It always makes sense to protect, restore and, if necessary, expand vegetation-rich coastal ecosystems, precisely because they serve nature and millions of people in so many different ways. Nonetheless, only a few countries and companies have invested in such projects to date. Many project initiators therefore hope to tap new sources of funding for their protection and restoration measures through the sale of “blue carbon credits”. The US computer manufacturer Apple, for example, has been working together with the environmental organization Conservation International and local coastal communities since 2018. Apple is investing in the restoration and protection of a 110 square kilometre mangrove forest in Colombia. In return, the company receives a certain number of emission certificates, known as carbon credits. These represent either a certain amount of prevented emissions or carbon dioxide absorbed by the mangrove forest, which Apple uses to compensate for a corresponding amount of its residual, hard-to-avoid emissions.

Voluntary and mandatory markets

When actors such as Apple and Conservation International enter into agreements of this kind and carbon credits are issued, this interaction takes place on one of the numerous emissions trading platforms or through bilateral transactions that can be assigned to the “voluntary market”. This market has developed without legal requirements for offsetting emissions and the rules and standards for carbon offsetting are defined by the market participants themselves. Simply put, any actor can issue certificates and sell them if they find a buyer who trusts that the money will actually go towards the protection, restoration or expansion of coastal ecosystems, thus resulting in the long-term removal of additional carbon dioxide from the atmosphere. So far, these certificates have rarely been resold. Carbon offsetting for air travel has been functioning along the same lines for many years now, except that those payments have so far mainly gone into measures to avoid emissions in emerging and developing countries, as well as into reforestation measures on land. Anyone buying products in the supermarket that are labelled “carbon-neutral” can assume that the corresponding emissions offsets have been made through transactions in the voluntary market.
The voluntary markets thus differ fundamentally from the centrally organized “mandatory markets”. These include, for example, the European Union Emissions Trading System (EU ETS), which records the emissions of some 11,000 energy industry facilities and energy-intensive industries across Europe. A certain number of emission certificates are issued for them, which the participating companies then trade among themselves. The number of available certificates is limited and reduces over time, forcing companies to either reduce their emissions or pay ever higher prices for each tonne of carbon dioxide equivalent emitted (more on this topic in Chapter 9). It is important to note that the listed companies are not allowed to use carbon credits purchased in the voluntary market to offset their emissions in their EU ETS balance.

Rules against greenwashing

There are as yet no uniformly binding regulations, accounting or control mechanisms for voluntary markets that issue blue carbon certificates. However, there is increasing pressure to introduce such regulations and mechanisms because in the digital age, no financier can afford to invest in projects that end up not being carried out at all, carried out improperly or to the detriment of the environment or the local community. Investments of that kind are referred to as “greenwashing” and are highly damaging to the investors’ image.
To prevent this, a number of companies and experts are currently developing programmes and framework guidelines intended to making the issuance of and trade in emission certificates in voluntary markets transparent and comprehensible. They also aim to ensure that all related measures are implemented in an environmentally sound and socially equitable manner. At best, experts say, the end result would be a market guided by clear rules and uniform procedures to measure carbon dioxide removal that prevent abuse and fraud. This level of caution is warranted because the demand for emission offsets is steadily increasing. It is estimated that in 2030 carbon credits worth up to 50 billion US dollars could be traded in voluntary markets.

Basic principles for the allocation of carbon credits

One of the proposed rulebooks sets out ten basic principles for the allocation of carbon credits. They were developed by the Task Force on Scaling Voluntary Carbon Markets. Among other things, the principles are designed to ensure that:

• the emission avoidance or carbon dioxide removal achieved has actually been “additional”, i.e. the impact would not have been realized if the project had not been carried out;
• there is no double accounting, for example, by both the investing company and the government of the country in which the measure is undertaken;
• investors publish comprehensive information, comprehensible to laypersons, on their emission offsets, including information on the impact of the financed measures on the environment and the local community;
• there is permanence or durability to the achieved avoided emissions or carbon dioxide removal;
• all issued emission certificates are reported to a central registry so that they can be clearly identified and traced at any time; and
• independent experts regularly review the awarding system and its mechanisms and use scientific methods to check whether the promised measures are actually being implemented and contributing to climate change mitigation.

A small but steadily growing market

Many blue carbon projects have not yet been able to meet these requirements. A difficulty may be, for example, that it is hard to prove exactly how much additional carbon dioxide is being removed from the atmosphere. For this reason, the amount of blue carbon credits issued is still comparatively small. Between 2013 and 2022, blue carbon credits for a mere one million tonnes of carbon dioxide equivalents were issued in voluntary markets. This sum corresponded to a market share of 0.7 per cent.
However, the number of projects working towards issuing blue carbon credits is steadily increasing. A critical factor in this regard has been the revision of a set of rules for the verification of emission avoidance and carbon dioxide removal through forest protection and (re)afforestation (Verified Carbon Standard REDD+ Methodology Framework). It now also includes emission accounting standards for tidal marshes, seagrass meadows and mangrove forests that are being protected, restored or newly created.
In addition, project initiators are increasingly trying to convince investors to invest not only in the ecosystems’ carbon removal functions, but additionally in their many ecosystem services such as coastal protection and conservation of species diversity. This also makes the projects interesting for those financiers who wish to invest in environmental protection.

An unanswered question: Who owns coastal ecosystems?

In many places, however, it is unclear who owns the tidal marshes, seagrass meadows, mangrove and kelp forests, who may decide on their future and who may make money with them. Is it the local communities whose behaviour is a basic prerequisite for the preservation of coastal ecosystems, or could regional, national or even global actors be allowed to decide on their future? And to what extent would they then have to involve the coastal people and pass on financial benefits? There are as yet no consistent answers to these and many other legal and regulatory questions, a situation that has so far discouraged financiers from undertaking extensive investments in the protection and restoration of vital coastal ecosystems.

Fig. 5.13 > Before a global market for blue carbon credits can emerge, social and financial aspects as well as regulatory framework conditions and control mechanisms must be clarified.