On 11 September 2024, as part of the SDG Local Solutions series, the United Nations Development Programme (UNDP) held a webinar to explore how carbon markets can help achieve climate goals and create a more sustainable future. The webinar highlighted local efforts in Cordoba, Argentina, and Freetown, Sierra Leone, where regions and cities use carbon markets to lower emissions and boost economic growth.
For several reasons, local carbon markets are important for addressing climate change. First, with over half the world’s population living in cities — expected to reach 70-80% by 2050 — urban areas have a large carbon footprint. Shifting to greener practices in cities is key to reducing global emissions. Second, cities play a crucial role in closing the “emission gap”, the difference between current emissions and the reductions needed to meet the Paris Agreement‘s climate targets.
Finally, carbon markets provide a way for cities to finance their climate actions by selling carbon credits. By 2030, these markets could be worth over $10 billion, making them an important tool for reaching global climate goals.
The video recording can be watched on our YouTube channel – also available in Spanish and French.
The experience of Cordoba province
Challenges and carbon market potential
The province of Cordoba, Argentina’s second agricultural and industrial hub, faces the challenge of maintaining economic growth while reducing emissions from energy use, industry, and agriculture. These sectors contribute significantly to the province’s greenhouse gas emissions, making it difficult to lower its carbon footprint. However, Cordoba’s potential for renewable energy provides a way forward. The province’s strategy leverages its agricultural and industrial strengths to reduce emissions and generate carbon credits through innovative biogas production, solar energy, and fuel-switching projects.
Step-by-step approach
The province of Cordoba entered the carbon market by creating a supply of carbon credits mainly through renewable energy and biogas projects, then shifting focus to generating demand for these credits. This step-by-step approach, which involved technological innovation and community engagement, led to environmental and economic gains.
- Creating supply: Cordoba has launched key projects to generate carbon credits. These include biogas production from agricultural waste, distributed solar panels on buildings, and industrial fuel switching from fossil fuels to natural gas.
- Generating demand and incentivizing carbon credit purchases: after establishing a supply of carbon credits, Cordoba targeted various sectors needing to offset emissions:
- Public works projects: contractors working on government projects were required to measure and offset their emissions by purchasing carbon credits.
- Government officials: by decree, high-ranking public officials were required to offset emissions from work-related transportation, such as cars or air travel. This regulation further incentivized the demand for carbon credits, encouraging public sector engagement in emission reduction efforts.
- Public and private institutions: entities like energy providers and other institutions interested in offsetting their emissions helped to create demand for carbon credits.
- Carbon credit auctions: the province of Cordoba organized two carbon credit auctions, one in 2022 and another in 2023. During these auctions, verified carbon units were made available on a specific date. Compensators participated in the auction, offering bids for the carbon credits. The best price determined the winner, and the certificates were awarded to the highest bidder. These certificates were then integrated into the buyer’s sustainability strategies, allowing them to benefit from competitive advantages, such as gaining an edge in future public tenders.
- Blockchain for transparency: the province utilized blockchain technology to tokenize each verified carbon unit, ensuring transparency and secure tracking. Carbon emissions were verified, converted into tokens, and stored on LACChain, a blockchain platform developed by the Inter-American Development Bank (IDB). This platform facilitated the exchange of carbon credits, ensuring traceability and preventing double-counting.
Results and impact
Cordoba’s carbon market initiatives have led to measurable results:
- 26,958 tons of CO2e were offset through two successful auctions, with an average price of $4.53 per ton.
- 196 participants from public works companies, public officials, and institutions engaged in the carbon credit auctions.
- Widespread adoption of renewable energy and energy efficiency practices across industries and households was developed, including the development of community solar parks or the demand for carbon credits at local festivals, the money of which was used to install solar panels in local schools.
- Cordoba’s success attracted international attention, leading to collaborations such as with Mexico’s Climate Action Reserve.
- The province aims to expand from pilot projects into a full-scale provincial carbon market, drawing in investments from local, national, and regional companies.
The experience of Freetown
Challenges and carbon market opportunities
The city of Freetown lost 70% of its forest cover over the past five decades due to rapid urbanization, making the city more vulnerable to climate-related disasters like floods and landslides. To address this problem, Freetown focused on reforestation, using its natural capital to generate carbon credits through large-scale tree planting. The initiative #FreetownTheTreeTown initiative wants to plant 1 million trees by 2024, with plans to scale up to 5 million by 2030 and 20 million by 2050, sequestering 100,000 tons of CO2 by 2030 and 500,000 tons by 2050
Step-by-step approach
Freetown’s carbon market strategy involves reforestation, technological innovation, and sustainable financing, combining efforts to reduce emissions and generate carbon credits.
- Community involvement and tree planting: local community-based organizations (CBOs) were integral to Freetown’s reforestation efforts. They participated in tree planting and maintenance, ensuring an 80% tree survival rate. Freetown implemented a tree tracker app, allowing residents to monitor tree growth, creating a verifiable record for carbon credits.
- Tokenization and carbon offset strategy: Freetown is developing a municipal carbon offset strategy that will tokenize tree-planting efforts. This will allow trees to be represented as digital assets that can be sold or traded. The strategy aims to attract investments from both voluntary carbon markets and corporate responsibility programs.
- Pre-feasibility study and market expansion: a pre-feasibility study conducted with the International Institute for Sustainable Development (IISD) confirmed Freetown’s reforestation project’s high carbon sequestration potential. The city plans to sequester 100,000 tons of CO2 by 2030, potentially expanding to 500,000 tons of CO2 by 2050 as tree-planting efforts grow.
Results and impact
By the end of 2023, the #FreetownTheTreeTown initiative had planted 977,000 trees, covered 13 water catchment areas, and restored 1,000 hectares of land. Other key results include:
- Reduction of environmental risks: reforestation helps mitigate landslides, flooding, and heat stress, improving the city’s resilience to climate change.
- Water and air quality improvements: the initiative protects water catchment areas, reduces water shortages by 50%, and improves air quality through increased vegetation.
- Technological innovation: the tree tracker app ensures an 80% tree survival rate, creating verifiable data for carbon credits.
- Municipal carbon offset strategy: a sustainable financial model is being developed to attract investments from voluntary carbon markets and corporate responsibility initiatives.
- Job creation: the project created 1,500 green jobs, with over 40% of the tree growers being women, empowering local communities and ensuring long-term sustainability.
Lessons learned
The experiences of the province of Cordoba and the city of Freetown offer valuable lessons for other local governments looking to enter carbon markets. While their challenges and contexts differ, both regions developed successful strategies that can serve as blueprints for others:
- Tailoring solutions to local strengths: Cordoba used its industrial and agricultural base, while Freetown focused on reforestation. Local governments should develop projects aligned with their unique resources and contexts.
- Community engagement is essential: Cordoba and Freetown involved local communities in their carbon reduction efforts, ensuring long-term commitment and sustainability.
- Leveraging technology for transparency: blockchain technology in Cordoba’s carbon auctions and Freetown’s tree tracker app both ensured transparency and accountability. Governments should integrate technology to maintain public trust in their carbon market participation.
- Building public-private partnerships: both regions relied on partnerships with the public and private sectors, which were key factors in generating demand for carbon credits and securing resources for project success.
- Scaling for long-term impact: Cordoba and Freetown plan to scale their initiatives over time. Local governments should design climate strategies that allow for growth and evolution over time.
Inspired by these best practices, local governments can access carbon markets, reduce emissions, and generate financial returns while fostering sustainable economic growth. Cordoba and Freetown’s experiences provide a roadmap for cities and regions to address climate challenges through local carbon markets.