Closing policy gaps in developing nations
Ahead of New York Climate Week, the UN Climate Change High-Level Champions wrote a piece on how we need net zero policies to turn climate promises into reality. Now, ahead of COP28, we turn our attention to how developing nations are closing policy and regulatory gaps with important initiatives to address climate change, while achieving broader developmental goals.
By Ramiro Fernandez, Director Global Campaigns, Climate Champions; Lucilla Dias, Net Zero Policy and Regulation Hub, University of Oxford; Tessa Vincent Race to Zero Policy & Engagement Lead, Climate Champions | November 29, 2023
Developing nations have pressing social and economic challenges, which need to be faced along the transition to a low-carbon economy. As a result, mitigation strategies in developing countries embed climate change in broader developmental goals, like reducing air pollution and deforestation, ending poverty, providing clean energy access, building sustainable infrastructure, and supporting the creation of high-quality, sustainable jobs. Because the challenges are context-specific, the solutions also need to be specific.
Net zero emissions through disclosure
The disclosure of climate-related information has been developed by voluntary bodies in the past two decades, and has transitioned into regulations in recent years. This trend from voluntary to mandatory disclosure of climate-related information, is true for developed and developing nations. For instance, Brazil and Mexico already mandate financial institutions to follow and disclose climate-related risks. India, Indonesia and South Africa have announced the development of similar regulations. China, Mexico, Saudi Arabia, the Republic of Türkiye, and South Africa also encourage companies, through non-mandatory guidelines, to follow and disclose their climate information, particularly if they are participating in stock markets. It’s clear that developing countries are playing their part in disclosing climate-related risks and opportunities.
Developing nations are also pioneering in disclosure regulations. In October 2023, for instance, Brazil became the first nation to adopt the recent ISSB Sustainability Financial Reports into regulation. As the shift from TCFD- to ISSB-based disclosures begins, Brazilian regulators are leading the transition towards this new standard.
Robust regulation for carbon markets
Robust regulation is also essential for carbon markets.
The African Carbon Markets Initiative is doing important work to shape and harness the potential for Carbon Markets in Africa.
With its proposed domestic carbon market, Brazil joins other major nations including Indonesia, India, Malaysia, and Vietnam, who are developing mandatory domestic carbon markets that would allow the use of carbon credits to comply with reduction targets set out in their Nationally Determined Contributions. The proposed law in Brazil outlines a cap and trade system, applicable to all sectors except agriculture, in which large emitters must disclose emissions, offsetting reports and plans – as well as reduction measures or the purchase of credits.
The proposed domestic carbon market in Brazil emphasizes and encourages solutions tailored to Brazil’s context, in particular Nature-based Solutions. These solutions may include activities like land restoration in degraded or deforested areas, which can generate tradable credits, and the inclusion of Indigenous and traditional communities as credit-sellers in the market. As a result, the carbon market can become a dual-purpose mechanism, benefiting both climate action and broader societal development. Additionally, credits may also find a place in the global carbon credit market, providing an additional avenue for financing solutions and trading regulated credits.
Protecting nature through biodiversity credit systems and markets
Different approaches to biodiversity credit systems and markets are emerging both internationally and domestically. It’s all starting with voluntary non-state actor action – and evolving into mandatory regimes.
For example, Spain’s ClimateTrade™ and Colombia’s Terrasos have joined forces to promote voluntary biodiversity credits to support habitat banking. Each credit corresponds to 30 years of conservation and restoration of 10 metres of habitat of threatened species, such as the yellow-eared parrot and spectacled bear. More initiatives such as these are needed around the globe.
To enshrine credible and scalable biodiversity credit markets through clear guidance and global principles, a group of scientists, conservation practitioners, standards setters and UN agency representatives are jointly supporting the Biodiversity Credit Alliance. Critical to its work is the views of Indigenous Peoples and local communities, who are at the frontline of the biodiversity countries.
Moreover, a number of countries are exploring their role in biodiversity credit systems and markets, including through:
- Market enablement: providing policies and guidance for the development and uptake of voluntary schemes, and potentially funding as the market is established;
- Market administration: establishing and managing a voluntary biodiversity schemes and activities in ongoing management and administration
We welcome governments around the world to work with non-state actors to integrate nature into climate credit systems and markets.
In this piece, we have shared examples of how developing nations are developing policies and regulations – some of which are more common, like disclosures of climate-related information, and others that are context-specific, like carbon markets that include Indigenous communities and value biodiversity.
Realizing the challenging transition to a low carbon planet depends on developing and developed nations’ actions. The policies and regulations taken forward by developing nations have the potential of not only addressing climate change but also laying the foundation for a sustainable, equitable, and prosperous future.
