As a devastating human tragedy unfolds in Ukraine, the dangers posed by our reliance on fossil fuels — including global instability, soaring prices, climate change and extreme weather — are undeniable.

Last week’s North American Carbon World Conference brought together companies, carbon market players and experts who argue that fixing failed incentives is critical to reducing that reliance quickly, cheaply and — if properly designed — equitably.

The idea is simple: Companies chase profits, so the rules must be changed to make clean energy more profitable than fossil fuels. This will drive new innovation and conservation strategies.

Carbon markets can help. They’re already reducing pollution in California, Europe, and Latin America — and providing justice.

Reducing deforestation in Brazil

In 2004, if the Brazilian state of Mato Grosso were a country, it would be the tenth largest emitter of greenhouse gases in the world, the result of massive deforestation to produce soybeans and grain-fed cattle.After the state developed plans to reduce deforestation through the REDD+ framework (Reducing Emissions from Deforestation and Forest Degradation), the state’s emissions have dropped so much that by 2014 the state will be the 77th largest emitter, even if Is the production of soybeans and cattle Increase.

In 2017, Mato Grosso’s success led the German Ministry for Economic Cooperation and Development to allocate $54 million to the state. It is worth noting that 60% of the resources that Mato Grosso receives go to local communities – including indigenous and traditional peoples and smallholders – who do their part to protect the forest. Despite the recent surge in deforestation across Brazil, deforestation in the state of Mato Grosso has remained relatively low.

While the state has not traded credits during this period, we can expect this performance from tropical forest jurisdictions participating in the market for high-quality, high-integrity tropical forest carbon credits that have the greatest impact on climate, biodiversity and people, Allows companies to buy these credits with confidence.

Equity, Inclusion and Welfare are Key

Mato Grosso and other REDD+ jurisdictions have shown that successful carbon pricing must be fair and equitable—either by supporting local forest communities as forest managers or addressing both climate pollution and harmful local air quality.

This can be done with the right policies.

In 2019, Colorado passed a statewide mandate to reduce climate pollution, while calling for strategies to reduce air pollution in overburdened communities. In 2021, Washington state passed a cap-and-invest plan that calls for enhanced local air monitoring and, if necessary, new standards to improve air quality.

Revenues from the California Cap-and-Trade Market, in partnership with Quebec, have resulted in an investment equivalent to 14 million fewer cars and 66,000 tons of pollution, while adding 170,000 jobs.

The Yurok Tribe is one of the beneficiaries of California’s carbon market. The Yurok people sold their carbon offsets for forest carbon sequestration that they purchased from timber companies, using the proceeds from their offset sales to invest in sustainable forest management practices and to purchase additional ancestral land.

Huge climate and community impact

Carbon markets can push private capital to the countries and sectors that need it most. In 2021, the LEAF Alliance (Reducing Emissions Through Accelerating Forest Financing) mobilized $1 billion in voluntary payments to tropical forest jurisdictions around the world—the largest public-private partnership to protect tropical forests in history​​.

Let’s be clear: companies in the LEAF alliance are complementing – not replacing – their efforts to reduce emissions from their own supply chains. LEAF investments also aim to provide social protection and benefits to communities that prevent deforestation.

The $1 billion LEAF has mobilized so far is a drop in the bucket compared to what will happen when the effort expands. Let’s imagine a future where LEAF jurisdictions could prevent 2.5 gigatons of carbon dioxide emissions each year from deforestation or forest degradation. That could easily amount to $25 billion or more in annual results-based payments.

Reduced costs and fair outcomes

Done right, carbon pricing policies can lower the cost of meeting emissions reduction targets, thereby lowering political barriers to setting more ambitious targets.

Well-crafted carbon markets can ensure billions of tons of emissions reductions, strengthen global ambitions, support forest communities, and help achieve the full promise of the Paris Agreement – accelerating our transition to a climate that is safer for everyone.

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