the basis for prospective remodeling, investment channeling and innovation.
In conclusion, if the fashion industry does not take prompt and fast action on sustainability performance, its contribution to the United Nations Sustainable Development Goals (SDGs) will not be significant, putting into high risk the commitments of the Paris Agreement and therefore the Agenda 2030. As a result, it is urgently needed to place environmental, social, and ethical improvements as an indispensable task within management’s agendas.
The fashion industry has the iron in the fire to empower large-scale environmental and social change. Integrating more energy-efficient and conscientious use of limited resources, fair working conditions, as well as progressing on upstream and downstream issues along the value chain are key strategies to make this change a reality.
ALLCOT is changing the change…
By Asier Aramburu Santa Cruz, Climate Change RENEN Manager
Thanks to the project for the capture of methane, the displacement of fossil fuels and the cogeneration of renewable energy that ALLCOT is currently developing in Colombia, the palm industry can be a great ally in reducing greenhouse gas emissions. The good management of its plantations and the avoidance of deforestation is not the only action that this industry can take, some changes in the processing of the fruit itself to obtain the oil can be also implemented to ensure a more sustainable product. Thus, Colombia has managed to turn a problem, waste management, into an opportunity. Industrial wastewater from the production process has a high organic load and requires a previous treatment to be discharged into an aquatic environment. In Colombia, this treatment was carried out using anaerobic lagoons, which emitted large amounts of methane into the atmosphere, a gas with a global warming potential 25 times greater than carbon dioxide (CO2).
However, a solution was found: the use of biodigesters. Thanks to these facilities, methane emissions are being reduced by capturing biogas, the methane-rich gaseous mixture produced in the wastewater treatment process.
Although few plants are using this biogas to generate energy, the second phase of the project contemplates the adoption of this form of electric power generation. Thus, instead of burning in a flare, the current destination of most of the biogas, the companies will be able to adopt the technology that allows them to use that methane as an energy source. That is how they can become self-sufficient and deliver their surplus energy to the electricity grid, increasing the project’s climate change mitigation potential.
ALLCOT faces now a critical moment, as there is a need to update the Project Design Document (PDD) initially delivered to the United Nations Framework Convention on Climate Change (UNFCCC). But the biggest challenge comes with the first verification of the emission reductions to obtain the carbon credits, which will certify for the first time the reductions that have already been carried out. ALLCOT is also challenged to demonstrate the potential and benefits of the project, so that the rest of the companies take part in the project and this industry is transformed. Furthermore, the success of this project comes with the development of other initiatives within the production process, such as composting the sludge and waste from the production process, which also emits large amounts of greenhouse gases in their decomposition process.
ALLCOT commitment goes not only by doing the calculations of the reductions and the preparation of the documentation to get the carbon credits. ALLCOT is involving and motivating the companies visiting their production facilities.
The palm oil industry is currently the world leader in the supply of oils and fats. At the top the Asian countries play the main role, led by Indonesia and Malaysia, which have achieved fast growth in recent decades, reaching a combined production of 59,000,000 tons (82.5% of the total). However, this growth has received multiple criticisms, since it has led to the destruction of natural forests.
In the case of Colombia, in a field dominated by Asian producers, it has managed to position itself as the first palm oil producer in America and the fourth in the world (1,600,000 tons).
Therefore, following this project, the Colombian palm industry could show its commitment to sustainable development, take distance from other producers and align with the objectives set forth in the Paris Agreement.
By Andrés Melendro, Sustainability Consultant.
ALLCOT is currently developing a REDD + project (Reduction of Co2 emissions from deforestation and forest degradation) in the south of the Department of Meta, in Colombia. The project area is located in a transition zone between the Amazon and the Orinoco bassins. In the vicinity of the project, the area is the La Macarena Special Management Area, within which are included four Natural Parks. Unfortunately, during the first weeks of 2020 there have been numerous fires. La Macarena and Tinigua National Parks have been particularly affected. According to the Environmental Information System for the Colombian Amazon (SIAT-AC), during the first two months of the year there have been around 7000 heat points in the department of Meta, almost all in the municipality of La Macarena.
According to the inventory of Greenhouse Gases (GHG) established by the IDEAM (Institute of Hydrology, Meteorology and Environmental Studies) of Colombia, in 2015, the AFOLU (agriculture, forestry and other land use) accounted for 55% of Colombia’s total emissions. In other words, AFOLU is more determinant than transportation, industry and energy combined. These figures highlight the importance of the forestry sector in Colombia’s climate change mitigation strategy and the severity of current fires.
The drivers and perpetrators for this wave of deforestation are not entirely clear. There are several hypotheses, namely the economic interests of moving the agricultural frontier forward, for both licit and illicit crops; the benefits of converting forest into grassland for livestock; but also, a few studies hypotheses related to speculation and hoarding of “cleared” land.
In the eyes of the Government, the dissent of the extinct FARC (Revolutionary Armed Forces of Colombia) guerrilla are the main actors in this process and their objective is the planting of coca plants. However, according to serious journalistic investigations, large landowners are also promoting the arrival of settlers in the Natural Parks and financing deforestation. Degrading the environmental value of the land, located both inside and outside of protected areas, by cutting down the forest and later introducing livestock, is a perverse strategy to one day trigger the legalization and subsequent valuation of these lands. Settlers degrade, occupy the land and further sell it at low cost to illegal land hoarders. These two actors sign purchase agreements of unduly occupied vacant lots, and over time they manage to validate and finally authenticate these certificates in notaries.
This vicious circle explains the fires that today destroy the same forests that our REDD + project aims to protect. The current conjuncture of forest degradation both within and outside protected areas highlights the importance of promoting voluntary schemes such as REDD + since monitoring and control are not enough. The work that ALLCOT carries out through its emissions reduction projects complements enforcement carried by the environmental authorities and the operations of the Military Forces such as Operation “Artemisa”.
By offering financial incentives to avoid deforestation in the Southern Meta, ALLCOT’s REDD+ project supports local communities in their productive reorientation. ALLCOT works with them to define the most viable sustainable productive projects and uses the income derived from the sale of carbon credits serves to finance them. Whether through technical assistance, purchasing materials, building infrastructure or structuring business plans and marketing strategies, REDD+ represents the opportunity to reconcile local economic development and climate change mitigation.
Each hectare burned in the area of influence of our projects is one extra reason to continue protecting the forest through the REDD+ scheme.
Proyecto Redd+, Sur del Meta
Written by Andrés Melendro, Sustainability Consultant.
Indigenous communities are key stakeholders in global climate change mitigation and their territories’ local sustainability. At the regional level, according to the State of the Amazon report published by WWF in 2017, territories governed indigenous communities correspond to 33% of the Amazon and only 8% of deforested lands. This fact highlights the relevance of their role in the fight against deforestation. Over the past decade, technology has empowered indigenous people to monitor their territories. For example, GPS devices are used by indigenous groups to report environmental crimes. This has made companies operating in the Amazon more accountable.
In Colombia, indigenous reservations have historically been located at the crossroads of drug trafficking routes and rebel groups fiefdoms. Having been hit by the armed conflict between guerrillas and the Colombian army, their development rates are now below the national average.
The Inga and Kamsá communities, native of Alto Putumayo and Caquetá provinces respectively (both in southern Colombia) play a key role in this new stage of their regions, in which the progressive restoration of public order can generate an intensification of deforestation. Putumayo and Caquetá are located in a transition zone between the Amazon and the Andean region, Colombia’s economic and administrative center, and they display some of the highest deforestation rates in the country. In addition, the signature of the peace agreement in 2016 has meant the arrival of settlers and large economic groups, which is reflected in land-use changes towards agriculture, whether of large estates or subsistence. The agricultural frontier and livestock frontiers exert pressure on forests. It is worth remembering that the forestry sector is the largest emitter of greenhouse gases (GHG) in Colombia, responsible for 36% of emissions, according to the National GHG Inventory. Hence this sector is key to achieve the goals of the nationally determined contribution (NDC) of the country.
ALLCOT coordinates forestry projects with the objective of preserving forests so these will continue playing their role as carbon sinks. Since the founding of ALLCOT 10 years ago, the social consultation process has been rigorous and indigenous communities have been allies of several forestry projects. The social consultation carried out by ALLCOT is always governed by the principle of prior, free and informed consent. Through the funds derived from forestry projects that ALLCOT develops, it is possible to improve the community’s wellbeing, measured by indicators linked to the UN’s Sustainable Development Goals (SDG) such as 24-hour access to energy, schooling rate or infant mortality rate. The ultimate goal is to improve the social and economic development of the local populations of the area in parallel with forest protection. This way, we contribute to both the 2030 Agenda and the Paris Agreement. This is ALLCOT’s mission and the ancestral knowledge that indigenous people have about forests is a key tool to achieve it.
Written by Alexis Leroy, CEO ALLCOT
Carbon offsets are just as valid and valuable as renewable power
Anyone involved in developing clean energy projects around the world will be familiar with the demands of securing project finance. Lenders typically want to see a solid revenue stream before they consider financing renewable energy or low-carbon energy projects.
Normally, a Power Purchase Agreement (PPA) fits this requirement: a long-term offtake agreement with a high-quality buyer offers confidence that the project will generate steady cash flow to service its debt.
Occasionally a PPA by itself may not be regarded as a sufficient guarantee of performance, or the off taker’s credit quality may not be sufficiently strong. In such instances additional security can be added in the form of liquid guarantees or performance bonds.
But there is another revenue stream that can play its part: carbon offsets.
Carbon offsets represent the saving in emissions of carbon dioxide and other greenhouse gases (GHGs); they’re measured against a baseline in which the project would use legacy technologies. In this way a wind farm, a solar park or a waste-to-energy plant represents savings in GHG emissions compared to coal or even gas-fired power.
The world is waiting for a new global offsets market to replace the Clean Development Mechanism (CDM) that will end when the Kyoto Protocol is superseded by the Paris Agreement in 2021. But in the meantime, there are plenty of opportunities to develop and sell carbon offsets for some existing markets. The revenues generated should help secure project finance.
South Africa and Colombia are leading the way in creating high-confidence markets for carbon offsets, by allowing them to be used in part payment of their respective national carbon taxes and thereby granting them a monetized value – at least on paper.
Besides, the International Civil Aviation Organisation is preparing the launch a global offsetting market for airlines in January 2021. Demand for offsets from airlines participating in CORSIA is projected to reach as much as 174 million tonnes of CO2 equivalent (tCO2e) tonnes in 2025 and could be nearly 8 billion tCO2e by 2040.
And beyond these formally established, government-backed markets is a wide variety of voluntary carbon offsetting programs operated by large industrial, commercial and retail companies around the world. According to Forest Trends, nearly 49 million offsets were retired by governments, companies, and individuals in 2018.
There are plenty of challenges facing the use of carbon offsets as securities for project finance. Firstly, the revenue stream from offsets would likely form only a fraction of the overall project costs, and for some, it may simply not be worth the effort to incorporate offsets into a finance agreement.
Also, revenue streams from offset sales tend not to be regular, but “lumpy”. Offset projects must submit independent verification and reporting of the volume of emissions reduced before they can apply for the issuance of those credits, and the costs associated with that process usually mean they can only afford annual or even biennial issuance. Such periodic issuance may not be steady or regular enough to satisfy a lender.
Yet at the same time, using carbon revenue to secure financing may yield two significant benefits: the quality and the reliability of the purchaser. In the case of countries with carbon taxes that can be part-paid in offsets, the guarantor of demand is the government, and industrial emitters must abide by the law.
Similarly, in the case of CORSIA, the end-buyers will be international airlines seeking to comply with government-established, UN-approved targets.
Why is the end-use of the offset important? Because lenders are concerned not only with the scale of revenue streams from a project but also the reliability and creditworthiness of the buyers. Higher-quality off-takers will mean more security for the seller and hence for the lender.
Secondly, it’s important to understand that there is a direct link between the security of the supply of renewable electricity and the security of the supply of carbon offsets. It should be the case that any lender that relies on a PPA as security against project finance, should also be able to rely on the flow of offsets through an emissions reduction purchase agreement (ERPA).
Lenders will consider the reliability of the power project – how much power it is expected to deliver across the length of any contract – when estimating the value of the PPA. The PPA, therefore, is a measure of the potential supply of power, and it can, therefore, be a measure of the supply of carbon offsets.
In the case of many reliable renewable energy technologies – waste gas, solar and even wind power – the actual generation of power and the generation of offsets are very closely linked.
A project developer could even use future delivery of offsets as a source of seed capital for a project. This was a common practice under the UN Clean Development Mechanism. By arranging an ERPA with a buyer who is seeking offsets for some compliance or even voluntary purpose, a project developer can then use this ERPA to raise seed capital. To be sure, the volume of offsets may be subject to clipping, but the principle is sound.
So why don’t lenders take ERPAs into account? If we agree that the fight against climate change is paramount, then how can we not support carbon offsets as a valid source of capital, and indeed may be more valuable than megawatt-hours of renewable power generation?
Written by Casania Fometescu, ALLCOT Group Business Development
Earlier this month, Casiana Fometescu, international CO2 consultant and ALLCOT Group business development director on Eastern Europe attended the 19th Annual Workshop on Greenhouse Gas Emissions Trading, jointly organized by The International Energy Agency (IEA), the International Emissions Trading Association (IETA) and the Electric Power Research Institute (EPRI) in Paris.
The Conference shows the growing importance of the CO2 market worldwide. The number of attendees at the Conference doubled from last year’s, especially in terms of government representatives (e.g. United Kingdom, Switzerland, European Commission, China, New Zealand, Canada, etc.). This feeling was embodied by Mark Lewis from BNP who told the audience he feels “in the glory days of the carbon action”.
The international carbon market has become such an extended topic since national and regional governments, but also companies have developed policies to reduce emissions, and each of them has different technical details in implementation. The presentations held explained many sub-national trading schemes or carbon initiatives (Ontario, Quebec, California), national ones (New Zealand, China, Taiwan, Korea, Japan, Costa Rica, Columbia), and supra-national carbon markets (EU ETS).
The following talking points are worth highlighting:
- The representative of the World Bank, Celine Ramstein, recognized the importance of pricing carbon and mentioned that there are 46 national and 30 subnational jurisdictions that have already implemented either carbon trading or carbon tax schemes. Yet, all the emissions trading schemes (ETS) in the world (including China) comprise just 20% from the worldwide greenhouse gas (GHG). Therefore, there is still plenty of room to broaden the scope of these mechanisms.
- According to the World Bank report on the state of the carbon market, there is a diversity of carbon prices in different countries, ranging from €127/tCO2 in Sweden and €96/tCO2 in Switzerland, to €25/tCO2 in the EU ETS to less than €10/tCO2 in most countries covered by carbon pricing. Only 5% of the global GHG market has carbon prices between €40-80/tCO2.
- Worldwide carbon revenues by governments are also on the rise from USD 22 billion in 2016 to 33 billion USD in 2017, and 45 billion USD in 2018, according to the WB.
- Voluntary carbon trading volumes have been rising in recent years and companies are increasingly looking to set CO2 targets in line with the Paris Agreements, Sustainable Development Goals and EU targets for 2030 and 2050.
- The EU target of carbon neutrality for 2050 can be achieved only if governments reinforce their National Determined Contributions (NDCs), and set higher targets to achieve through carbon offsetting and investment in green technologies, renewable energy, and carbon storage measures.
- Germany would like to introduce a national sectoral trading scheme in addition to the mandatory EU ETS, which will comprise more activity sectors compared to the EU ETS. China has been moving forward on the implementation of the national ETS finalizing Phase I with the plan to realize Phase 2 “simulation exercises” before the end of this year.
- Article 6 negotiations of the Paris Agreement can represent an opportunity for private entities to contribute to global mitigation efforts through their participation in international market mechanisms, but also through voluntary cooperation in the implementation of the each country’s NDC. Yet, all pilot initiatives under Article 6 are government initiatives and not private ones.
- IETA’s 2019 GHG Market Sentiment Survey shows that 85% of respondents expect corporate voluntary action to increase over the next 5-10 years with businesses much more involved in reducing GHGs emissions and achieving their voluntary targets.