A man diving amongst a school of fish off the coast of the Maldives
From the Small Islands Geographic Society’s Sustainability Begins at Helping Our Marine Environment project docuseries. | Credit: Ibrahim Faiz

Deep Dive into Blue Carbon, Coastal Resilience, and Ocean Finance

By Chip Cunliffe

Chip Cunliffe is the Programme and Risk Director at the Ocean Risk and Resilience Action Alliance (ORRAA), anchor partner of the Coastal Resilience, Carbon, and Conservation Finance (C3F) activity under the USAID Climate Finance for Development Accelerator. C3F aims to encourage the flow of private sector capital into coastal resilience and blue carbon projects that generate biodiversity conservation, climate mitigation, and adaptation outcomes while benefiting local communities. The activity is conducting initial pilot assessments in Senegal and small Pacific Islands countries.

For the uninitiated, what are the most important things for people to know about blue carbon?

Coastal ecosystems–for example, saltmarshes, seagrass meadows, and, most famously, mangroves–store many tonnes of carbon in their biomass and the soil beneath them. These coastal blue carbon ecosystems sequester up to five times more carbon than terrestrial forests; as of 2021, the value of the carbon stored in these ecosystems contributes $190 billion to global wealth each year. 

But they’re not just blue carbon sinks. Mangroves, in particular, provide hugely important resilience benefits. By acting as wave and wind breaks, they’re estimated to reduce costs of storm surges and coastal flooding by more than $65 billion per year. In addition, they provide biodiversity conservation benefits, as they’re critical habitats for many species, especially as nurseries for fish. Then there’s the social aspect: the loss of mangroves impacts local food security. On top of that, they have cultural relevance for Indigenous Peoples and local communities who have been living in these locations for millennia. Despite all this, these ecosystems are under threat–approximately 67 percent of all mangroves have been destroyed by human activity, and it’s not stopping.

Where does blue carbon stand in terms of the larger global carbon market? 

It’s still in its infancy. In 2023, there were only 24 blue carbon projects registered with carbon crediting programs, under validation, or under development. For example, Conservation International’s Vida Manglar project is both conserving and expanding mangroves in partnership with local communities in Cispatá Bay, Colombia. 

There’s a lot of discussion, but the size of the market itself is very small–though not for lack of trying. There’s a great deal of demand in the market for carbon, and blue carbon specifically, as net zero commitments by companies, cities, and other organizations have tripled between 2020 and 2021. This means there’s a lot of interest and money that’s ready to be driven into the space. We just need to find and develop the project pipeline that allows this interest to be realized.

What are some examples of places or projects where this is either working really well or where you see opportunities?

Many blue carbon projects are in their early stages, so I’ll speak more to some promising projects that we hope will serve as successful models for future replication. Through the UK and Canadian Governments, ORRAA is funding a non-governmental organization in Tanzania called Aqua-Farms Organization (AFO). AFO is planting 20,000 mangrove seedlings to develop blue carbon credits, which they will sell to help diversify the income of the local communities. Also through the UK Government, ORRAA is supporting a project in Ghana piloted by the University of Education, Winneba, which is encouraging local farmers to end mangrove logging (their current primary source of revenue) by developing carbon credits and offering loan packages to help them make money by instead restoring and maintaining the wetlands. There is also significant work being undertaken in Mozambique, Kenya, Bangladesh, and Colombia. 

Are there things that certain projects are doing really well?

Many projects are focused on more than just carbon, strengthening livelihoods, food security, biodiversity conservation, and protection of cultural heritage. Integrating these components into planning should be a priority. We collaborated with Salesforce, Conservation International, The Nature Conservancy, and others to develop high-quality blue carbon principles and guidelines to provide project developers with a blueprint for integrating all of these elements. For example, the Vida Manglar project has reinvested 92 percent of the revenue from credit sales back into the project to expand its impact. 

Beyond blue carbon, what are some other financial products, models, and approaches focused on oceans and coastal resilience?

ORRAA is currently investing in around 40 projects, and we are starting to see clusters forming. One such cluster is nature as an asset class–how nature can be viewed as an asset and integrated into profit and loss so it can be considered integral to any government or private sector programming. Another cluster is insurance, which is an important part of how we're protecting these ecosystems in the future. We’re doing a lot of microinsurance work with fisheries in Indonesia and the Philippines. Parametric insurance–where a payout only occurs if a parameter, such as rainfall or wind speed, has been reached–is being used to help repair and manage coral reefs in Fiji and Hawaii in the aftermath of tropical storms. 

What are some of the biggest challenges in generating investment into blue nature? 

Unfortunately, there are only a few blue carbon projects on the market. Current lack of capacity, and the scale and long timeframes, might be deterring investment. Expanding and conserving mangroves and coastal wetlands is often more expensive than comparative “terrestrial” carbon credit generating activities; the financial challenges are compounded by policy and regulatory barriers to implementing projects in coastal zones, unclear tenure rights for many local communities, and general lack of capacity to implement project activities. Finally, there are comparatively few methodologies for blue carbon, further limiting developers’ options for designing them to fit specific local contexts. 

Through our work with the C3F activity, we are beginning work with USAID in several countries to identify bankable blue carbon and/or coastal resilience projects. We hope this will give us some additional insights and pathways forward.

What considerations should those designing projects in this area take into account?

It’s crucial to have high quality data and links in-country. It’s all about having feet on the ground, engaging with local communities, and having a good understanding of the regulatory and policy environment and the legal requirements for these projects to take place. When there is interest from the private sector to drive this forward, we don’t want this to become the Wild West. We must ensure that these markets are developed in a responsible manner where guidelines are adhered to, and where we can ensure that the benefits of these projects are felt by local people who have their lives and livelihoods improved.

ORRAA works with many different types of stakeholders on the public and private sides. What opportunities do you see for increased collaboration?

ORRAA sits in a privileged position. We have members from governments, the private sector, philanthropy, civil society, and academia. We bring these different parties together to work on solutions for the benefit of coastal people, creating a community of practice and utilizing the expertise of our membership to build these products and pipelines. 

We’re excited to announce that, as part of our work with C3F, we’re launching a Coastal Resilience and Ocean Finance Expert Group. We see this as a longer-term process to bring both our members and others to the table. We’ll convene different stakeholders because we know that working together will help us to identify and develop solutions in a quicker and more collaborative way.

Sectors
Climate Finance
Strategic Objective
Adaptation, Mitigation
Topics
Carbon, Carbon Markets, Climate Finance, Climate Finance and Economic Growth, Coastal, Indigenous Peoples and Local Communities, Marine, Private Sector Engagement, Resilience
Region
Global

Chip Cunliffe

Chip Cunliffe serves as Programme and Risk Director for the Ocean Risk and Resilience Action Alliance (ORRAA). He has spent the past 10 years working in the insurance industry, identifying ways in which risk transfer mechanisms and finance solutions can be best used to build resilience to ocean-related risks. He established AXA’s Ocean Risk Initiative, which included developing and launching a Coastal Risk Index to integrate coastal ecosystems into insurance risk models; working with partners to develop the scientific basis to create a mangrove insurance product; and identifying insurance pathways to prevent illegal, unreported, and unregulated fishing.

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