Nature’s Market Moment: Turning Ecosystems into Economic Climate Assets 

The scale of our climate challenge is vast: We need to cut 53 gigatons of global climate pollution per year. Achieving that goal requires solutions that can meet such a scale—and nature is possibly our greatest untapped opportunity to put a huge dent in this challenge. 
 
In earlier posts, I laid out the case for compliance carbon markets, one of the few tools proven to reduce emissions at scale by putting a real price on pollution. These markets are working right now for power, transport, and industry. I’m proposing that we can also use them to protect our most powerful climate asset: nature. 

When most of us think of “nature,” we think of the ecosystem services nature provides.  A healthy forest purifies water for our cities, a healthy ocean provides abundant fish, and healthy, biodiverse soils increase crop production. But in the background, nature is also a quiet economic engine driving our climate. 

By some estimates, the world’s forests, oceans, and soils store 1,000 times our annual carbon emissions. But that scale cuts both ways. If these natural carbon sinks are degraded, even small percentage losses in stored carbon could significantly increase the emissions we must manage each year. This is not just theoretical. According to World Resources Institute, the 2023 fire season in Canada released around 3 GT of carbon dioxide, around 3 times as much as all airplanes in the world. In the same year, global deforestation led to 3.7 million hectares of primary forest loss, releasing around 2.4 GT of carbon dioxide (Global Forest Review). But the key thing is, the reverse is also true: protecting and strengthening these systems means even modest gains in storage can materially reduce the scale of the problem. 

Put simply: our ability to make major progress on climate change hinges on our ability to harness the immense potential in nature. And if we solve nature for climate change, we get to enjoy the ecosystem services that come along with it.   

It’s the climate solution I’m most bullish about. 

In truth, I’m hardly proposing a new idea. For decades, scientists, economists, and policymakers have pointed to nature as a central part of the climate solution. EDF itself has upheld a long‑standing commitment to strengthening and scaling high‑quality forest carbon markets. But the world hasn’t yet leveraged compliance carbon markets to translate nature’s climate potential into durable, large-scale action. Naturally, the question that comes to mind is – why?  

First, there’s a common belief that we need to focus first on reducing industrial emissions, and to rely on nature only after all those possibilities are exhausted.  But the evidence points in a different direction: Nature holds enormous potential because it is one of our most affordable climate solutions at scale, so my view is we should leverage it to the maximum extent possible. Second, approaches that have used nature, like offsets and project-based credits, have suffered from credibility issues stemming from concerns about additionality, permanence, and leakage. If designed right, nature-based compliance markets help solve those challenges. 

Even focusing only on forests, it may be possible to store an extra 7 gigatons of emissions per year for under $100 per ton. A large share of that comes from reducing deforestation, a critical, relatively low-cost action that avoids emissions immediately. Forest restoration adds further potential to expand the scale (and lower the price tag) of this solution. These are some of our lowest-cost, highest-benefit climate solutions, and they are not yet being captured at scale. 

Compliance carbon markets are the key to leveraging the opportunity of nature as a climate solution. In the EU and in China, compliance markets are already reducing emissions at scale across sectors like power and transport. These markets work because they set a clear limit (or cap) on emissions and require a penalty or credited emissions reduction for every ton released above that cap. Applying that same framework to nature is, in my view, the most direct way to unlock its potential as a climate solution on a grand scale. 

 Here’s how a “nature-based compliance market” could work 

A country or jurisdiction would implement a cap on net carbon emissions from nature.  I say “net” because a given plot of land can both store more carbon (for example, through restoration) or release carbon (for example, through deforestation), so the cap would dictate the net total amount of emissions that is allowed in the jurisdiction (as an aside, the approach could also be used for net storage of carbon).Hypothetically, say the jurisdiction is Canada. If someone  wanted to cut down trees for timber, which released one ton of CO2, they would have to purchase one of the compliance credits from that cap. Conversely, if a cattle rancher restored a degraded Canadian grassland, thus storing one more ton, they would sell a credit and get paid.  

This approach aligns incentives because landowners would be paid to store more and have to pay to emit more, bringing land-use decisions into the same economic framework that already applies to industrial emissions. 

For a nature-based compliance market to work, design matters. 

Nature-based compliance markets would need to be designed with transparency, integrity and credibility baked in. That means integrating some of the same features that make existing compliance markets around the world effective and trustworthy. 

• First, the cap needs to apply at the level of the full jurisdiction, whether that is a state, country or other regional government. Keeping this at a larger scale helps avoid familiar problems like leakage and ensures that reductions are real at the system level.  

• Second, trading creates a price. A positive price signals that more carbon storage is real (i.e. “additional”); it also helps identify where the most cost-effective opportunities lie.  

• Third, the system has to operate over time. Operating the market over multiple decades gives confidence that the carbon being stored today will remain stored in the future. 

Bringing a nature-based compliance market to life 

There are many ways to bring nature into compliance markets, which is part of why this opportunity is so practical. 

One path is to build from systems that already exist. High-integrity jurisdictional REDD+, where governments manage forest carbon emissions across a whole jurisdiction, already includes many of the features a nature-based compliance market would need. Already in-place or under development in a number of tropical countries such as Ghana, Mexico, Costa Rica, and Acre state of Brazil, jurisdictional REDD+ programs primarily operate within voluntary markets, but they have been accepted in CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation), the first global, sector-wide emissions market for the aviation industry. We can expand on their use in CORSIA to support emissions reductions in other sectors.  

Another path is for jurisdictions that already run compliance markets for polluters, like California, the EU, or China, to bring nature in as a sector within their existing systems. That would allow them to apply the same market logic they already use for power or industry to forests, fire, or other natural carbon systems. 

A third option is a bilateral market between two countries: one with ambitious climate goals but relatively high abatement costs, like Singapore, and another with abundant, lower-cost nature-based opportunities, such as Ghana, Paraguay and Peru. That kind of arrangement isn’t hypothetical, it’s already happening. By expanding nature-based compliance markets, it could turbocharge such deals in the future to further lower costs while expanding credible mitigation. 

And a fourth option is for a nature-rich country to create its own nature-based compliance market, establish its credibility through strong design and measurement, and then sell units from that market to other countries or companies with climate commitments. 

The building blocks are already in front of us. Now we need a serious effort to connect them, prove the model, and scale it. 

Measuring and verifying emissions reductions with emerging tech and modeling 

A natural question is whether we can measure changes in carbon storage in nature with enough precision to support a market. That question is paramount: integrity is critical to a well-functioning market. 

Fortunately, we have high-integrity standards and market-grade accounting that can help determine whether credits pass muster. Likewise, advances in satellite monitoring, sensors, and modeling over the past decade have significantly improved how we track land use and carbon dynamics. While the systems are still evolving, we have more tools, frameworks and guardrails to ensure these credits deliver real emissions reductions with transparency and integrity that will be required by a compliance market. 

Protecting nature pays off for people, beyond the climate benefits 

Measures to protect nature come with added benefits. Protecting and restoring ecosystems improves water quality, reduces wildfire risk, supports biodiversity, and strengthens local livelihoods. In many cases, these co-benefits are as significant as the pollution reduction itself. In some contexts, even more so. 

This is part of what makes nature-based approaches distinct. They deliver multiple economic and social returns from the same underlying investment. 

We know what nature can do, but we have not done justice to building the systems needed to harness it. There is widespread agreement that we need to invest more in nature: the United Nations shows that we are investing $220 billion per year, but the need is closer to $570 billion a year by 2030.  However, the big question is: What investments will actually be effective? I think nature-based compliance markets help answer that question. 
 
Naturally, there are many details to work out and much learning and consultation to pursue. Compliance markets have shown they can turn intent into action. Extending that same discipline to nature would bring an enormous and underused solution into action.