BEYOND NATURAL BEAUTY: THE CARBON CREDITS MARKET AND THE BAHAMAS
By Antoine Bastian, pictured below right, Executive Chairman and CEO of Genesis Fund Services Limited
Introduction
It has been a privilege for me to grow up in The Bahamas and enjoy the crystal-clear, aquamarine waters as a child and now I continue to marvel at its beauty on my daily drive to work. The opportunities to visit the idyllic, pristine, white sandy beaches at Cape Santa Maria in Long Island, and the Tropic of Cancer Beach in Exuma have allowed me to visualise even more of what The Bahamas has in terms of obvious natural assets and resources.
The value proposition of The Bahamas has never truly envisaged the oceans, seas, mangroves and marsh lands as having the potential to create a blue economy with direct contribution to the GDP in and by themselves. Rather, the perspective has always been that the true value of The Bahamas' natural beauty, embodied in white sandy beaches and balmy breeze, was inextricably hitched to tourism sector.
Today, however, with the climate crisis top of mind, the seagrass meadows, mangroves and salt marshes of The Bahamas may well be the answer to a considerable uptick in the overall Bahamian economy, with global implications for challenges posed by carbon emissions.
Sun, sand, sea and science
According to more recent scientific research done on sea grass meadows in The Bahamas, it is estimated that there is up to 92,000 sq. km of seagrass
meadows throughout Bahamian waters, storing billions of tons of greenhouse gases (CO2e). In fact, and by some estimates, The Bahamas is believed to have at least 30% of the world's seagrass meadows habitat.
While it is perhaps not a helpful thought for sea bathers and sea waders, the discovery was formed through an innovative partnership with cameras on the backs of tiger sharks. As a result, the further ground truthing and mapping of the world's largest seagrass meadows has convinced the Government of the Bahamas that a new revolutionary economic, social and environment impact can be brought to fruition through the monetization of its blue natural assets and development of a blue carbon credit regime.
Under the terms of the United Nation's Article 6.4 of the Paris Agreement, and in particular the United Nation's Carbon Offset Platform (https://offset.climateneutralnow.org/), for the avoidance and removal of greenhouse emissions from the atmosphere, via projects in the developing world, The Bahamas Government enactment of the Climate Change and Carbon Initiatives Act, 2022 (the "CCCIA") now provides regulatory framework for the accreditation and transactions of blue carbon credits.
The Bahamas has also enacted the Carbon Credit Trading Act, 2022; this legislation now enables the Securities Commission of The Bahamas to regulate the trading of carbon credits securities related to this new asset class. While the current legislation allows entities or individuals to manage the monetization of blue carbon sales or trading, the seagrasses, saltmarshes, and mangroves remain the property of the Government. In its current arrangement 92.5% of all proceeds after operational costs will be the proceeds of the Government of the Bahamas.
The economic opportunity
The economic opportunity for The Bahamas with regards to the carbon credit market is not only promising, but the overall potential impact of the sale of blue carbon credits could be revolutionary. As the world heads to a carbon dioxide reduction of 1.5 degrees, The Bahamas' nature-based global, institutional offering of blue carbon credits can potentially mean a "carbon wealth", all owned by the Sovereign, with a value north of 50 billion, and generating revenues in the hundreds of millions per annum.
Based on the preliminary mapping and core samples already done by Beneath the Wave (the group of marine scientist overseeing the project),the current seagrass meadows of The Bahamas, having regard to the trajectory for its decline (i.e. net of degradation) and additionality (i.e. possibility of expansion) could mean at the outset, at least 2.5 million carbon credits available in The Bahamas for the market as early as 2024, and up to 10 million carbon credits may be available on the voluntary market by 2030.
Most analysts think that the estimated price for carbon credits will be around $90, or greater, per credit by 2030. Admittedly, the prices of carbon credits in the voluntary market, which have varied from a few dollars to over $100 per ton, have also been volatile and is predicated on many other difficult factors, including the nature of the project, the verification factors of additionality, the transparency of the project and more importantly the actual impact in the communities of the project.
Environmentally centred and internationally focused
While the economic upside has enormous potential, the Paris Agreement is keenly focused on the impact on society inclusive of adaptation and mitigation for the overall reduction of greenhouse gases, and the sale of any carbon credit in the voluntary market wrapped around a country's National Determined Contribution. (NDC). NDCs are at the heart of the Paris Agreement and the achievement of its long-term goals. NDCs represents policies and or legislation submitted to the United Nations by each country to reduce national emissions and adjust to the impacts of climate change.
In this regard, The Bahamas has taken steps to meet these objectives by submitting to the UN its ‘Updated Intended Nationally Determined Contribution (NDC)' and "The Bahamas' First Biennial Update Report to the United Nations Framework Convention on Climate Change"(BUR). Together they form the basis for The Bahamas beginning to install two railway tracks… the rail for economic success but also the rail to impact the environment.
The Paris Agreement stipulates that each Party must prepare, communicate and maintain successive nationally determined contributions (NDCs) that it intends to achieve. The Bahamas NDC provides a fundamental framework that will evolve and develop. It clearly articulates the commitment of The Bahamas to achieving the UN's published sustainable development goals. Carbon credits in the voluntary markets will not be successful if some of these goals are not included in the overall monetization plan and work has begun in The Bahamas to realise this objective.
The 17 sustainable development goals (SDGs) to transform our world:
GOAL 3: Good Health and Well-being
GOAL 6: Clean Water and Sanitation
GOAL 7: Affordable and Clean Energy
GOAL 8: Decent Work and Economic Growth
GOAL 9: Industry, Innovation and Infrastructure
GOAL 11: Sustainable Cities and Communities
GOAL 12: Responsible Consumption and Production
GOAL 16: Peace and Justice Strong Institutions
GOAL 17: Partnerships to achieve the Goal
Potential impact on The Bahamas
While this article cannot articulate with any certainty how proceeds from the sale of carbon credits, will be spent, Goal 2, which addresses the need for food security and the improvement of nutrition and sustainable agriculture, should be a priority. "The Bahamas National Pathway for Food Systems Transformations" prepared by the Ministry of Agriculture and Marine Resources, sets out bleak and worrisome facts about the nature of the Bahamas' food imports.
The reality is that 90% of all food items are imported. Capital injections for the development of efficient farms or for the purchase of very costly farm machinery and highly efficient farm solutions is a priority for The Bahamas. The successful sale of blue carbon credits in the global market can transform the very nature of agriculture and aquaculture by adding capital inflows generated by the sales which automatically reduces the need to import and use foreign currency in doing so.
The innovation of efficient farms eliminates old methods of slash and burn, thus making an immediate positive impact on the reduction of greenhouse gases due to cleaner methods of farming. The development of modern agricultural practices is paramount to building a sustainable and self-sufficient country, but these require large capital funding.
Goals
Goals 14 and 15 are also important and critical aspects of ensuring that the price in the voluntary carbon market of The Bahamas' carbon credits is hitched to substantive adaptation and mitigation programs. The BUR and the NDC reports suggest that there is a lack of financial and technical support for the continuation of ongoing mitigation and adaption policies essential for the Bahamas' part in the global climate improvement. While legislation exists to improve the natural assets of the Bahamas, like the law banning commercial shark fishing and the selling and trading of shark, or the law that bans long-line fishing, fishing for turtles or stingrays, it is difficult to meet the NDC without major funding.
Further, the commitment to monitor, enhance and add more nationally protected areas like Exuma Cays Land and Sea Park that was established in tin 1958 requires large funding. The ideology of conservation is a critical and a meaningful element for the monetisation of carbon credits in The Bahamas. Again, the ongoing funding for a generational endeavor may be made possible through the proceeds and the sale of the Bahamas' blue carbon credits.
The success of The Bahamas' plan for its part in climate change and the reduction of greenhouse cases is an expensive venture for a nation of approximately 400,000 people. The World Bank's designation of The Bahamas as a "high-income, developed country" eliminates the country from certain environmental funding for climate adaption and mitigation. During the period 2010 to 2020, The Bahamas government had financial inflows to use towards adaption and mitigation of climate change of approximately $154m. Of this, approximately $50m was airmarked from domestic taxes and other government funding. The reality of the statistic is sobering and is shockingly small compared to the ambitious seven-year commitments that was made by The Bahamas for the reduction of greenhouse gases and the overall principles of addressing climate change. However, successful monetisation of carbon credits may be able to achieve BUR and NDC commitments.
Conclusion
The Bahamas is keen on having its citizens transformed from tourism jobs, which accounts for more than 50% of GDP, to careers as stewards of the seagrass meadows, mangroves and pine forests restoration, or simply custodians of the Bahamas' plethora of natural assets environmental biodiversity. The Bahamas is set to change its nations and its people's narrative if the program to monetise blue carbon credits is successful.
The imagery of pleasure boats or majestic cruise ships laden with excited tourists sailing through Bahamian waters is likely to be altered and enhanced with that of ships of environmentalist working to pioneer the global endeavor to lower greenhouse gases, achieve the reduction of global warming and save the planet from a climate catastrophe. The success of the blue carbon project in The Bahamas could be a global success. We must wait and see how The Bahamas reveals itself beyond its natural beauty and as a forerunner in the "blue" carbon market space and also a leading nation committed to the overall reduction of greenhouse gases
Article by Antoine Bastian, Executive Chairman and CEO of Genesis Fund Services Limited.
