Background and Objectives
The World Bank Group (WBG) believes that linking and other forms of international cooperation will have an important role to play in the successful, cost-effective implementation of the Paris Agreement. In contrast to the Kyoto Protocol, Article 6 of the Paris Agreement allows countries to transfer mitigation outcomes from any mechanism, measure or protocol. By potentially expanding substantially both the geographic scope of linking opportunities and the instruments which may be linked, the Paris Agreement could open the door for operationalizing the next generation of climate markets, and support the achievement of the global ambition promised in the Agreement.
Against this backdrop, the Carbon Markets and Innovation (CMI) Practice has set as its principle mandate to explore the specific role of climate markets under Paris, and develop and pilot the required architecture to facilitate the generation and transfer of mitigation outcomes. Towards this mandate, the CMI is leveraging programs such as the Carbon Pricing Leadership Coalition (CPLC), the Partnership for Market Readiness (PMR) and the Networked Carbon Markets (NCM) initiative, to provide advocacy, advisory and knowledge services needed to operationalize cooperative, bottom-up approaches envisaged in the Paris Agreement.
Specifically, the NCM initiative is working with Governments, private sector, academia and civil society to develop the tools, services and institutions needed for linked international climate markets that accommodate a "patchwork" of different domestic climate actions. The end-goal is to enhance the transparency and comparability of heterogeneous climate actions in order to enable more countries to participate in liquid and scalable international climate markets, while still preserving the environmental integrity of the trade. Furthermore, it is envisioned that the mechanisms developed by the initiative would have multi-purpose, stand-alone benefits, in addition to supporting linkage. For instance, comparing the mitigation outcomes of actions through a common, robust and transparent assessment framework could enable benchmarking of climate mitigation programs, policies and commitments; guide financing and capacity building priorities; track and monitor progress towards NDC implementation; and incentivize greater ambition through a race-to-the-top.
Highlights of Fiscal Year 2017
NCM Concept Development
Pertaining to services, market infrastructures and institutional frameworks required for NCM
- Partner with CPLC to develop the METRIC Guidelines in order to make the case for expanding the range of approaches to climate market linkages under the Paris Agreement
- Work with teams across WBG, including IFC and Global Practices, to progress WBG’s Strategy for operationalizing Article 6
Country Engagement & Pilots
Application of tools, services and institutions, as well as outreach in the form of consultations and workshops
- Apply the MAAP to more than 140 programs globally to enable “finance-ready” and “market-ready” mitigation actions
- Build India’s technical readiness to link “market-ready” mitigation actions to regional and international climate markets through analytical work
Modelling & Data Assessments
Refine methodologies for the generation and issuance of mitigation outcomes. Model and simulate different linking scenarios
- Provide financial and technical contribution to the Climate Transparency consortium to progress the composite mitigation index
- Share lessons learned and collaborate with the Initiative for Climate Action Transparency (ICAT) and Gold Standard to refine and develop assessment methodologies for the generation and issuance of mitigation outcomes
- Finalize the preliminary modelling study to estimate the financial and mitigation implications of linking China, Mexico and South Korea’s cap-and-trade systems
Modernize infrastructures to facilitate more efficient and secure data collection processes and market transactions
- Partner with PMR to conduct feasibility studies on the application of emerging technologies such as Blockchain to modernize registry functions for climate markets and linkage.
- Develop the MAAP online interface to generate and manage up-to-date MAAP scores, and increase access to datasets generated by the MAAP for benchmarking and comparison