Non-market approaches: What are they exactly?

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By Ma. Eliza J. Villarino

I got interested in non-market approaches toward climate action during a conversation I had with Steve Leonard, a lawyer who’s an expert in the language of the United Nations Framework Convention on Climate Change, sometime in the latter half of 2023. I asked him what these approaches are about; he said they are voluntary cooperation mechanisms under the Paris Agreement that are anything outside carbon markets.

That was a moment of eureka for me. I began to think that the research I have been doing for my doctoral program at the University of Copenhagen and that as part of the Low-Emission Food Systems team at the Alliance of Bioversity International and the International Center for Tropical Agriculture would align with the concept of non-market approaches.

As soon as that conversation was over, I looked up UNFCCC text around non-market approaches — or NMAs as those that have been engaged in this issue call it.

Article 6, paragraph 8, of the Paris Agreement defines NMAs. Here’s the exact language:

“Parties recognize the importance of integrated, holistic and balanced non-market approaches being available to Parties to assist in the implementation of their nationally determined contributions, in the context of sustainable development and poverty eradication, in a coordinated and effective manner, including through, inter alia, mitigation, adaptation, finance, technology transfer and capacity building, as appropriate. These approaches shall aim to: (a) Promote mitigation and adaptation ambition; (b) Enhance public and private sector participation in the implementation of nationally determined contributions; and (c) Enable opportunities for coordination across instruments and relevant institutional arrangements.”

Well, that was a broad definition, I thought to myself. I wasn’t alone in that impression.

An article that the UNFCCC Secretariat published on its website noted that an NMA “can be anything and everything, provided it’s not market-based.” NMAs, the article added, are “a broad basket, but based on what Parties have expressed since Paris, the non-market approaches mechanism will focus on cooperation on climate policy, it could include fiscal measures, such as putting a price on carbon or applying taxes to discourage emissions.”

I followed closely the sessions on NMAs at COP28 in Dubai. I got the sense that something more needs to happen before most would have clarity about what NMAs are.

We here at the CGIAR Initiative on Low-Emission Food Systems strive to do our part to help shed light on the topic. At COP28, we held a session on how NMAs could look like on the ground.

What defines NMAs lies in the nature of the relevant actions, according to Souparna Lahiri. Unlike market-based mechanisms, NMAs are not transactions that involve compensation, he added.

“We see [NMAs as] a kind of contribution, a rightful contribution from the corporates or the governments who are historically responsible for [climate change],” Lahiri said during our session.

NMAs are grants, thus not loans, equities or green bonds, the climate campaigner and advisor for the Global Forest Coalition explained.

The group of Marcos Nordgren, climate specialist of Plataforma Boliviana Frente al Cambio Climático, has been exploring how NMAs could be implemented in an indigenous community that lies within the Amazon region, located to the north of Bolivia.

There, the group has been working with the community on enhancing its longtime tradition of producing and collecting Brazil nuts while avoiding deforestation. It estimates that avoided deforestation would lead to annual reductions of 100,000 tons of carbon emissions.

For now, the effort constitutes a mitigation measure. Nordgren noted that such effort will transform into what an NMA should be, which is that of a holistic, integrated action, when combined with adaptation measures. In the case of the community that he and his group have been working with, this would mean enabling it to have access to health services and water and energy sources.

Augusto Castro, who leads the Low-Emission Food Systems team at the Alliance of Bioversity-CIAT, revealed that his team at first explored the feasibility of implementing carbon markets in conflict-affected settings. The team realized later that carbon markets might not cover the full cost of reducing carbon emissions.

What his team found was that there exist financial and policy instruments that can incentivize the transition from a high-carbon emitting production system to a low-carbon one. In the case of Colombia, there is what is known as obras por impuestos, which gives the option to Colombian companies that have reached a certain amount of gross income per year – roughly USD400,000 equivalent in 2024  – to invest half of the taxes attached to that income in sustainable production in conflict-affected settings.

An example of a sustainable production system would be agroforestry, which is the predominant way of farming cocoa in Colombia. Agroforestry, in essence, is a mitigation and adaptation solution, which is a core feature of an NMA.

Castro, who also leads the scaling work package of the CGIAR Initiative on Low-Emission Food Systems, sees the potential of NMAs complementing carbon markets.

“At the end, what we want is to reduce emissions,” he said. “We are all in this fight against climate change, and maybe, that’s a way for achieving this.”

Our session allowed me to understand the concept of NMAs better. Operationalizing the concept though would require more discourse.

That said, there’s progress in that direction: Negotiators in Dubai came to a decision on upcoming activities of the work program on NMAs. Let’s see what happens next in Bonn!

You can watch the recording of the session on “How non-market approaches could look on the ground” by clicking the video below.

See more information on the CGIAR Initiative on Low-Emission Food Systems.

Photo credit: Ma. Eliza J. Villarino (left) talks with Souparna Lahiri (second from the left), Augusto Castro (middle, on the screen) and Marcos Nordgren (right) during the session on “How non-market approaches could look on the ground” at the Food and Agriculture Pavilion at COP28 in Dubai, UAE / CGIAR YouTube

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