ANALYSIS: Argentina at a 'turning point' as interest in carbon grows

Quantum Commodity Intelligence - A turning point has been reached in Argentina's carbon markets with growing interest in new projects, backed by stronger investor confidence due to improved macroeconomic conditions, although public policies are still needed to support sustainable growth.

The South American country has long lagged behind many of its neighbours in terms of new projects, but a new impetus for projects is gathering steam as inflation recedes and financing becomes less costly.

"This is a turning point for Argentina," Alfredo Nicastro, vice president of carbon markets at financial services outfit StoneX, told Quantum on the sidelines of the Argentina Carbon Forum, held in Cordoba this week.

"Previously, the economy was so bad amid hyperinflation that no one had the capacity to think about carbon; it was a complete blackout. But things have improved, and investors are feeling more confident to start new projects," he added.

The troubled economy, combined with the lack of specific public policies for carbon markets, has resulted in missed opportunities, such as reforestation projects, which have been more common so far in its smaller neighbour Uruguay.

"Argentina is no Brazil or Colombia when it comes to nature-based solutions for carbon markets, it doesn't have the Amazon, for example," Agustina Cundari, an ex-federal official who is now an international policy advisor at emissions trading lobby group IETA, told Quantum.

"So it needs to try harder than they do [to attract developers], including support from governments — if not from the federal governments, at least from the provinces — with targeted public policies to support new projects," said Cundari.

Argentina has the potential to "thrive" in several sectors, such as soil carbon, given it is one of the world's largest soybean and livestock producers, according to multiple sources.

The signs of improvement are also seen with the growing interest of international carbon standards, such as the US-based Climate Action Reserve (CAR) and Verra, sources say.

Earlier this year, CAR published a draft landfill gas protocol for Argentina, which came after one dedicated to livestock published in 2024.

"A couple of years ago, those guys didn't even know we were on the map; now they are all here," one source said, making reference to the fact that both standards sent representatives for the Argentina Carbon Forum.

Another source close to Verra recently told Quantum that there has been "strong interest" from potential developers in the country in its VM0042 Improved Agricultural Land Management methodology, with market players forecasting prices between $20 and $30 per tonne of CO2 equivalent (tCO2e).

Dollars

Even if the central government does not lend direct support to carbon projects, with the widely known opposition to climate topics by President Javier Milei, there has been a reckoning in Buenos Aires that selling carbon credits abroad may bring much-needed dollars to the heavily indebted country.

"They changed the tone," said IETA's Cundari.

"If their initial position was to be totally against [climate goals], they now understand the potential for exports of credits, and they have gathered a team that understands carbon."

Nazareno Castillo, head of the federal subsecretary for climate change, which has effectively replaced the now defunct Ministry of Environment, tried to reassure developers at the conference that the government plans to support voluntary carbon markets.

"For the time being, we will do all we can to support carbon markets' growth, at least concerning the issuance of mitigation contribution units (MCU)," said Nazareno.

MCUs are credits under the Paris Agreement's Article 6.4, which can be used for voluntary reasons by companies but are not authorised by a government for compliance use, such as the UN-backed aviation decarbonisation scheme Corsia, or by foreign governments to claim emissions reductions.

"In the future, we will focus on making sure international methodologies are compatible with the carbon inventory under our Nationally Determined Contribution (NDC), so we can eventually do corresponding adjustments. And then we will look into operationalising the trading of ITMOs [Internationally Transferred Mitigation Outcomes]," Nazareno said.

"However, before that, we need to understand our capacity to authorise ITMOs while still reaching goals set under our NDC [which outline countries' climate goals under the Paris Agreement]," he added.

Provinces

Despite Nazareno's words, the provinces of Córdoba, Corrientes, Entre Ríos, Formosa, Jujuy, Neuquén, La Pampa, Salta, and Tucuman signed an agreement to join efforts in building carbon markets, including by directly promoting the sale of credits.

Quantum understands the main goal of the agreement is to fill the vacuum left so far by the lack of concrete actions from the federal government, while increasing potential revenues that could come from carbon credits.

Some of those are actively pushing for carbon credits, such as Córdoba, which announced its own carbon standard to stimulate new projects at cheaper costs when provided to international standards.

The Neuquén government has also announced that it sees carbon credits as a key element to offset emissions under its important oil and gas sector, set to boost over the next few years.

Meanwhile, a source close to Misiones told Quantum that the province is on "the verge" of issuing jurisdictional REDD+ credits under Verra's Jurisdictional and Nested REDD+ (JNR) methodology, following months of delays.

"We ran into some mishaps, as it's taking longer than we thought for Verra to issue the credits, but we are very close," said the source.

Misiones had said in September last year that it was on the verge of issuing its first carbon credits under the JNR methodology. 

The province is in active talks with potential buyers, with a price "floor" hovering around $15/tCO2e, added the source.

The Quantum View: Stronger interest from potential investors, foreign standards, and even the federal government, which not long ago had toyed with the idea of abandoning the Paris Agreement, is great news for Argentina. It may finally start catching up with its neighbours on carbon credits, particularly as a complementary source of revenue for its agricultural markets, the crown jewel of the economy.