How can carbon markets strengthen communities' resilience to tropical cyclones?

As the third United Nations Conference (UNOC3) has come to an end, the protection of the Ocean and all marine ecosystems has never been more relevant. Throughout the last two weeks, we have heard of the urgent need to protect and sustainably manage our ocean and its vital ecosystems. Covering over 70% of the planet, the ocean plays a crucial role in regulating climate, supporting biodiversity, and providing food and livelihoods for billions of people. However, increasing threats such as; pollution, overfishing, and climate change are pushing marine ecosystems to the brink. UNOC3 serves as a global platform to mobilize action, strengthen international cooperation, and drive progress toward Sustainable Development Goal 14: Life Below Water. 

As part of our participation in UNOC, ClimateSeed joined AXA Climate to highlight the role of parametric insurance in protecting marine ecosystems, specifically mangrove forests. Since July 2023, ClimateSeed has been collaborating with AXA Climate to develop and implement a parametric insurance product for one of our flagship blue carbon projects.

About The Ejido San Crisanto 

This project, the Ejido San Crisanto, is located on the Northern part of the Yucatán Peninsula, on the coast of the Gulf of Mexico. The community received a land claim under the Ejido System, which is the land tenure right in Mexico that came about as a result of the Mexican Revolution and the Agrarian Reform. The community received approval and designation by federal mandate in 1980. This means that 35 communal landowners received communal land ownership of over 1,400 hectares, including about 800 hectares of mangrove forest. Today, the community consists of 150 Mayan families and around 650 inhabitants. 

Given its coastal position in the Caribbean Hurricane Zone, the community is highly vulnerable to hurricanes. Historically, the community has suffered from various hurricanes, including Hurricane Gilbert in 1988 and Roxanne and Opal in 1995, which struck the region within two weeks of each other. This said, the most notable hurricane struck in 2002, Hurricane Isidore, which destroyed 99% of the community's mangroves. 

In response to these events, especially after Hurricane Isidore, the community came together to carry out cleanup efforts. This included channel dredging and clean-up, which allowed natural mangrove regeneration, cleaning of the secondary channels to facilitate the free flow of water between the lagoon systems and communal lands, and both hydrological restoration and the construction of additional channels. These clean-up efforts, along with assisted natural reforestation, allowed the regrowth of the mangrove forest. The community carried out all these activities in the days and weeks following the hurricane. Their proactive restoration work laid the foundation for a model blue carbon project.

The First Blue Carbon Project in Mexico

In April 2022, the Ejido San Crisanto became the first blue carbon project certified under Climate Action Reserve. This milestone reflects years of community-led ecosystem restoration, scientific research, and financial support from ClimateSeed.

Today, the project undertakes numerous activities to preserve its ecosystem and monitor its biodiversity, including the Mexican crocodile (Crocodylus moreletii) and migratory bird species, such as the pink flamingo (Phoenicopterus ruber). The community sustainably manages natural resources, builds community capacity, and has improved the delivery of healthcare and educational services. The primary focus is cleaning and maintaining local channels and cenotes (natural sinkholes) to prevent siltation, which has detrimental effects on the health of these local ecosystems. 

As a result of restoration activities, the mangrove forest benefits from clear and open channels, which also enable the community to provide boat trips and wildlife observation excursions to visiting tourists. Today, along with the carbon revenues, ecotourism has become an essential source of income to the community, welcoming around 50,000 tourists every year. 

More about the blue carbon project here. 

Innovative Parametric Insurance

As a result of the significant work carried out by AXA Climate, the community was able to enroll in insurance coverage for hurricane losses, with the Ejido San Crisanto as the policyholder and beneficiary. This parametric insurance provides swift financial payouts following a hurricane of a particular category, so that the community can receive the necessary funds to carry out channel cleaning and drainage to prevent further ecosystem damage and limit the mangrove damage. Additionally, the community is covered for any business interruption related to ecotourism losses.

The insurance premium is directly paid by the community through the funds received from the carbon credit sales that are generated annually under the Voluntary Carbon Market. This not only provides the community with the funds to protect its most vital natural resources, but also provides quality to the carbon credit buyer that the ecosystem is protected against the threat of disastrous natural events, such as hurricanes. Providing both quality and certainty for the blue carbon credits generated by the Ejido San Crisanto. This creates a circular model of resilience, where revenue from Nature-based Solutions funds disaster preparedness, while assuring carbon credit buyers of the long-term stability and protection of the ecosystem.

Why is it important? 

Ejido San Crisanto exemplifies how parametric insurance and blue carbon credits can work hand-in-hand to build resilience, protect ecosystems, and empower communities. As climate change continues to escalate natural disasters, innovative financial mechanisms like this can deliver both environmental impact and economic security. The model is scalable and offers a path forward for coastal communities around the world.

More information on the insurance coverage here.