They lie along the coasts, humble ecosystems that few people pay much attention to: seagrasses, mangroves and salt marshes. While forests are grandly pronounced to be Earth’s “lungs” because they absorb carbon dioxide (CO2) and release oxygen, these coastal ecosystems that occupy only about .2% of the globe actually lock in up to 10 times more CO2 than terrestrial forests. And yet, according to global economic calculus, this “blue carbon” is nearly worthless.
“We have something (with a value) that’s bigger than zero, but the economy says it’s zero… we have an economy problem, and we have an ecology problem and we have a society problem,” said Nuno Gaspar de Oliveira, CEO of Natural Business Intelligence, a consultancy focused on Nature Based Solutions (NbS) for climate change.
De Oliveira spoke at an event entitled Blue Carbon and the Natural Capital of the Ocean presented by the Lisbon Ocean Professionals Network December 5. He was joined on the panel by moderator José Gamito Pires, Blue Finance, Climate Adaptation, Sustainability and Innovation for International Finance Corporation; Prof. Gonçalo Calado of Lusofona University, Prof. Joao Vaz of Nova SBE; and Cristina Melo Antunes of Santander.
Blue carbon’s ability to provide ecosystem services–from preventing coastal erosion to absorbing the heat and CO2 from human-driven climate change–should make it invaluable. But the extraction-oriented economy makes it nearly impossible to fairly value these ecosystems. Economic models can calculate the value of coastal resilience in terms of money saved for insurance companies and property owners; and habitat protection can be valued for its impact on fishing profits, but oxygen production and carbon sequestration can be challenging to put on a balance sheet.
Governments and NGOs have been the main source of funds. For example, Gonçalo Calado, Professor of Ecology and Marine Biology at Lusofona University in Lisbon and a researcher at MARE–Marine and Environmental Sciences Centre, mentioned the opportunity afforded by EU’s Nature Restoration Law. The law was put into place to restore ecosystems, habitats and species across the EU’s land and sea to enable the sustained recovery of biodiverse and resilient nature, as well as contribute to EU’s climate mitigation and international commitments.
“In the EU 81% of habitats are in poor status,” the regulation notes. “Every euro invested into nature restoration adds €4 to €38 in benefits.” The restoration targets cover at least 20% of the EU’s land and sea areas by 2030, and ultimately all ecosystems in need of restoration by 2050.
By mid 2026, Calado notes, countries must submit their National Restoration Plans; so this is a perfect time to put blue carbon high on the agenda.
“As it is mandatory, we are in the right time to discuss this and debate what we want to do as a society concerning ecosystem restoration and therefore blue carbon,” he said.
One such project, called A-AAgora, is implementing and monitoring blue carbon restoration projects in Portugal, Ireland and Norway, partly in hopes of finding ways to finance them ongoing. The €8.5 million project involves 10 national entities and 18 European partners. Panelist João Vaz, postdoctoral researcher at Nova School of Business and Economics, said he is part of a team “working on creative financial mechanisms by which we could sustain these activities for a long-term impact.”
A-AAgora is trying to restore a native species of seagrass that has declined considerably in Central Portugal because of seaport infrastructure development and operations. They’re measuring how much carbon the restored ecosystem can capture, hoping to use carbon offsets as a funding mechanism. But there are key problems to solve.
One, Vaz said, is that blue carbon is only peripherally considered by the carbon markets. They aren’t part of the regulatory carbon markets businesses use to stay compliant. And while the three largest international voluntary carbon market platforms have approved methodologies for certifying blue carbon credits, there aren’t many certifiable blue carbon projects yet.
“There’s very little data on the extent and characterization of these blue carbon ecosystems,” Vaz said. “In general, most countries don’t have periodic official mapping of blue carbon ecosystems nor their capacity to sequester carbon. So we’re talking about very high upfront costs and very expensive monitoring and verification methods underwater, much more expensive than it is in terrestrial ecosystems. This would not necessarily be a problem if the price at which we could sell these credits would be sufficiently high, but that’s not really the case.”
Generally he said, credits for voluntary carbon markets go for about €10 a ton, which isn’t enough to cover the costs of restoration, measurement or monitoring. “For context and comparison,” he said, “in the regulator EU ETS emissions trading scheme, the price hovers around €50 to €75 a ton.”
Panelist Cristina Melo Antunes, business leader in sustainable finance and ESG for Santander Bank, noted that this is partly because of how nascent blue carbon is. But she expects movement. Antunes noted that the European Investment Bank committed to dedicating more than 50% of its operations financing to climate action and environmental sustainability by 2025.
“2025 is tomorrow,” Antunes said. “We are in December.”
Risky or unprofitable ventures are unlikely to find bank funding, she said, though if they’re sustainable they can sometimes benefit from braided or blended finance in which public and private funders work together. The more data projects collect and share, as with A-AAgora, the better chance they have of getting funding.
“We can partner with governments that can partner with venture capital, they can partner with private equity, they can partner with banks so that we can multiply the public resources and we can increase the financing to these projects,” she said.
She mentioned a document published in 2023 entitled Bonds to Finance the Sustainable Blue Economy, A Practitioner’s Guide, that was a joint collaboration between the Asian Development Bank (ADB), International Capital Market Association (ICMA), International Finance Corporation (IFC), United Nations Environment Programme – Finance Initiative (UNEP FI), and United Nations Global Compact (UNGC).
“The purpose of this is to provide a clearer view of the eligibility criteria that can be used,” Antunes said. “It was built on an existing framework…on existing guidance. So it was not something made from scratch… The reason that this is important is because with this we can help to reduce the information asymmetry that still exists.” With a more standardized system, she said, more blue carbon NbS projects can get funded.
Additionally, there are more vehicles for funding than many people realize. Blue bonds are growing in popularity. And Nuno de Oliveira noted a few others including debt swaps and parametric insurance.
“Most of the debt we have in the world it’s unpayable,” he said. “If you add up all the debt in the world, all the debt of all the countries in the world it’s actually. 7.3 times bigger than the global GDP.” Debt for Nature Swaps allow debt forgiveness for a country that invests in maintaining, restoring or conserving, wetlands, marshes, forests…. So that’s one funding vehicle.
Parametric insurance is another. While most insurance policies leverage against the risk and assess payouts on a case-by-case basis, parametric insurance is based on parameters beyond which the agency will immediately pay for a regulator to fix the situation. For example, if there’s a hurricane of a specific magnitude, a certain amount will be paid out for repairs and resilience. De Oliveira said this type of insurance is greatly accelerating the speed of insurance settlements.
But as De Oliveira noted, the key is to shift societal perspectives on what’s valuable. A private jet that pumps out massive amounts of CO2 is considered solid collateral, whereas a project that costs the same but absorbs CO2 and generates oxygen for free is considered a questionable investment.
Solving that problem is the key to unlocking blue carbon restoration.
