Good COP, Bad COP
COP27 formally ended last Friday and - observing the output from afar - it was a whirlwind of big announcements, ambitious aims, hardhitting facts and sobering statistics. Events like this create a weird opposition: on the one hand, excitement and positivity around the innovation and progress being made, while on the other hand, fear and worry that we are still dragging our heels and favouring discussion and head-scratching over immediate action.
One thing is for sure. In order to make the kind of changes that are essential if we are to meet the goals set for 2030 or even 2050, we need a more robust carbon removal sector. Of course the first step is omitting and reducing omissions - that should go without saying - but this has to happen alongside strategies that will literally remove CO2 from the atmosphere. And the carbon removal sector needs more investment, more confidence, faster-paced scaling of projects and - in our humble opinion - security for forward purchased credits in the shape of carbon insurance products. This was highlighted through many of the talks and events at COP27.
It’s hard to sift through the incredible amount of information that is generated in a global conference of this magnitude…so allow our team at Kita to do this for you (with a particular focus on the themes that are relevant to our business). Here are just a few of the stories that captured our attention:
Natalia Dorfman, Co-founder and CEO: I’ve been glued to the content coming out of COP27 that pertains to carbon removal. Our company is founded on the recognition that removing CO2 is pivotal in the fight against climate change. We are focused on developing products that support carbon removal through increasing the security and integrity of forward purchased credits. This explanation clearly outlines the increasing necessity of carbon removal and echoes Kita’s commitment to supporting the rapid scaling of projects in this field. Beyond this, like everybody else I will be watching closely how the loss and damages fund progresses, and also next steps on nature-based solutions, e.g. outlined here. Final point – I enjoyed reading this report on carbon credit rights (takes me back to my law firm days!), and it definitely made me think how future Kita insurance products could reduce some of these risks.
Dr Paul Young, Co-founder and CTO: This announcement at COP27 caught my eye. Creating standards is hard. Ten times harder is creating standards that are well respected for their integrity and globally adopted. ISO has 75 years of experience and a great track record of creating thousands of standards central to health, safety and environmental protection. For me, this is a promising milestone that marks the rising levels of scientific and engineering rigour in the industry.
Tom Merriman, Co-founder and CPO: I was very interested in the news from Verra and Pachama that they would pursue digital forest carbon monitoring. That two such notable participants in the carbon markets have joined the many organisations looking to digitise Monitoring, Reporting and Verification (MRV) is significant. The existing MRV process is highly manual and not easily scalable given the amount of growth needed in the carbon removal industry. But the technology to support digital (aka ‘remote’) MRV is fast maturing: Kita is working with TerraPulse to monitor insured forestry projects. TerraPulse’s technology can offer carbon/biomass monitoring at high frequency – in some cases as little as week. As the accuracy of this type of technology improves, it opens the door to the digital MRV that Verra and Pachama are collaborating on. This approach allows MRV to be automated, bringing immediate benefits to buyers, sellers and other carbon market ecosystem participants. For example, it raises the prospect of increasing the frequency of existing vintage issuance. This increase benefits buyers and sellers by reducing the time between project creation and cashflow, easing what is currently a complex and expensive financing process. From an insurance perspective, digital MRV is an important development. Not only does it increase the granularity and frequency of the data available, but it reduces the uncertainty surrounding future vintage delivery. Ultimately, the MRV process must become more efficient and less expensive for the carbon removal industry to scale at the rates humanity requires. The announcement by Verra and Pachama shows just how seriously this challenge is being taken by the industry.
Melanie Martin, Head of Legal: As this article explains, COP27 did not make substantial headway on rules for a global carbon market under Article 6.4 of the Paris Agreement. Decisions on key sticking points, such as what constitutes carbon removals, have been deferred to next year’s COP28. Meanwhile, the US Energy Transition Accelerator and the Africa Carbon Markets Initiative are promising new catalysts for the expansion of voluntary carbon markets. At the same time, it is imperative such programmes do not lead to further corporate greenwashing. This is why the UN’s High Level Expert Group Report on the Net-Zero Emissions Commitments of Non-State Entities is praiseworthy. The Group’s recommendation on ‘Using Voluntary Credits’ emphasises that non-state actors must invest only in high-integrity, permanent removals, crucially highlights the need for a rights-based approach to the development of voluntary carbon markets, and insists on transparent and accurate reporting of credit transactions, all of which are in line with Kita’s mission.