Beyond Natural Beauty: The Carbon Credits Market And The Bahamas

* Antoine Bastian, CEO of Genesis Fund Services Limited

The Bahamas, whose surrounding waters are a natural carbon sink, intends to be the first country in the world to trade blue-carbon credits.

t 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 idyllic, pristine, white, sandy beaches at Cape Santa Maria in Long Island and the Tropic of Cancer Beach in Exuma have often filled me with wonder at The Bahamas’ natural assets and resources. The value proposition of The Bahamas has never truly envisaged the oceans, seas, mangroves and marsh lands contributing directly to the nation’s GDP by themselves and creating a blue economy. Rather, the perspective has always been that the true value of The Bahamas’ natural beauty, embodied in its white sandy beaches and its balmy breezes, is hitched inextricably to the 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 cause of a considerable uptick in the Bahamian economy, with global implications for challenges posed by carbon emissions.

SUN, SAND, SEA AND SCIENCE

Recent scientific research suggests that there are up to 92,000 square kilometres of seagrass meadows in Bahamian waters, storing billions of tons of greenhouse gases (CO2e). In fact, by some estimates, The Bahamas is believed to have at least 30% of the world’s seagrass-meadow habitat. Although it is not a helpful thought for sea bathers and sea waders, much of this came to light through surveys that used cameras on the backs of tiger sharks. As a result, some further ground truthing has convinced the Government of the Bahamas that a new, revolutionary, economic, social and environmental model can be brought to fruition through the monetization of its blue natural assets and the development of a blue-carbon credit regime.

Iconferences of parties on the subject of climate change, forms the foundation of the Paris Agreement, which attendees at COP 21 struck in 2015. Nearly 200 countries have now signed it. Article 6.4 of the agreement provides for a global platform for the trading of emission reductions by all states and the United Nations’ Carbon Offset Platform is in line with it. Its aim is the avoidance and removal of greenhouse emissions from the atmosphere through projects in the developing world.

With this in mind, The Bahamas’ Climate Change and Carbon Initiatives Act, 2022 now provides a regulatory framework for the accreditation of – and transactions in – 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 the carbon credits, carbon securities and carbon-linked digital assets that make up 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 go to the Government of the Bahamas.

OPPORTUNITY KNOCKS!

The economic opportunity for The Bahamas with regards to the carbon credit market is not only promising; the sale of blue-carbon credits could have a revolutionary impact. As the world heads towards 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 in excess of $50 billion, and generating revenues in the hundreds of millions per annum.

The UN Framework Convention on Climate Change (UNFCCC) of 1992, which obliges signatory countries to attend regular COPs or

According to the preliminary maps and core samples already produced by Beneath the Wave (the group of marine scientist overseeing the project), the current seagrass meadows of The Bahamas, having regard to the trajectory of their decline (i.e. net of degradation) and additionality (i.e. possibility of expansion) could, at the outset, make 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 US$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 US$100 per ton, have also been volatile and they are 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.

An Environmentally Centred And Internationally Focused Jurisdiction

Although it has an economic upside of enormous potential, the Paris Agreement is keenly focused on the impact on society (including the ways in which countries adapt to and mitigate climate change) of the overall reduction of greenhouse gases and the sale of any carbon credit in the voluntary market.

The process is wrapped around each country’s National Determined Contribution. NDCs are at the heart of the Paris Agreement and are vital to the achievement of its long-term goals. An NDC represents policy 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 – a rail for economic success but also a rail to impact the environment.

The Paris Agreement stipulates that each party must prepare, communicate and maintain the 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; work has begun in The Bahamas to realise this objective.

Goals For The Future

In 2015 the UN also published 17 sustainable development goals (SDGs) to transform our world, which are as follows.

GOAL 1: No Poverty.

GOAL 2: Zero Hunger.

GOAL 3: Good Health and Well-being.

GOAL 4: Quality Education.

GOAL 5: Gender Equality.

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 10: Reduced Inequality.

GOAL 11: Sustainable Cities and Communities.

GOAL 12: Responsible Consumption and Production.

GOAL 13: Climate Action.

GOAL 14: Life Below Water.

GOAL 15: Life on Land.

GOAL 16: Peace and Justice Strong Institutions.

GOAL 17: Partnerships to achieve the Goal.

Potential Impact On The Bahamas

Although this article cannot predict with any certainty how proceeds from the sale of carbon credits, if sold, 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 some bleak and worrisome facts about the nature of the Bahamas’ food imports. The islands import 90% of all food items. Capital injections for the development of efficient farms or for the purchase of very costly farm machinery and highly-efficient farm solutions are 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. This might automatically reduce the islands’ need to import food and to use foreign currency to do so. Innovations, cleaner methods and greater efficiency on farms can eliminate the old methods of slash and burn, thus reducing emissions of greenhouse gases. The development of modern agricultural practices is paramount for the building of a sustainable and self-sufficient country, but this requires large capital funding.

Goals 14 and 15 are also important. They are a critical way of ensuring that the prices in the voluntary carbon market of The Bahamas’ carbon credits are hitched to substantive adaptation and mitigation programmes. 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; these are essential for the Bahamas’ efforts to help improve the global climate. While legislation exists to improve the natural assets of the Bahamas, like the law that bans commercial shark fishing and the selling and trading of shark, or the law that bans long-line fishing and fishing for turtles or stingrays, it is difficult to fulfil the aims of the NDC without major funding.

Furthermore, the commitment to monitor, enhance and add more nationally-protected areas like The Exuma Cays Land and Sea Park (established in 1958) requires large funding. The ideology of conservation is a critical and a meaningful precondition for the monetization of carbon credits in The Bahamas. Again, some ongoing funding for a generational endeavour in this area may be made possible through the proceeds and the sale of the Bahamas’ blue-carbon credits.

The Bahamas’ plan to help the world to mitigate climate change and reduce greenhouse gases 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 between 2010 and 2020, The Government of the Bahamas had financial inflows to use towards the adaption and mitigation of climate change of approximately $154 million. Of this, approximately $50 million was earmarked from domestic taxes and other government sources of funding. This statistic is sobering and shockingly small.

A Transformation In The Making

The Bahamas is keen to persuade many of its citizens to leave their jobs in tourism, which accounts for more than 50% of GDP, for careers as stewards of the seagrass meadows, mangroves and pine forests (which are regenerating gradually), or simply as custodians of the country’s plethora of natural assets and its environmental biodiversity. The destiny of The Bahamas is bound to change if the programme to monetize blue-carbon credits is successful. The image of pleasure boats or majestic cruise ships laden with excited tourists sailing through Bahamian waters is likely to be joined by another image – one of ships full of environmentalists taking part in the global endeavour to lower greenhouse gas emissions, slow down the process of global warming and save the planet from a climate catastrophe.

The success of the blue-carbon project in The Bahamas could be part of a global success story. We must wait and see whether The Bahamas transcends its natural beauty to become a forerunner in the blue-carbon market and a leader in the global crusade to reduce greenhouse gases.

* Antoine Bastian can be reached on +(242) 502 7020 or at info@genesisfundservices.com