As the global community grapples with the urgent need to mitigate climate change, nature-based solutions have emerged as a promising strategy for reducing greenhouse gas emissions and enhancing climate resilience. Recent studies suggest that natural climate solutions are modelled to potentially provide 37% of cost-effective CO2 mitigation needed through 2030 for a 66% chance of holding warming to below 2C. Despite this potential, the implementation of nature-based solutions faces significant challenges, particularly in financing, governance, and integration into broader climate policies.

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Nature-based solutions are defined as measures that protect, conserve, restore, and manage ecosystems while also enhancing human well-being, ecosystem services, and biodiversity. The core principle behind nature-based solutions is to work in harmony with nature rather than against it, offering sustainable and cost-effective alternatives to conventional engineering solutions.

Examples of nature-based solutions can be seen in Kenya, where drought is a persistent threat, and rangeland restoration efforts have significantly improved livestock productivity. These restored rangelands provide both resilient grazing grounds for livestock and additional income streams through sustainable practices like rotational grazing and fodder production, helping communities against the economic shocks that often accompany prolonged dry periods, thereby enhancing their overall resilience to climate change. Similarly, in Zimbabwe, forest conservation efforts have helped maintain the ecosystems necessary for beekeeping, a key source of income for local communities during droughts when traditional crops fail, ensuring that bees have access to diverse flora. 

Beyond their role in climate mitigation, nature-based solutions offer a range of co-benefits that are crucial for sustainable development. They have demonstrated significant positive impacts on biodiversity, thereby supporting a variety of plant and animal species. On average, nature-based interventions were associated with a 67% increase in plant or animal species richness, with 88% of interventions that reported positive outcomes for climate change adaptation reporting benefits for ecosystem health. Nature-based solutions also play a significant role in improving water quality. They can filter pollutants from runoff, improving the quality of water in rivers, lakes, and coastal areas, benefiting ecosystems, human health and livelihoods. Additionally, by involving local communities, these projects have social and economic benefits, such as job creation and increased environmental stewardship.

Nature-Based vs Engineering-Based Solutions

To date, the predominant response to extreme weather events and natural disasters has been engineered interventions like seawalls and levees. In Bangladesh, for example, 88% of adaptation projects approved by the Bangladesh Climate Change Trust involved engineered solutions, with only 12% focusing on nature-based solutions. Traditional engineering methods are often more effective in providing immediate, localised, and robust protection by physically blocking or redirecting water and other natural forces. However, they tend to be rigid, expensive to build and maintain, and can sometimes exacerbate environmental problems by disrupting natural ecosystems and processes. 

Nature-based solutions come with challenges, too. They require more space and time to establish and may not be as immediately effective as traditional methods in certain high-risk areas. Moreover, the success of nature-based solutions depends on proper planning, community involvement, and long-term management to ensure that they deliver the intended benefits. However, there is increasing evidence that these solutions can complement or even replace traditional engineering-based solutions in certain contexts. A 2024 paper suggests that, among the studies that compared nature-based solutions with engineering-based approaches, 65% found nature-based solutions to be more effective at mitigating hazards, while 26% found them to be partially more effective, but never less effective. 

How Cost-Effective Are Nature-Based Solutions?

In a 2024 study conducted by researchers at the University of Massachusetts Amherst, nature-based solutions were found to be consistently cost-effective in addressing a wide range of natural hazards. The study reviewed over 20,000 scientific articles and found that 71% of studies concluded that nature-based solutions are a cost-effective approach to mitigating risks from disasters such as floods, hurricanes, heatwaves, and landslides. Additionally, another 24% of the studies found nature-based solutions to be cost-effective under certain conditions. The most effective ecosystem-based approaches for mitigating natural hazards were linked to mangroves (80%), forests (77%), and coastal ecosystems (73%).

The problem with current evidence for the cost-effectiveness of nature-based solutions is that quantifying the full range of advantages they provide poses significant challenges, leading to an underestimation of their long-term economic benefits. These solutions offer a wide range of non-market benefits, including food and water security, carbon sequestration, aesthetic enjoyment, and community cohesion. These benefits are rarely accounted for in economic evaluations due to monetisation difficulties and uncertainties about their non-market value. Additionally, estimating the cost-effectiveness of nature-based solutions is complicated by the variable levels of protection they offer. It can fluctuate based on the intensity and frequency of threats, the resilience of the ecosystem to climate change, and the vulnerabilities of the socioeconomic system. 

Consequently, predicting and estimating the costs of ecosystem responses is more challenging compared to engineered infrastructure. As a result, even though nature-based solutions offer long-term economic and environmental benefits, they are often underutilised in favour of traditional engineering approaches. Advancements in modelling the effectiveness of natural landforms in mitigating hazards are helping to alleviate some of this uncertainty. However, policies that recognise and incentivise these broader benefits are also needed. 

How Are Nature-Based Solutions Financed?

Despite broad recognition of the severe threats to the global economy posed by climate change, less than 5% of climate finance is currently directed towards combating climate impacts, and less than 1% goes to coastal defences, infrastructure and disaster risk management. Similarly, nature-based solutions are undercapitalised with this lack of finance recognised as one of the main barriers to the implementation and monitoring of these solutions across the globe.

Financing nature-based solutions is complex, particularly for large-scale projects that require substantial investment. The implementation and funding of such projects are subject to market failures and barriers, including information shortfalls (due to the lack of data on the benefits and trade-offs of nature-based solutions, skills and expertise shortages, and a lack of awareness among the general public), a failure to coordinate across public agencies, high transaction costs, long timeframes for financial returns, and greater risk profiles than other comparable investment opportunities.

A large part of the problem is that many of the benefits associated with nature-based solutions cannot be capitalised by any one party or organisation. They create non-excludable benefits and co-benefits that impact many different groups, resulting in a “public good” problem. This often leads to underinvestment in these solutions because private entities cannot capture enough of the return on investment to justify the costs, making it difficult to incentivise private investment in such projects. As a result, it is estimated that only 3% of nature-based solution projects are financed by private capital. 

Additionally, financing requires the provision of appropriate risk-sharing arrangements. Typically, these projects are financed through debt, which results in those executing the projects shouldering a significant portion of the associated risk. For example, bank lending and microfinance – the most widely used sources of external funding in developing countries – often impose the risk burden on those who may already be economically vulnerable and least capable of absorbing potential losses. 

To scale up nature-based solutions effectively, there needs to be a shift towards financing models that do not solely rely on debt. 

What Barriers Are Preventing Nature-Based Solutions From Being Implemented?

Institutional norms and path dependency, where decision-makers tend to implement familiar solutions, also pose challenges to nature-based solutions adoption. Decision-making may be influenced by power dynamics, where choices are driven by interests tied to property regimes that do not support them. In certain cultural contexts, traditional engineering-based solutions are deeply ingrained and shape institutional practices, further compounded by a lack of awareness of ecosystem services provided by nature-based solutions, a lack of seeming responsibility for action, or the discounting of climate related risks. 

Overcoming these challenges requires robust institutions, well-established planning structures, and effective processes and instruments to ensure the benefits of nature-based solutions are realised across landscapes and seascapes.

Future Outlook

The growing recognition of nature-based solutions in international policy and business discussions reflects their significant potential to address the challenges of climate change and biodiversity loss. Nature-based solutions can effectively mitigate climate change impacts while simultaneously supporting biodiversity and maintaining the ecosystem services vital for human well-being.

However, their integration into climate and development policies faces three main barriers. First, there is a significant challenge in accurately measuring or predicting the effectiveness of nature-based solutions, leading to uncertainties regarding their cost-effectiveness compared to traditional alternatives. Second, the financial models and economic appraisals used to evaluate nature-based solutions are often inadequate, resulting in underinvestment. Third, existing governance structures are often inflexible and highly segmented, which hampers the widespread adoption of nature-based solutions. Many decision-makers continue to default to engineered solutions for climate adaptation and mitigation.

While nature-based solutions are a promising tool for mitigating climate risk, realising their potential requires overcoming significant economic and political barriers.This, in turn, requires a fundamental shift in how interdisciplinary research is conducted and communicated, as well as how institutions are organised and operated. This includes developing more sophisticated financing models that account for the full range of benefits provided by nature-based solutions, as well as fostering institutional change that supports their integration into mainstream climate adaptation and mitigation strategies.

While they have the potential to facilitate sustainable development within planetary boundaries, their benefits will only be fully realised if they are implemented within a systems-thinking framework which accounts for multiple ecosystem services and acknowledges the trade-offs between them from diverse stakeholder perspectives. As countries revise their Nationally Determined Contributions (NDCs) and climate policy increasingly focuses on greenhouse gas removal to meet targets, developing and applying this systematic framework should be a critical focus for future research.

Featured image: Derek Tang.

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A recent study published in Nature Energy demonstrates the unintended consequences of the US government’s latest fuel efficiency standards for heavy-duty trucks. While these regulations aim to reduce greenhouse gas emissions and fuel consumption, the research highlights a rebound effect between fuel efficiency and energy use.

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In a world where climate change has become a pressing global concern, the transportation sector’s role in greenhouse gas emissions has come under intense scrutiny. 

Heavy-duty trucks are significant contributors to these emissions. While they constitute only 1% of total fleet vehicles, they are responsible for a disproportionate 25% share of global road emissions. In response, the US Environmental Protection Agency (EPA) has implemented fuel efficiency standards aimed at reducing the carbon footprint of these vehicles. However, a recent study reveals a challenge that threatens to undermine these efforts: the rebound effect.

Conducted by Jonathan Hughes from the University of Colorado at Boulder and James Bushnell from the University of California at Davis, the study investigates how the improved fuel efficiency of heavy-duty trucks could inadvertently lead to higher overall energy consumption, known as the rebound effect. In the context of freight transport, this means more efficient trucks could make trucking cheaper, prompting a shift from rail to truck transport.

Freight Transportation in the US

The freight sector is a major contributor to energy consumption and greenhouse gas (GHG) emissions in the United States. It includes the transportation of goods by truck, train, ship, and plane. Heavy-duty trucks are larger vehicles designed to transport goods and materials over long distances. 

As of recent data, heavy-duty trucks account for approximately 25% of the energy consumption and 23% of GHG emissions from the country’s transportation sector, a 76% increase since 1990. This rise is attributed to the growing demand for quick and flexible delivery options, which trucks provide more effectively than other modes of transport. 

In recent years, the EPA has been proactive in implementing regulations to improve the fuel efficiency of these trucks. The regulations, part of a broader strategy to combat climate change, were introduced in multiple phases. The first phase, initiated in 2011, targeted vehicle models for the years 2014 to 2018. These standards mandated significant enhancements in vehicle, engine, and trailer technologies to boost fuel efficiency.

Building on the initial success, the EPA rolled out Phase 2 of the regulations in 2016, aimed at further improving fuel economy for vehicle models from 2018 to 2027. These updated standards are designed to reduce fuel consumption and emissions by implementing advanced technological improvements in new trucks over time. The goal is to achieve a 19-25% increase in fuel efficiency for new heavy-duty vehicles by 2027 compared to pre-regulation levels.

Rebound Effect of Energy-Efficient Heavy-Duty Trucks

The rebound effect describes where gains in energy efficiency lead to a reduction in operational costs, which can subsequently result in increased usage of a n energy-efficient technology or service. This increase in usage can partially or fully offset the expected energy savings, leading to higher overall energy consumption.

Initially, the study projected significant fuel savings from the new efficiency standards. Without accounting for the rebound effect, the improved fuel economy standards were expected to save approximately 674 million gallons of fuel per year. This projection assumed that the increased efficiency would directly translate to reduced fuel consumption across the board. However, when the rebound effect was taken into consideration, the study revealed a different scenario. 

When trucks become more fuel-efficient, the cost per mile of transportation decreases. This reduction in costs incentivises companies to use trucks more frequently instead of other, less energy-intensive modes of transport such as rail. This shift reduced the anticipated fuel savings to 497 million gallons per year, representing a 26% reduction in the expected benefits. The rebound effect thus significantly diminishes the effectiveness of the fuel efficiency standards in reducing overall energy consumption.

The study also identified specific industries that are particularly susceptible to the rebound effect. Sectors such as chemicals, agriculture, and beverages are highly sensitive to changes in transportation costs. These industries rely heavily on cost-effective logistics for their large volumes of goods, making them more likely to shift to cheaper truck transport when fuel efficiency improves. Consequently, the rebound effect is more pronounced in these sectors, leading to greater increases in truck usage and thus higher overall fuel consumption.

Implications for the Freight Sector and Policy

The study shows that heavy-duty truck fuel economy regulations cause some shipments that would have travelled by more efficient rail transport to be substituted for truck transportation. Analysis of truck fuel economy standards, which ignores this mechanism, can substantially overstate fuel and emissions savings. Understanding these broader system-level impacts is crucial for accurately assessing the effectiveness of such regulations.

These findings therefore have significant implications for future policies, such as those promoting the adoption of electric heavy-duty trucks. While electric trucks promise lower emissions and improved efficiency, they could also trigger rebound effects for similar reasons. As electric trucks become more prevalent and cost-competitive, they may increasingly compete with rail for shorter shipments. This competition could further exacerbate the modal shift from rail to road, particularly if electric trucks are primarily deployed on shorter, more frequent routes where they hold a logistical advantage. Policies should aim to make electric trucks complementary to rail rather than competitive, encouraging their use in ways that enhance overall transport efficiency.

However, the rebound effects observed in the study are analogous to those seen in passenger travel, buildings, and energy-consuming durable goods, where improvements in energy efficiency can lead to increased usage of more energy-intensive options. This emphasises the need for attention to how energy efficiency policies influence technology choices across various sectors rather than specific technologies. 

For future policy development, comprehensive impact assessments are crucial. These assessments should account for potential mode substitutions and other rebound effects to provide a more accurate picture of the net benefits of fuel economy regulations and other energy efficiency initiatives. Integrated transport planning is also necessary, aligning truck and rail transport policies to maximise efficiency and minimise emissions. By encouraging the use of the most efficient transport mode for each type of shipment and investing in technologies that facilitate seamless transfers between trucks and trains, policymakers can ensure that energy efficiency improvements translate into real-world benefits.

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Composting food waste produces significantly less methane emissions than landfills, yet most organic waste is landfilled. Economic incentives such as pricing strategies for near-expiry products and the provision of municipal composting services can effectively reduce this waste. 

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Food waste is a significant global issue with profound economic and environmental impacts. According to the UN Environment Programme Food Waste Index Report 2024, approximately one-fifth (19%) of food available to consumers is wasted at the retail, food service, and household level, amounting to about 1.05 billion tonnes, and leading to economic losses estimated at $936 billion annually. The same report indicates that households accounted for 631 million tonnes (60%) of the total food waste in 2022, while the food service sector contributed 290 million tonnes and the retail sector added 131 million tonnes.

Food waste generates 8-10% of global greenhouse gas (GHG) emissions – almost five times the total emissions generated by the aviation sector. This waste is largely sent to landfills, where it undergoes anaerobic decomposition due to the lack of oxygen. This process generates methane, a potent greenhouse gas over 21 times more effective at trapping heat in the atmosphere than carbon dioxide over a 100-year period. Landfills rank as the third-largest source of human-induced methane emissions, following fossil fuels and livestock, accounting for around 10% of all anthropogenic methane emissions globally. Given methane remains in the atmosphere for a much shorter amount of time than carbon dioxide, reductions in methane emissions today have a more immediate impact on reducing global warming. Therefore, reducing food waste in landfills can have a substantial impact on lowering greenhouse gas emissions and mitigating climate change.

Economic incentives can play an important role in reducing food waste and subsequent greenhouse gas emissions by influencing the behaviour of households. By providing convenient composting options through the provision of goods, such as curbside collection, governments can facilitate the diversion of organic waste from landfills to composting facilities, thereby reducing methane emissions and promoting sustainable waste practices. Policies that support dynamic pricing for near-expiry products can help retailers reduce food waste. Clear and accurate food labelling can also help consumers make informed decisions, reducing unnecessary food waste.

More on the topic: 25 Shocking Statistics About Food Waste

The Potential of Composting

Composting is a key solution to reducing the amount of food waste in landfills. Composting organic waste can significantly reduce methane emissions by providing an aerobic alternative to anaerobic decomposition in landfills. When food and garden waste is composted, the presence of oxygen prevents the formation of methane, as methane-producing microbes are not active in such conditions. Instead, composting facilitates the breakdown of organic matter into valuable compost that provides a number of environmental benefits including the enrichment of soil, promoting higher agricultural yields, reducing the need for chemical fertilisers, and aiding in reforestation and habitat restoration. 

Economically, composting is one of the cost-effective methods for mitigating methane emissions from landfills. The process of composting can be relatively low-tech and inexpensive to implement, especially at a municipal level, making it an accessible solution for many communities.

Despite these advantages, most food waste ends up in landfills or is incinerated. For instance, in 2018 the US sent 50% of food and garden waste to landfills, 32% was composted, 12% was incinerated, 6% to other management pathways. To combat this, governments are increasingly investing in municipal composting services. The European Union (EU) saw composted municipal waste rise from 11% in 2004 to 17% in 2018. Similarly, US municipalities with separate food waste collection grew from 24 in 2005 to 510 in 2021, and Australian local governments offering composting services jumped from 10% in 2012 to 25% in 2023.

The Role of Economics

Economic incentives play a pivotal role in reducing food waste by influencing behaviours through monetary and non-monetary means. Monetary incentives offer direct financial benefits to individuals and organisations that adopt waste-reducing practices. 

For example, by offering lower prices on items close to their expiration dates, retailers can encourage consumers to purchase products that might otherwise go to waste. Non-monetary incentives, such as the provision of goods and information, provides consumers with the information and means to take action to reduce their food waste. It provides increased accessibility for consumers to make decisions which provide public benefit. 

1. Government Direct Provision: The Effects of Municipal Composting Services

Municipal composting services are waste management programs provided by local governments that allow residents to dispose of their organic waste, such as food scraps and garden clippings, in a designated compost bin. These programs typically involve curbside collection, where the waste is picked up from households and transported to a central composting facility. At these facilities, the organic waste is processed into compost.

These services reduce the cost and effort for households to compost, making it more convenient to dispose of food waste. Without them, individuals would need to manage their own composting, which can be time-consuming and would require space that not all households have. Moreover, municipal composting services lead to increased composting rates and, consequently, a reduction in emissions from landfills.

A 2024 study demonstrates the effectiveness of municipal composting services in reducing household waste sent to landfills. The research focused on a large-scale quasi-experiment in New South Wales (NSW), Australia, where 24 local governments adopted curbside composting services between 2009 and 2015. By comparing councils that adopted these services with those that had not, the study found that households redirected an average of 4.2 kilograms (9.3 pounds) of waste per week from the landfill stream into the composting stream. This diversion represented approximately one-fourth of the waste that households were previously sending to landfills. The results suggested that curbside composting could reduce emissions from landfills by 6 to 26%.

2. Price Incentives: The Effects of Pricing Strategies on Near-Expiry Products

Pricing strategies for near-expiry products are designed to reduce food waste by discounting products that are close to their expiration dates, making them more attractive to price-sensitive shoppers. By doing so, retailers can sell items that might otherwise go to waste, reducing the overall amount of food discarded. Supermarkets already use pricing strategies to sell food that is close to its expiration date, but these methods are often not applied consistently or to their full potential.

Studies have shown that pricing strategies can effectively reduce food waste in retail environments. A 2022 study highlights that dynamic pricing strategies can reduce food waste at the retail stage of the food supply chain. The study focuses on using real-time Internet of Things (IoT) sensor data to adjust prices at different stages of a product’s lifecycle. By adjusting prices based on freshness scores obtained through IoT sensors, retailers can optimise pricing to balance inventory, sales, and waste reduction. The study found that appropriate pricing interventions could not only reduce food waste but also boost sales and increase profits. Specifically, it highlighted that discounting strategies applied at the right time could help deplete on-hand inventory before the products reach their best-before dates. 

3. Provision of Information: The Effects of Food Labelling 

Food labelling informs consumers about the quality and safety of food products. However traditional date labels, such as “use by” and “best before” dates, often cause confusion among consumers, leading to the premature disposal of food that is still safe and edible. 

Food labelling can act as an economic incentive by reducing the uncertainty about food quality and safety, encouraging consumers to maximise the use of their purchases rather than discarding them prematurely. Clear and accurate labelling increases the amount of information available to consumers, enabling them to make better-informed decisions, thus reducing unnecessary waste and saving money. 

A 2022 study highlights that many consumers misinterpret date labels, resulting in increased food waste. The study explores the effectiveness of alternative labelling strategies, including freshness indicators and simplified date labels, to assess the likelihood of discarding food. The findings revealed that more explicit date labels and freshness indicators, such as colour-coded dots showing the actual freshness of the product, could reduce the likelihood of discarding food. For example, the use of a “best if used by” label with a green freshness indicator significantly decreased the probability of consumers discarding food compared to traditional labels. 

More on the topic: Climate Labels on Food Can Change Eating Habits For the Better: Study

Implications for Policy and Future Action

It is evident that addressing food waste requires more than individual and household efforts; comprehensive government and policy actions are crucial. While some reduction in food waste can be achieved through personal and community initiatives, significant progress hinges on the implementation of economic incentives provided by governments through policy action. These incentives can effectively change consumer behaviour and operational practices across the food supply chain, from production to consumption, making it easier and more financially viable to reduce food waste and subsequent landfill emissions. 

For future progress, it is essential to expand research and development into the effectiveness of various economic incentives and their scalability across different regions and populations. Studies should explore consumer behaviour to fine-tune these strategies and ensure they are effective and practical. Investment in and adoption of technologies like smart packaging and IoT sensors can also provide real-time information on food quality, helping reduce waste. Governments should support these innovations through funding and policy frameworks that encourage their widespread use. Continued efforts and innovations in these areas will not only help mitigate climate change but support a more sustainable and efficient food system.

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Recent research by the University of Bristol has marked a significant milestone in the global effort to combat climate change and protect the ozone layer. The study showcases significant achievement in phasing out of ozone-depleting substances, indicating a positive trend for both climate change mitigation and ozone recovery. 

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A June 2024 study led by the University of Bristol and published in Nature Climate Change marks pivotal advancements in the reduction of hydrochlorofluorocarbons (HCFCs), gases notorious for depleting the ozone layer and exacerbating global warming. The international research indicates that the total ozone-depleting chlorine from all HCFCs reached its highest level in 2021. 

These substances, which contribute to greenhouse gas emissions, similarly reached their peak contribution to climate change in the same year, five years earlier than the latest forecasts had suggested. While the reduction in HCFC emissions between 2021 and 2023 was less than 1%, it nonetheless demonstrates a positive trend in decreasing emissions. 

The breakthrough highlights the effectiveness of international agreements like the Montreal Protocol and its amendments in phasing out these substances.

More on the topic: Ozone Layer Restoration Is Back on Track as Harmful Chemicals Phased Out, UN Says

The Problem with Hydrochlorofluorocarbons (HCFCs)

Hydrochlorofluorocarbons (HCFCs) are a group of man-made compounds primarily used in refrigeration, air conditioning, foam blowing, and as solvents. HCFCs were initially developed to replace chlorofluorocarbons (CFCs), which were found to significantly deplete the ozone layer. HCFCs are less damaging to the ozone layer compared to CFCs; you would have to release around 10 times as much HCFC to have a comparable impact on the ozone layer. However, they still pose significant threats due to their potent greenhouse gas properties and ability to persist in the atmosphere. 

HCFCs have a high global warming potential, meaning they can trap significantly more heat in the atmosphere compared to carbon dioxide (CO2). The most commonly used HCFC, HCFC-22, has a global warming potential of 1,760 times on a ten-year time scale – meaning that 1 tonne of HCFC-22 would trap 1,760 times more heat than 1 tonne of CO2.

HCFCs also still contribute to the degradation of the ozone layer, which protects life on Earth from harmful ultraviolet (UV) radiation. The release of HCFCs into the atmosphere leads to their breakdown by UV light, releasing chlorine atoms that then participate in ozone destruction. In cold temperatures, such as over the Antarctic and the Arctic, a singular chlorine atom can destroy thousands of ozone molecules.

The Montreal Protocol and Its Impact

Established in 1987, the Montreal Protocol on Substances That Deplete the Ozone Layer is a landmark international treaty designed to phase out the production and consumption of substances that deplete the ozone layer, including chlorofluorocarbons (CFCs) and hydrochlorofluorocarbons (HCFCs), which developed and developing countries agreed to stop producing and using by 2020 and 2030, respectively.

In 2016, the Kigali Amendment to the Montreal Protocol was adopted, targeting hydrofluorocarbons (HFCs), which are used as replacements for HCFCs and CFCs. Although HFCs do not deplete the ozone layer, they are still potent greenhouse gases that contribute significantly to global warming. The global warming potentials for the most abundant HFCs are as large as 14,800 – meaning that 1 tonne of an HFC would trap 14,800 times more heat than 1 tonne of CO2. The Kigali Amendment aims to reduce HFC production and consumption by over 80% over the next 30 years, potentially avoiding up to 0.4C of global warming by the end of the century.

The Montreal Protocol has already been widely successful. According to a 2022 United Nations report, if current policies remain in place, the ozone is expected to recover to 1980 values by 2040. It has already benefited efforts to mitigate climate change, helping avoid global warming by an estimated 0.5C.

A Decrease in Radiative Forcing

The study indicates that between 2021 and 2023, there was a decline in both the global direct radiative forcing and the equivalent effective chlorine (EECl) of HCFCs, which measure the atmospheric chlorine content from ozone-depleting substances, indicating a decrease in their contribution to global warming. Researchers found that HCFC radiative forcing peaked in 2021 at 61.75 mW m−2 and EECl at 321.69 ppt. By 2023, these values had decreased slightly to 61.28 mW m−2 and 319.33 ppt, respectively. 

This trend, particularly rapid in the Northern Hemisphere, was largely driven by reductions in HCFC-22, the most abundant HCFC, and a decline in HCFC-141b emissions, mainly released from ageing appliance foams and their use in polymer production. One of the standout findings of the research is that this reduction in harmful emissions has been achieved five years earlier than predicted.

Several minor HCFCs, with concentrations below 1 ppt, present varied trends. HCFC-124 levels are declining, while HCFC-31, HCFC-133a, and HCFC-132b have either remained stable or increased in recent years. These emissions are likely due to leaks during the production of other chemicals. The production of HCFCs and other ozone-depleting substances (ODS) during the manufacture of other chemicals, as feedstocks, intermediates, or by-products, is not regulated under the Montreal Protocol. This lack of regulation is based on the assumption that emissions from these processes are negligible, although studies suggest otherwise.

However, the speed at which the total radiative forcing and equivalent effective chlorine (EECl) from HCFCs will decrease remains uncertain. Projections indicate that HCFC levels will return to their 1980 values by 2082 for radiative forcing and by 2087 for EECl, based on the dominant three HCFCs. Although the production and consumption of HCFCs are being phased out, emissions from appliances and foams will persist unless there are efforts to reclaim HCFCs before they are released. To avoid future increases in radiative forcing and EECl from HCFC emissions during chemical manufacturing, changes to the Protocol are needed. The Kigali Amendment has already implemented controls on by-product emissions of HFC-23. Any future rise in HCFC radiative forcing and EECl would conflict with the Protocol’s goals.

More on the topic: Ozone Layer Hole is Healing, But Australian Wildfires Threaten Progress

Analysis and Implications for Climate Change and Ozone Layer Recovery

The results highlight the Montreal Protocol’s success, reinforced by the Kigali Amendment, in curbing global temperature increases and reducing stratospheric ozone depletion. It highlights the effectiveness of global collaborative efforts in environmental protection and the potential for further advancements in reducing ozone-depleting substances and greenhouse gases. 

Lead author Dr Luke Western, Marie Curie Research Fellow at the University’s School of Chemistry, said: “The results are very encouraging. They underscore the great importance of establishing and sticking to international protocols. Without the Montreal Protocol, this success would not have been possible, so it’s a resounding endorsement of multilateral commitments to combat stratospheric ozone depletion, with additional benefits in tackling human-induced climate change.”

However, the study’s findings also emphasise the necessity of maintaining global environmental agreements. While the Montreal Protocol and its amendments have demonstrated substantial success, the ongoing challenge of emissions from HCFCs during the manufacture of other chemicals, which are not yet controlled under the Protocol, highlights areas needing further regulatory attention. Amendments must be made when new research comes out, and studies like this underscore the importance of adapting and strengthening these agreements. Moving forward, policymakers need to act on these insights, ensuring that regulations are updated and strengthened as new research emerges.

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Scientists worldwide agree that to limit global warming to 2C, consumers – especially in the developed world – must largely change their diets. Reducing meat consumption and substituting for a plant-based diet, along with wasting less food, are some of the most effective actions individuals can take. However, while significant focus is given to the diet choices of individuals, the economic systems promoting the consumption of meat and dairy are often overlooked. Meat and dairy subsidies are artificially lowering the price of animal-based products, promoting their consumption and raising greenhouse gas emissions beyond sustainable levels. 

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The Impact of Animal Agriculture on Climate Change

According to the United Nations Food and Agricultural Organization (FAO), meat and dairy account for around 14.5% of global greenhouse gas (GHG) emissions. The production of beef and cattle milk accounts for most of these emissions, contributing 41% and 20%, respectively, while pig and poultry meat and eggs contribute 9% and 8% to the sector’s emissions, respectively. Additionally, animal agriculture puts a significant strain on Earth’s limited resources, including land, water, and energy. 

To support the billions of animals raised annually for human consumption, one-third of the planet’s ice-free land and nearly 16% of global freshwater are used for raising livestock. Furthermore, one-third of global grain production is used to feed livestock. With consumption of meat and dairy products expected to increase by 76% and 64%, respectively, by 2050, the burden the industry poses on these resources will only grow further.

In comparison, plant-based foods such as fruits and vegetables, whole grains, beans, peas, nuts, and lentils have a much smaller carbon footprint. On average, emissions from plant-based foods are 10 to 50 times smaller than those from animal products. According to a 2022 study by scientists from Stanford University and the University of California Berkeley, phasing out animal agriculture over the next 15 years would have the same effect as a 68% reduction of carbon dioxide (CO2) emissions through the year 2100. This would provide 52% of the net emission reductions necessary to limit global warming to 2C above pre-industrial levels. 

More on the topic: How Animal Agriculture Is Accelerating Global Deforestation

Meat and Dairy Subsidies: An Overview

What are subsidies?

Meat and dairy subsidies are financial incentives provided by governments to support the production, distribution, and consumption of animal-based products such as meat, milk, and cheese. These subsidies come in various forms, including direct payments to farmers, tax breaks, and financial support for infrastructure and technology improvements. The primary goal of these subsidies is to stabilise food prices, ensure a steady supply of agricultural products, and protect the livelihoods of farmers by mitigating the risks associated with market volatility and unpredictable weather conditions.

By lowering the costs of production, subsidies make meat and dairy products more affordable for consumers. This, in turn, promotes higher consumption of these products, with significant implications for the environment. Indeed, whilethese financial supports help maintain a stable agricultural sector, they also encourage the continuation of practices that contribute substantially to greenhouse gas emissions and other environmental issues.

What is the current scale of these subsidies?

The global scale of meat and dairy subsidies is immense, with governments around the world allocating billions of dollars each year to support these industries. 

According to a OECD report in 2021, more than US$700 billion in transfers is provided annually to the agricultural sector worldwide. A significant portion of this funding supports the meat and dairy industries. For instance, in the European Union (EU), livestock farmers receive 1,200 times more public funding than those producing plant-based or cultivated meat alternatives. In the US, animal farmers benefit from 800 times more public funding than their plant-based counterparts. 

The difference in funding is stark when compared to the relatively minimal financial support allocated to sustainable agriculture. For example, from 2014 to 2020, the combined spending on plant-based alternatives in the EU and the US was a mere $42 million, representing just 0.1% of the $44 billion spent on meat and dairy during the same period. 

The Impact of Meat & Dairy Subsidies

One consequence of these subsidies is the distortion of market prices. These subsidies lower production costs for farmers, which in turn reduces the retail prices of meat and dairy products in supermarkets. As a result, consumers pay prices which do not reflect the true cost of production. 

This artificially low pricing fails to account for the extensive environmental damage caused by animal agriculture, including GHG emissions, deforestation, water usage, and pollution. The hidden costs are instead borne by society in the form of environmental degradation – amongst other externalities. 

This contributes directly to overconsumption. When consumers encounter cheaper prices, they are more likely to purchase and consume greater quantities of these products than they would if the prices reflected the true environmental and production costs. This increased consumption exacerbates the negative effects associated with meat and dairy production, such as climate change.

What Can We Do?

The Case for Reforming Subsidies

Advocates for agricultural subsidy reform argue for a more equitable distribution of government support, emphasising the need to shift financial incentives towards sustainable practices and plant-based production. Currently, subsidies disproportionately favour the meat and dairy industries, contributing to artificially low prices and their overconsumption. To address this imbalance, governments could offer subsidies and tax breaks for sustainable agricultural practices and plant-based food producers, levelling the playing field and encouraging more environmentally friendly food choices.

Studies have shown that making subsidy payments conditional on producing fruits, vegetables, and other plant-based foods can significantly increase their production while reducing meat and dairy output. For example, an economic model that tracked the effects of altering subsidies found that fruit and vegetable production could increase by about 20% in developed countries, leading to healthier diets and lower greenhouse gas emissions. Policymakers in the EU are already exploring ways to reduce the environmental impacts of subsidy payments, with proposals to tie subsidies to public goods like clean water, wildlife habitat, and nutritious food supply. 

Implementing a Meat Tax

Another proposed solution is the implementation of a meat tax, which would adjust the price of meat to reflect its true environmental costs. Research published in the Review of Environmental Economics and Policy suggests that the retail price for meat in high-income countries would need to increase significantly to account for the environmental damage caused by its production. For instance, beef prices would need to rise by 35-56%, poultry by 25%, and lamb and pork by 19%.

Implementing a meat tax could potentially drive down meat consumption, helping to reduce greenhouse gas emissions. The revenue generated from such a tax could be redistributed to subsidise the production of vegetables, grains, and alternative proteins, making plant-based foods more affordable and attractive. 

Countries like Germany and the Netherlands have already considered the idea of a meat tax, recognising its potential to decarbonise agriculture and promote healthier diets. While the political climate may currently pose challenges to implementing such a tax, the urgency of the climate crisis may eventually necessitate this approach.

More on the topic: How Do We Solve Meat Addiction?

Conclusion

The current system of meat and dairy subsidies is a significant driver of climate change, perpetuating the overconsumption of animal-based products and contributing to extensive environmental degradation. These subsidies artificially lower the cost of meat and dairy, making them more accessible and appealing to consumers, while failing to account for the true environmental costs associated with their production. This price distortion encourages overconsumption, exacerbating the negative impacts on our climate. By reallocating financial support to sustainable agricultural practices and plant-based food production, governments can reduce greenhouse gas emissions and mitigate the environmental impacts of food production. 

However, the feasibility of these reforms is questionable given the current global economic context. Economies are still grappling with the aftermath of the Covid-19 pandemic and the ongoing impacts of the war in Ukraine, making substantial policy shifts challenging. Governments may be hesitant to introduce measures that could increase food prices during a time of economic recovery. 

Despite these obstacles, the urgency of addressing climate change and the environmental impact of meat and dairy production cannot be overstated. Concerted efforts are required to balance economic recovery with sustainable practices.

The post How Meat and Dairy Subsidies Are Driving Climate Change appeared first on Earth.Org.

A major international climate change conference has just concluded in Bonn, Germany. The yearly event sets the stage for the topics that will be covered during the upcoming COP29 summit in Baku, Azerbaijan. Here are the main takeaways from the conference and how they will influence negotiations in November.

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What Is the Bonn Climate Change Conference?

Held annually by the United Nations, the Bonn Climate Change Conference is the mid-year gathering of the Subsidiary Body for Implementation (SBI) and the Subsidiary Body for Scientific and Technological Advice (SBSTA). The Subsidiary Bodies only meet twice a year: in Bonn in the middle of the year and at the Conference of the Parties (COP), which is typically held between November and December.

Formally known as the Sessions of the United Nations Framework Convention on Climate Change (UNFCCC) Subsidiary Bodies (SBs), the 60th meeting of the Subsidiary Bodies (SB60) concluded earlier this month.

UNFCCC countries negotiate procedures for implementing agreements reached at the previous COP, and the outcomes are likely to influence discussions and negotiations at COP, with recommendations made at the June meetings often appearing in the final decisions acted upon by parties at the UN summit. 

You might also like: Explainer: What Is the UNFCCC?

What Were the Key Outcomes of SB60?

Here is a summary of some of the outcomes. The full report can be found here. 

1. Climate Finance

One of the central issues at the Bonn 2024 conference was the ongoing negotiation over climate finance, particularly the New Collective Quantified Goal (NCQG). The NCQG aims to mobilise substantial financial resources from developed nations to support climate action in developing countries. This goal is set to replace the $100 billion target established at COP21 in Paris. Negotiations at Bonn sought to lay the groundwork for more ambitious and achievable targets post-2025. However the process of negotiating the NCQG has faced significant challenges. Nations have disagreed on almost every aspect of the new target, including the total amount of money to be provided, the contributors, the recipients, and the types of funds to be included. 

Developing countries consistently argued for climate finance to be provided in the form of grants rather than loans, to avoid further indebting nations already grappling with economic challenges exacerbated by climate impacts. They emphasised that grants would provide more direct and effective support for their mitigation and adaptation efforts, enabling them to tackle climate impacts without the added strain of loan repayments.

The Climate Action Network (CAN) – a global network of more than 1,900 civil society organisations in over 130 countries – highlighted the need for the European Union (EU) to make clear moves in support of an ambitious climate finance agreement, emphasising that the bloc “must be a driving force for agreeing a robust new climate finance goal for post-2025 that centres public finance and is needs-based, fair, and equitable.” 

The conference also saw intense discussions on the allocation of climate finance across different needs, including mitigation, adaptation, and loss and damage (see point 3), with delegates emphasising the need for balanced allocation to ensure comprehensive support in all climate action areas. 

Despite these efforts, there were substantial disagreements amongst delegates regarding the accountability and transparency of financial commitments. Developing countries demanded clear mechanisms to ensure that pledged funds are delivered and effectively utilised. The lack of progress on these fronts was a major point of contention, with several delegates expressing frustration at the slow pace of negotiations. 

Simon Stiell, UNFCCC Executive Secretary, underscored the urgency of resolving these issues, stating: “We’ve left ourselves with a very steep mountain to climb to achieve ambitious outcomes.” His remarks reflected a broader sentiment that while some progress was made, the pace and scale of commitments need to be significantly ramped up to meet the demands of the climate crisis.

2. Article 6

Article 6 of the Paris Agreement includes provisions for both market-based and non-market-based approaches to carbon reduction. 

In Bonn, significant strides were made to clarify the rules for implementing Articles 6.2 and 6.4. The former allows for the transfer of carbon credits between countries through bilateral or multilateral agreements, while the latter establishes a centralised mechanism for creating and trading high-quality carbon credits. 

Delegates focused on ensuring that carbon markets operate with high transparency and environmental integrity. However, these discussions also highlighted several challenges that need to be addressed before finalising the mechanisms at COP29.

More on the topic: Explainer: What Is Article 6 of the Paris Agreement?

A primary concern in the negotiations was maintaining the environmental integrity of carbon markets. Delegates worked on establishing robust monitoring, reporting, and verification (MRV) systems to ensure that carbon credits represent real, measurable, and additional emissions reductions. Developing countries emphasised the need for capacity building and technical assistance to effectively participate in carbon markets. The discussions highlighted the importance of providing these countries with the necessary resources and expertise to develop and implement carbon market projects. 

Progress was also made on the operational details of the Article 6.4 mechanism, which is intended to function similarly to the Clean Development Mechanism (CDM) under the Kyoto Protocol, albeit with enhanced features. Delegates discussed the roles and responsibilities of the supervisory body, the processes for approving and validating projects, and the criteria for issuing carbon credits. These discussions aimed to ensure the mechanism supports high-quality projects that deliver genuine emissions reductions. However, while significant strides were made, it remains to be seen if these objectives will be fully met. The emphasis on establishing robust MRV systems is promising, but the effectiveness of these measures will depend on their implementation and enforcement in practice.

3. Loss and Damage Fund

With the fund set up and attention turning to the new, post-2025 climate finance target – the NCQG – the Loss and Damage Fund (LDF) was less prominent in the Bonn discussions. Set up at COP27 in Egypt, the LDF aims to provide financial assistance to countries and communities of the Global South that are most vulnerable to the adverse impacts of climate change. The LDF was first proposed to compensate vulnerable countries for these damages, and its operationalisation at COP28 was viewed as a “historic” achievement.

More on the topic: Explainer: What Is Loss and Damage Compensation?

One of the many sticking points in the discussion of the NCQG was developing countries’ insistence that there should be a separate “window” specifically earmarked for loss and damage, as well as funds for mitigation and adaptation. A joint document submitted by the LDCs and the Alliance of Small Island States (AOSIS) emphasised that the money for this loss and damage “sub-goal” in the NCQG should predominantly come from public and grant-based money. However, developed countries opposed this view, arguing that loss and damage finance is not part of the NCQG’s mandate. They contended that including it within the target would stretch existing resources thinner, rather than provide new finance. 

The question of loss and damage finance was deferred until COP29, with parties unable to find any compromise.

4. Adaptation and Mitigation Strategies

Adaptation strategies – which focus on adjusting to the effects of climate change, and mitigation strategies – aimed at reducing greenhouse gas emissions, were also at the center of negotiations.

A significant portion of the Bonn discussions centred on the Global Goal on Adaptation (GGA). Established in the 2015 Paris Agreement, the goal seeks to enhance adaptive capacity, strengthen resilience, and reduce vulnerability to climate change. The Adaptation Committee’s report highlighted that while some progress has been made, many countries, particularly developing nations, still lack the necessary resources and infrastructure to implement effective adaptation strategies. 

Stiell stressed the urgency of scaling up adaptation efforts, noting that “adaptation is not an option but a necessity for survival for many communities around the world.” He urged developed nations to increase their support, both financially and technically, to help vulnerable countries build resilience against climate impacts. Delegates also emphasised the need for robust frameworks to measure and track progress in adaptation efforts.

Mitigation strategies were also debated, focusing in particular on the implementation of the Mitigation Ambition and Implementation Work Program (MWP), which aims to accelerate efforts to reduce emissions in line with the Paris Agreement targets. However, the discussions revealed significant divisions among parties. Some countries pushed for more ambitious targets and immediate action, while others, particularly those reliant on fossil fuels, were more cautious about committing to stringent emissions reductions. 

The importance of integrating the outcomes of the Global Stocktake (GST) into the MWP was another recurring theme. The GST, which assesses collective progress towards the Paris Agreement goals, indicated that current efforts are insufficient to limit global warming to 1.5C. Delegates discussed how the findings of the GST could inform and enhance national climate action plans, known as Nationally Determined Contributions (NDCs), to ensure they are more ambitious and aligned with global climate goals.

Lastly, mitigation discussions also touched upon the contentious issue of phasing out fossil fuels. At COP28, countries pledged for the first time to “transition away” from fossil fuels towards renewable energy sources. In Bonn, delegates worked on operationalising this commitment, exploring pathways to implement just transitions that do not disproportionately impact vulnerable populations. This included debates on financial mechanisms to support workers and communities dependent on the fossil fuel industry as they transition to greener economies. 

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The Road to COP29

The 2024 Bonn Climate Change Conference has highlighted both progress and challenges in global climate negotiations. Despite some advancements in areas such as climate finance and carbon market mechanisms, significant disagreements and setbacks persist, particularly in addressing loss and damage and ensuring effective adaptation and mitigation strategies.

The outcomes of Bonn 2024 lay the groundwork for critical decisions at COP29. All parties must intensify their efforts to bridge divides and work collaboratively to meet urgent challenges posed by climate change. All eyes are now on Azerbaijan, the host nation for COP29, a country with significant fossil fuel interests. Criticisms regarding Azerbaijan’s human rights record and its plans to expand gas operations highlight the complexities involved in setting ambitious climate finance goals and ensuring that the commitments made translate into actionable plans.

Featured image: UNclimatechange/Flickr.

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Historically applied in environmental law, economists are increasingly exploring the polluter pays principle in climate policy to address greenhouse gas emissions. This principle is materialised through a carbon price, employing mechanisms like carbon taxes and emissions trading schemes to ensure that polluters are financially responsible for their impact on climate change and air pollution.

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What Is the Polluter Pays Principle?

The polluter pays principle is the idea that the costs of polluting activities should be borne by the party who caused it, rather than the individual or community who suffer from the consequences of pollution. For example, a shipping company that spills oil into a marine ecosystem during its operations will bear responsibility for cleaning up the oil spill and mitigating its ecological impact. 

This principle is grounded in the belief that externalising the costs of pollution onto society is unjust and instead advocates that the parties responsible for environmental harm should be the ones facing the consequences of their own actions by mitigating and rectifying the damage.

“Polluter pays” is a component of a broader set of principles aimed at guiding global sustainable development, officially outlined in the United Nations’ 1992 Rio Declaration. The principle can be applied to various environmental challenges, including addressing industrial air and water pollution, combating deforestation linked to habitat loss, and mitigating the release of greenhouse gases (GHG) contributing to climate change. It has the potential to be used in designing policies to avert environmental harm before it takes place, or, in situations where pollution is unavoidable, the principle can be employed to reallocate or recover the expenses associated with environmental damage.

The Role of ‘Polluter Pays’ in Climate Policy

The polluter pays principle is applied commonly in environmental law to tackle environmental challenges – such as it has been the case in the Homestake Mining Company of California vs Mariano Lake and Smith Lake and India’s 1928 Air Prevention and Control of Pollution Act.

• The Homestake Mining Company of California vs Mariano Lake and Smith Lake case involved the contamination of water bodies by mining activities. The Homestake Mining Company faced legal action due to pollutants seeping into both Mariano Lake and Smith Lake, causing environmental damage on the lands of the Navajo Nation. The polluter pays principle was central to the resolution, with the company held financially accountable for cleanup and mitigation efforts. 
• India’s 1928 Air Prevention and Control of Pollution Act aimed to address air pollution concerns in India’s rapidly industrialising urban centres. The Act introduced regulatory mechanisms to control emissions from industries and vehicles, with provisions incorporating the polluter pays principle. Industries failing to adhere to emission standards faced penalties and fines, which encouraged compliance and fostered a culture of environmental responsibility within the business community. 

However, economists are increasingly looking into how the principle can be applied to tackle GHG emissions in climate policy.

Greenhouse gases are one of the main forms of pollution in modern societies due to their impact on the climate, as well as their contribution to ambient air pollution. According to the World Health Organisation (WHO), ambient air pollution in 2019 was associated with approximately 4.2 million premature deaths globally.

Despite the concerning numbers, the recognition of the link between human activities, increased GHG emissions, and climate change has been slow to materialise in society. Consequently, those emitting these gases are usually not held accountable for the pollution they cause. When this occurs, the costs associated with emissions are not covered by the emitters, and the expenses end up being externalised to society. In economics, this is referred to as a negative externality which is deemed as a type of market failure – where a market is not able to allocate resources to deliver an optimal result. The polluter pays principle aims to correct market failure and its resulting social injustice by shifting pollution costs from society to polluting companies, while simultaneously reducing emissions. 

The application of the polluter pays principle to greenhouse gas emitters involves the use of a carbon pricing. This entails imposing a fee on greenhouse gas emissions, reflecting the potential future costs associated with climate change, thereby compelling emitters to internalise the pollution they generate as well as their expenses. 

This is referred to as the Social Cost of Carbon (SCC), and it is widely endorsed by mainstream economists as the most effective means of carbon pricing. Carbon pricing can then be adopted into stand-alone policies, including carbon taxes – which are designed to internalise the external costs associated with carbon emissions and operate by imposing a direct fee for each tonne of greenhouse gas emitted – and emissions trading schemes (ETS) – a market-based approach designed to reduce emissions that sets an overall limit or cap on the maximum level of emissions for a given time period and distributes permits or allowances for each unit of greenhouse gas among firms that produce emissions. Entities that can reduce their emissions more efficiently or at a lower cost than their allocated allowances may choose to do so and then sell their excess allowances to entities facing higher abatement costs. 

This trading mechanism encourages emission reductions where they can be achieved most cost-effectively, creating economic incentives for businesses to invest in cleaner technologies and practices. The polluters have “paid” through ensuring they have enough permits to cover their total emissions for a given year.

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Conclusion

The polluter pays principle represents an important mechanism for addressing environmental issues such as climate change. By holding polluters accountable for the environmental harm they cause and internalising the costs of pollution, societies can effectively reduce emissions while fostering economic incentives for innovation and investment in cleaner technologies.

However, doubts remain regarding its effectiveness and implementation. Despite mechanisms such as emissions trading schemes being economically and politically popular, and being increasingly implemented worldwide, greenhouse gas emissions are still increasing and pollution levels in many parts of the world – especially in Southeast Asia – are worsening. It is evident that there is a need for further efforts to address some of the operational challenges associated with emissions trading schemes and carbon pricing as a whole. 

Some questions remain open. Do market based climate solutions in capitalist systems really work? Are these approaches capable of driving the necessary emissions reductions at the scale and pace required to mitigate climate change? Moreover, do they adequately address underlying systemic issues such as inequality and environmental justice within capitalist frameworks? 

These questions underscore the need for research and policy innovation in harnessing the full potential of mechanisms applying the polluter pays principle.

The post Explainer: What Is the Polluter Pays Principle and How Can It Be Used in Climate Policy? appeared first on Earth.Org.

In the face of climate change and escalating environmental challenges, the financial industry is undergoing a transformation marked by a growing commitment to sustainability. New investment standards – such as environmental, social, and corporate governance (ESG) investing – has led to the growth of a number of financial instruments and transparency mechanisms in the financial sector to attract more investments in sustainable and green projects. At the forefront of this shift are green bonds, a financial instrument designed to fund projects with positive environmental or climate-related impacts.

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What Are Green Bonds?

A traditional bond is a debt security where the issuer – usually a government or corporation – borrows money from investors. The issuer promises to pay back the principal amount (face value) at the bond’s maturity date and pays periodic interest payments to bondholders. The funds raised from traditional bonds can be used for various purposes, including general operating expenses, capital projects, debt refinancing, or any other financial needs of the issuer. There are typically no specific restrictions on how the funds are allocated. Bonds can be issued by governments (government bonds or treasury bonds), municipalities (municipal bonds), and corporations (corporate bonds). They may or may not have an explicit focus on environmental or social considerations.

A green bond, on the other hand, is a type of bond designed to raise capital for projects and initiatives with environmental benefits. The issuer commits to using the funds for environmentally sustainable projects, such as renewable energy, energy efficiency, green buildings, sustainable agriculture, and other initiatives aimed at mitigating climate change or promoting environmental conservation. Thus, in addition to evaluating the standard financial characteristics (such as maturity, coupon, price, and credit quality of the issuer), investors also assess the specific environmental purpose of the projects that the bonds intend to support.

The distinguishing feature of green bonds is the earmarking of funds for environmentally friendly projects. Issuers are required to provide transparency and disclosure regarding how the proceeds will be utilised, ensuring alignment with recognised environmental standards. Green bonds appeal to investors who prioritise sustainability and environmental responsibility. These investors seek to support projects that contribute positively to the planet while earning a financial return.

Examples of Green Bonds

Several multilateral banks have issued bonds supporting the financing of “green” projects, including the following:

• The African Development Bank (AfDB) serves the development needs of its member countries and issued a first US$500 million green bond in October 2013, building on previous experience with clean energy bonds for the Japanese retail market. The proceeds are allocated to support the financing of climate change solutions as part of a broader strategy to support inclusive and sustainable growth in Africa.

• The European Investment Bank (EIB) issued a €600 million (US$653 million) Climate Awareness Bond in 2007 that focused on renewable energy and energy efficiency. Instead of a fixed coupon, the bond returns were linked to an equity index (such a bond is commonly referred to in the bond market as “structured”).
  
• The International Bank for Reconstruction and Development or (IBRD) – a lending arm of the World Bank Group – launched the first labelled green bond in 2008 in the amount of 3.35 billion Swedish krona (approximately US$440 million). It responded to specific demand from Scandinavian pension funds seeking to support climate-focused projects through a simple fixed-income product. Since 2008, the World Bank has issued approximately US$18 billion equivalent in Green Bonds through over 200 bonds in 28 currencies, supporting about 70 climate mitigation and adaptation projects around the developing world.
  

Growth of Green Bonds

The green bond market has seen exponential growth. The market reached its most substantial milestone in early December 2020, with US$1 trillion in cumulative issuance since market establishment in 2007. Green bonds enjoyed a 49% growth rate in the five years before 2021, according to Climate Bonds, whose analysis suggests the green bond market annual issuance could exceed the $1 trillion mark by 2023. 

Investors have increasingly become aware of the risks of climate change to their portfolios and, through mechanisms such as the Task Force on Climate-related Financial Disclosures (TCFD), they are also beginning to report on such risks. Additionally, stakeholders are pressuring the investment community to employ heighted environmental, social, and governance (ESG) policies. 

Green bonds address some of these changes to the new landscape. They offer investors a platform to engage in good practices, influencing the business strategy of bond issuers. They provide a means to hedge against climate change risks while achieving at least similar, if not better, returns on their investment. In this way, the growth in green bonds and green finance also indirectly works as a disincentive for high carbon-emitting projects. 

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Which Is Better: Regular or Green Bonds?

Compareing a green bond with a regular bond would require the issuer to issue them almost simultaneously and with almost identical terms – including currency, structure, yield, and maturity. This is very rare. However, we can still attempt to compare them based on the following points:

• Risk and Return

Traditional bonds often carry lower perceived risks compared to riskier assets like stocks. The return on regular bonds is primarily driven by the fixed interest payments, and their prices may fluctuate based on changes in interest rates. Green bonds, while sharing many characteristics with regular bonds, come with an additional layer of scrutiny regarding the environmental impact of the projects they finance. The risk-return profile can vary based on the issuer and the specific green initiatives funded.

• Market Liquidity

Traditional bonds typically enjoy high liquidity, facilitating ease of buying and selling in the secondary market. This liquidity is beneficial for investors who may need to adjust their portfolios quickly. The liquidity of green bonds has been improving, but it may not match that of regular bonds. However, as the market matures and gains broader acceptance, liquidity is expected to increase.

• Pricing

It is generally accepted that green bonds are priced very close to regular bonds; that is, investors are not willing to give up return or pay extra for the green aspect of the bond and related reporting. However, observers of this nascent market point to growing demand and preference for green bonds by a growing number of mainstream investors. Anecdotally, investors in green bonds have been able to sell at higher prices than conventional bonds because of the rarity of green bonds. Depending on demand and supply trends in specific markets, differential pricing for green bonds relative to other bonds could emerge in the future.

You might also like: ‘Green’ ESG Investments: The Future of Business?

The post Explainer: What Are Green Bonds? appeared first on Earth.Org.

The first global declaration on curbing emissions from food production agreed during week one of COP28 is a start, say researchers. However, one must acknowledge that the declaration avoids addressing some of the most contentious issues in the realm of emissions reduction. 

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More than 130 countries have signed the COP28 UAE Declaration on Sustainable Agriculture, Resilient Food Systems, and Climate Action, a declaration pledging to reduce greenhouse gas  emissions from processes related to producing and consuming food. These countries represent 5.7  billion people and 75% of all emissions from global food production and consumption, according to  this year’s host, the United Arab Emirates (UAE). The agreement marks a historic moment in the nearly three-decade history of climate summits, as it is the first time that the importance of food systems is formally recognised. 

Food production and consumption contribute substantially to greenhouse gas emissions,  constituting approximately one-third of the global emissions, with meat and dairy accounting for emissions but providing just 18% of the world’s calories. Meat and dairy production are also  leading causes of other environmental ills, including deforestation, pandemic risk, and water  pollution. Plant-based foods typically have a much smaller carbon footprint, and require far less land and water.

The declaration has garnered widespread approval. “It’s great to finally have food on the COP  menu,” said Clement Metivier, a climate and biodiversity policy expert at the World Wildlife Fund (WWF) for Nature in the UK. “There is really a growing momentum around food systems transformation to  tackle both the biodiversity and climate crisis.” 

However, the declaration has faced scrutiny from food experts, including the International Panel of  Experts on Sustainable Food Systems, due to the lack of specific targets or explicit measures to  tackle sustainable diets. 

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The Declaration

The declaration, signed on December 1st, 2023 acknowledges the pivotal role of agriculture and food systems in both contributing to and mitigating climate change. It recognises the significant threats to food availability, particularly for vulnerable communities, and delineates goals to transition to lower-emissions diets, bolster resilience, enhance food security, and advocate for the well-being of marginalised workers. 

By signing the Declaration, signatories committed to incorporating food and agriculture into their upcoming rounds of emissions reduction plans, commonly referred to as Nationally Determined  Contributions (NDCs), demonstrating their commitment to achieving the objectives of the Paris  Agreement. But its initial impact looks likely to be limited. 

Notably, the declaration lacks legal binding, and it overlooks the significant role of fossil fuels  within food systems, such as the use of transportation, farm machinery, and refrigeration.  Furthermore, the latest draft text, crucial for all nations to endorse at the conclusion of COP28, does not address food systems. “It was a glaring omission,” said Metivier, who raised hopes for rectification in the final version. 

“It’s at least a commitment at the highest level, but there’s still not much specificity in terms of  what actually needs to be done,” said biodiversity and agriculture researcher Lim Li Ching at the  Third World Network, a non-governmental organisation based in Malaysia. “We need an inclusion  of food systems and phasing out of fossil fuels to be built into the revision of national climate  commitments.”

Will It Work? 

The declaration is… vague 

We cannot meet our global climate goals without urgent action to transform the industrial food system,” said Lim Li Ching, co-chair of IPES-Food and senior researcher for Third World Network. “But while this is an essential first step, the language remains very vague – and specific actions and  measurable targets are conspicuously missing”. 

The resolution will only be meaningful if governments turn the promises into real policies. “The  134 countries who have committed to the declaration will need to work with every actor in the food  system to deliver real lasting change”, says Jennifer Morris, CEO of global environmental  organisation The Nature Conservancy. 

Global food systems are complex 

Reducing emissions from agriculture is a complex task, as it involves changing farming practices,  land use, and potentially altering dietary patterns. The diverse nature of agricultural systems 

globally makes it challenging to find one-size-fits-all solutions that are effective across different  regions and farming contexts. 

For example, reducing meat consumption may be feasible for individuals in high-income countries;  however, the situation is more complex in low- and middle-income nations. In these countries, meat  serves as a scarce protein source for many, meaning cutting down on meat is not as achievable. 

The nutritional needs of different individuals must also be taken into account. The universal healthy  reference diet, created by the EAT–Lancet Commission on Food, Planet, Health demonstrates what  an ideal diet would look like that increases the likelihood of attainment of the UN Sustainable  Development Goals (SDGs). It prioritises the consumption of vegetables, fruits, whole grains, and more, over red meat and processed foods. However, some researchers questioned whether the diet would provide enough nutrition for people in low-income settings. 

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Economic and political challenges 

Implementing changes in food systems may also face resistance from powerful economic and  political interests. Agricultural industries, particularly those tied to conventional and intensive  farming practices, may resist changes that could impact their profitability. Transitioning to more  sustainable practices might require financial investments and changes in production models that  some businesses may find economically challenging. 

Concerns have been raised about the influence of the meat industry, whose lobbying reportedly  includes efforts to create “positive livestock content” at COP28. A recent Guardian investigation  exposed how pressure from the meat industry led to the Food and Agriculture Organization (FAO) diluting reports and suppressing evidence of livestock’s impact on the climate emergency. Notably, the COP28 declaration does not explicitly mention meat or livestock, raising questions about the industry’s role in shaping climate related policies. 

The Question at Large 

As the world grapples with the urgency of addressing the agricultural impact on climate change, the  question lingers: Will this declaration actually work? 

While it is a first-of-its-kind international agreement, the declaration’s vagueness, lack of specific targets, and the absence of legal binding raise concerns  about its effectiveness. The complex landscape of global food systems, coupled with potential  resistance from influential economic interests, particularly in the meat industry, underscores the challenges ahead. The upcoming revisions of national climate commitments provide an opportunity to rectify current shortcomings and pave the way for a more concrete and impactful approach to curbing emissions. Ultimately, its success hinges on the translation of commitments into policies and the collaboration of nations and stakeholders across the food system spectrum.

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