OGDEN, Utah – As the world looks beyond the COVID-19 pandemic, a consensus is emerging: certain measures to curb the growth of greenhouse-gas emissions will be central to global economic recovery. Awareness is also growing around the urgent need to slow the destruction of the natural world, and it is becoming clear that the two environmental crises—a changing climate and nature loss—are inextricably linked and compounding.
Natural climate solutions (NCS)—conservation, restoration, and land-management actions that increase carbon storage and avoid greenhouse-gas emissions—offer a way to address both crises and to increase resilience as the climate changes. In fact, as argued in a new paper produced by McKinsey in partnership with the World Economic Forum, there is no clear path to deliver climate mitigation without investing in nature. Climate action requires both the reduction of emissions and the removal of carbon dioxide already in the atmosphere. NCS can help with both, starting today.
Private-sector commitment to climate action is gaining momentum, with companies increasingly adopting strategies aimed at reaching net-zero emissions and some pledging to invest in nature through the purchase of NCS-generated carbon credits (or “offsets”) as part of the effort. Based on current net-zero commitments from more than 700 of the world’s largest companies, there have already been commitments of carbon credits of around 0.2 gigatons (Gt) of CO2 by 2030. Some companies are even beginning to make commitments beyond carbon to biodiversity and water, which will be a growing trend over the next decade. As a core component of corporate climate mitigation, NCS are thus becoming mainstream, if not yet commonplace. While undersized overall, NCS now account for around 40 percent of retired carbon credits in voluntary carbon markets, up from only 5 percent in 2010. Leaders are also beginning to invest directly in nature through protecting and restoring large expanses of land and ocean.
The prize is large. Science tells us that if we are to establish an emissions pathway that limits warming to 1.5 degrees Celsius above preindustrial levels, then we would need to reduce emissions by 50 percent, or 23 GtCO2, by 2030 from 2019 levels. Our analysis (see sidebar for methodology) suggests that NCS projects could yield nearly a third of that target, or close to 7 GtCO2 per year by the end of this decade—mainly from avoided deforestation and peatland impact, reforestation, and soil sequestration in agriculture. It also shows that NCS, and in particular forestry projects, are largely a low-cost measure. In addition, there are substantial co-benefits of NCS, both from promoting environmental benefits such as biodiversity and water quality, and from fostering capital flows to forest-rich countries in the Global South in support of sustainable development. With close to 7 GtCO2 in annual potential by 2030, assuming an illustrative price per ton of $20 would suggest potential capital flows greater than $100 billion to countries in the Global South that have high concentrations of NCS potential.
Yet the ambition to undertake NCS at global and meaningful scale is bedevilled by a number of difficulties, both real and perceived. These difficulties include the lack of consensus on how to treat NCS in corporate claims on climate action, combined with low public confidence in the effectiveness of past NCS schemes in contributing to real emissions reduction. There is a widespread suspicion that companies may be tempted to use NCS offsetting as an excuse to avoid fully addressing their own carbon footprint, despite clear guidance that direct emissions avoidance and reduction by corporations must be the priority.