Climate and carbon market experts, as well as OPIS thought leaders, hopped across events and soaked in knowledge at Climate Week NYC 2024. Convened at a record-breaking 900 events and activities, global stakeholders spanning world and corporate leaders to policy regulators and carbon credit market-makers and takers took Manhattan. Anything and everything climate change and energy transition was in-focus on agendas, along the sidelines and over drinks.

Below are our key takeaways from those conversations:

Carbon Removals: Overcoming Financing & Liquidity Hurdles to Scale

There is an urgent need to scale and expand carbon dioxide removal (CDR) efforts, and the CDR market is evolving at an accelerated pace because of the demand for high-quality emissions reduction solutions.

Collaboration between early innovators and the establishment of trading platforms is slowly unlocking buyer engagement. Additionally, many companies are signing multi-year agreements and forward contracts to show their commitment to long-term carbon removal strategies.

However, financing remains a substantial hurdle – CDR projects are facing difficulty securing capital in the absence of clear demand signals and robust financial mechanisms. Uncertainty around regulatory frameworks, long-term returns, and the readiness of CDR technologies has also led to some investor hesitance. This reluctance is understandable in the current market where some projects are not yet mature, and financing pathways remain unclear.

Both new and seasoned investors agreed during the event (Sept. 22-29) that structured markets and greater liquidity are needed to facilitate transactions and meet growing demand. Other keys to market development are building confidence with trusted supply- and buy-side signals and ensuring that removals projects are scientifically robust, credible and deliver permanent carbon reductions. Similarly, clarity is needed around the willingness of companies to transact in the market.

Meantime, more companies are integrating blended portfolios that combine nature-based solutions with engineered carbon removals, such as direct air capture and biochar.

Voluntary Biodiversity: Corporate Sector Eyes Nature-Positive Commitments

Corporate awareness about businesses’ impact on nature has been gaining in prominence, and the trend was in the spotlight at multiple biodiversity summits during Climate Week NYC 2024.

Companies are being encouraged to voluntarily adopt frameworks that disclose the impact of their operations on nature and reduce their greenhouse gas emissions by a growing number of global initiatives like the Taskforce for Nature-related Financial Disclosures (TNFD) and the Science-Based Target Initiatives (SBTi).

A substantial 440 companies had adopted the TNFD disclosure framework since it was published in September 2023.

Meantime, an increasing number of companies have expressed interest in the growing voluntary biodiversity credit market ahead of the United Nations Biodiversity Conference (COP16) to be held in late October 2023.

To facilitate transactions and gain momentum in the voluntary biodiversity markets, stakeholders pointed to the use of blockchain technology – an immutable and decentralized ledger accessible to anyone. A number of tech companies, like Microsoft, hosted popular events on how this technology could help bolster accountability in this space.

US Compliance Markets: Seeking Clarity at Critical Cap-and-Trade Crossroads

A recurring theme during discussions about North American Cap-and-Trade markets was the strong demand among stakeholders for clear guidance on the future of both emerging and established programs..

Washington state’s nascent Cap-and-Invest Program faces a significant challenge with state ballot initiative 2117, which goes to public vote on November 5, 2024.

If passed, the measure would effectively dismantle the program just two years after its launch, and prompt immediate questions about how to wind down the program and manage the existing allowances already in circulation. Conversely, if the initiative fails, Washington will continue to work toward linkage with California and Quebec’s Cap-and-Trade programs. Last week, all three jurisdictions reaffirmed their commitment to the complex regulatory undertaking.

Meanwhile, California faces its own climate program uncertainty. The California Air Resources Board (CARB) is still evaluating potential amendments to its Cap-and-Trade program, including a reduction in annual allowance budgets to align with the state’s ambitious climate targets. Also looming on the horizon are post-2030 scenarios, and authorization of the program beyond 2030 is expected to be a key target of lawmakers in upcoming state legislative sessions.

New York state regulators are busy not only with rulemaking for the state’s future Cap-and-Invest Program and updates to the Regional Greenhouse Gas Initiative (RGGI) – of which the state is a member – but also with addressing how these two programs will operate alongside each other. This includes clarifying the responsibilities for entities regulated by both frameworks.

CORSIA Phase 1: Scarce Supply & Corresponding Adjustment Headwinds

Conversations circled around persistent turbulence for the international aviation emissions reduction program CORSIA. But stakeholders said that they aren’t all in a holding pattern while the International Civil Aviation Organisation (ICAO) works to certify more eligible emissions units into an extremely scarce supply pool.

In the face of uncertainty, airlines are taking leaps of faith by inking contracts for credits that are not yet certified to fill offsetting obligations for CORSIA’s current Phase 1, but are expected to be made eligible ahead of the compliance deadline. Some are and some aren’t jumping with a proverbial parachute in the form of carbon insurance policies that safeguard against everything from reputational to compliance and financial risk, should Phase 1-eligible supply stall.

Since the start of the year, stakeholders have grown increasingly uneasy about a lack of eligible emissions units for CORSIA Phase 1, which covers international air traffic emissions between 2024 to 2026. The issue is complicated, dynamic and evolving and centers on carbon registry approvals and double counting protections.

ICAO has so far approved just two carbon credit registries to supply eligible emissions units into Phase 1, ACR and Architecture for REDD+ Transactions (ART), while the eligibility of several large-volume registries remains in limbo. ICAO’s Technical Advisory Body or TAB, is expected to make fresh updates in October 2024 on key standards like Gold Standard and Verra.

Meanwhile, eligible credits also must be authorized for sale by its host country with a Letter of Authorization (LoA) that acknowledges a corresponding adjustment and that credits will not be claimed against the country’s nationally determined contributions (NDC). However, a discussion point was made that it is widely understood that an LoA isn’t needed at the time of CORSIA Phase 1 credit purchase, but there is an expectation that the unit will be correspondingly adjusted in the future.