Nature-based solutions for climate protection: market-based instruments to support climate-friendly soil management

Soils play a special role in climate protection: Soils store more carbon than all vegetation and the atmosphere combined and act as a sink for greenhouse gas emissions. In addition, the use of soils has other environmental impacts on, for example, biodiversity and water quality, and climate-smart soil use can have a positive impact on soil health and thus on climate adaptation goals and food security.

Market-based instruments and other forms of Results-based Payments (RBP) could play a role in promoting sink-building activities. However, such instruments simultaneously pose risks and challenges in terms of their environmental and social impacts. Key challenges include the additionality of emission reductions or sequestration resulting from the proposed activity, as well as the permanence of sequestered CO2, uncertainties in the accounting of GHG emissions and sequestration in the LULUCF sector, uncertainties in the establishment of reference scenarios, and the risk of leakage. In addition, general challenges of market-based instruments such as effective MRV systems also play a role in the implementation and impact of projects in the land-use sector. In addition, environmental services and functions of soils as complex ecosystems need to be considered in the design of climate change mitigation measures to avoid conflicting goals. Only if these risks are adequately addressed can market-based instruments contribute to a fundamental transformation towards climate-friendly land use.

In this project, Oeko-Institut, in cooperation with Ecologic Institute and Giessen University, analyzes measures for climate-friendly soil use and challenges and opportunities of market-based instruments to promote these measures. In addition, current legal and political framework conditions for nature-based solutions and climate-friendly soil use will be examined.

The project has two main objectives:

• Classification and assessment of the global potential of nature-based solutions to avoid, mitigate and sequester greenhouse gases;

• Concrete analysis of specific measures for climate-friendly soil use and evaluating the opportunities and risks of market-based instruments to promote these measures in the land-use sector.