VCMI, GGGI launch research on carbon markets for climate adaptation funding

The Voluntary Carbon Markets Integrity Initiative and the Global Green Growth Institute are starting research to help climate-vulnerable countries tap carbon markets for adaptation finance. The work comes as developing countries face an estimated $310 billion to $365 billion annual adaptation gap by 2035 and look for new ways to finance resilience plans.

Why it matters: - Climate-vulnerable countries face a widening adaptation finance gap that could reach $310 billion to $365 billion a year by 2035. - International public flows for adaptation were $26 billion in 2023, down from $28 billion in 2022. - Carbon markets could give governments another way to fund climate resilience, not just emissions cuts. - The issue is growing in importance after last year’s UN climate talks in Brazil called for tripling adaptation finance by 2035.

What happened: - The Voluntary Carbon Markets Integrity Initiative and the Global Green Growth Institute are launching new research on how carbon markets can help finance adaptation plans in climate-vulnerable countries. - The research will begin over the summer, with a report expected by early November. - The findings will feed into GGGI’s Carbon Transaction Facility Readiness program and VCMI’s Access Strategies Program.

The details: - The research will examine policy options and readiness gaps governments face when trying to use carbon markets for adaptation finance. - It will look at how vulnerable countries can engage with carbon markets to maximize carbon finance for adaptation. - The work will also assess implications from both a host-country governance perspective and a deal and trade perspective. - Carbon markets are mainly used as a climate mitigation tool, but host countries are increasingly looking for adaptation co-benefits. - Projects that can deliver both emissions cuts and adaptation support include blue carbon, agroforestry and landscape restoration. - Agriculture is highlighted as a major opportunity in many climate-vulnerable countries because it can improve resilience while generating carbon credits. - Sylvera found that multi-benefit projects can command premiums in the voluntary market up to three times higher than projects with the lowest co-benefit scores. - Modeling cited in the release suggests carbon credits could bring in as much as $50 billion for adaptation if they make up one-fifth of revenue in nature-based resilience solutions.

Between the lines: - The research signals a shift from viewing carbon markets purely as a mitigation tool toward treating them as a potential financing channel for adaptation. - For governments with limited public funding, the key question is not whether carbon markets can help, but whether national rules and deal structures are ready enough to capture the value. - The emphasis on policy and regulatory frameworks suggests access to carbon finance may depend as much on governance capacity as on project availability.

What's next: - VCMI and GGGI will produce the research over the coming months. - The report is expected by early November. - The findings are meant to support more targeted technical assistance on Article 6 strategies and broader outreach to policymakers and market partners. - Governments looking to use carbon markets for adaptation will likely use the report to test whether their frameworks are ready to compete for capital.

The bottom line: - Carbon markets are being positioned as a possible new funding stream for adaptation, but countries will need the right policy and market structures to benefit.