02 December, 2024

The Next Industrial Revolution from AlterCOP29

The following are notes of the presentation delivered at AlterCOP29, on the 14th November 2024.  These are my opinions, as President of Red Sycamore. 

I said this at COP28, and I am repeating it here, carbon credits are the new oil.  With the proper strategic framework, it becomes a strategic asset that can influence energy and financial policy of related nations.  These are the steps that I believe we should work at, which democratises the process. 

We need to encourage private players to run carbon exchanges, in the same way that the cryptocurrency market has grown.  We should create the hype, and ride it, instead of stifling it.  Perhaps an offshore compliance exchange is an option. 

This is my controversial opinion: Fold the voluntary carbon credit market into the compliance market.  This is inevitable anyway.  As we develop carbon credits as financial instruments, I foresee increasingly more comprehensive compliance and regulatory frameworks.  There is no space for the laissez-faire approach of the voluntary market. 

We need to work towards creating rated, investment-grade compliance carbon credits, as a first step towards having them recognised as financial instruments.  The best carbon credits projects to create the necessary volume for trade is blue carbon credits from seagrass projects.  This is why Red Sycamore is in this space. 

The strategic intent for this is to create a secondary market for carbon credits.  When we have carbon credit futures, ETFs, and other derivatives, we have speculation and a viable secondary market that is a means to create the liquidity and encourage investment into more sustainability projects globally. 

This is how we address the funding gap, and bring in more players into the market.  If there is money to be made, there will be investment.  An appeal to self-interest is far more realistic than an appeal to altruism.  Major corporations and funds are beholden to self-interest.  Any claim of altruism is cynical and hypocritical.



Enhancing Market Confidence from AlterCOP29

The following are notes of the presentation delivered at AlterCOP29, on the 14th November 2024.  These are my opinions, as President of Red Sycamore. 

To enhance market confidence, the obvious next step is establishing clear, standardised criteria for what constitutes a high-quality carbon credits.  From a financial perspective, we need to agree, across financial institutions, on the status of carbon credits, whether commodity, options contract, or something different.  The independent verification by accredited third parties should be made more stringent.  Gold, Verra and similar organisations are not the answer.  We need something that functions just like rating agencies like Moody’s and Fitch.  Perhaps, we need something similar for the carbon market. 

Projects need a better, legally enforceable framework for transparent, publicly available information about their methodologies, results, and impacts when reporting.  This framework needs to be standardised across projects, as far as practicable.  What we have is nowhere near enough.  Also, considering the different kinds of credits, even in the compliance market, we need a mechanism for convertibility.  This is a step towards fungibility. 

At COP29, there is a push to mobilise US$65 billion annually from the private sector to complement public funding for climate projects.  I am sceptical. The answer is not found in philanthropy and localised private funding.  This is publicity, not reality.  This level of coordination is not going to compete with the energy lobby, the mining lobby and other special interest groups.  The way forward is the appeal to self-interest, not altruism.