3 Countries Awarded New PMR Grants for Carbon Pricing Work

November 7, 2014

Meredith Ellen McGreavy/World Bank

  • The Partnership for Market Readiness brings together more than 30 countries, including some of the world's fastest growing economies and largest greenhouse gas emitters, to design and develop the carbon pricing mechanisms of the future.
  • Several of the countries involved have carbon pricing plans in progress, including South Africa and Chile, both with carbon taxes planned, and China, which is developing a national carbon market.

As countries begin to shift toward low-carbon development, momentum is building around different approaches to pricing greenhouse gas emissions. South Africa and Chile are preparing to implement carbon pricing policies that tax carbon. China plans to launch a national emissions trading system. Vietnam, Mexico, Indonesia, and Brazil are all working on national plans to lower their greenhouse gas emissions.

This week in Santiago, Chile, the Partnership for Market Readiness (PMR) brought together representatives from more than 30 countries, including some of the world’s largest and fastest growing economies and emitters, to discuss lessons learned and good practices for putting in place carbon pricing policies and systems that can begin to bring down greenhouse emissions. The talks built on momentum from the UN Climate Leadership Summit, where 74 national governments and over 1,000 companies announced support for a price on carbon.

The PMR, housed at the World Bank, is a country-led platform that helps prepare governments to develop and implement market-based instruments that support carbon pricing policies. Countries choose different instruments based on their national goals and priorities, and the PMR provides systematic, holistic and long-term support to these countries. 

" We are convinced that it is possible to uncouple economic growth from growing energy consumption. "

Máximo Pacheco

Minister of Energy, Chile

The partnership recently awarded $3 million grants each to Brazil, Ukraine, and Vietnam to implement national plans to lower emissions and move toward low-carbon growth paths. Brazil will use the grant to carry out analytical work on a carbon tax and the Ukraine will use the funds to build a monitoring, reporting and verification (MRV) system for a future emissions trading scheme. 

Representatives from Vietnam presented their proposal at the meeting for a national sector-wide program that will reduce emissions and earn carbon credits, a program that might be scaled up in the future. They plan to use the funds to help develop necessary infrastructure, including setting an emissions baseline and creating an MRV system.

"This significantly contributes to the implementation of important climate change policies in our country, especially greenhouse gas emission reductions,” said Truong Duc Tri, deputy director general of the Department of Climate Change at the Vietnam Ministry of Natural Resources and Environment. “Through the implementation of credited mitigation actions in the steel and solid waste sectors, this project helps our government take important steps to analyze economic policies that shift carbon use and create opportunities for investors to develop sector-wise actions that support growth models to develop a low-carbon economy.” 

Chile takes an active lead in South America

During the PMR Partnership Assembly meeting this week, Chilean Minister of Energy Máximo Pacheco discussed the progress in PMR countries. He said it was motivating to know that a growing number of middle-income countries are exploring the use of carbon pricing instruments.

Chile itself is showing the way with plans to become the first country in South America to implement a carbon tax. On September 29, Chile approved a law which goes into effect in January 2017 and that will tax CO2 emissions from boilers and turbines with an installed capacity of 50MW thermal, as well as diesel passenger vehicles and local pollutants. 

Chile’s energy sources have traditionally been fossil fuel-based and, as the minister pointed out, greenhouse gas emissions doubled between 1990 and 2010. Electricity generation, transportation, and mining were the main sources. However, Chile is committed to reducing emissions by 20 percent by 2020 and, as part of their national energy agenda, has pledged that 45 percent of power generation installed between now and 2025 will come from renewable energy sources.

“The energy agenda is our roadmap for the next few decades and certainly will be part of a conversation on the strategic vision that we have as a country on the issue of climate change,” said Minister Pacheco. “We want to prioritize energy efficiency as a clean, safe and economical way to fulfil the demand for energy, thus breaking with the dominant paradigm for so many decades. We are convinced that it is possible to uncouple economic growth from growing energy consumption, as other countries have done.”

Other countries are also moving forward.

South Africa’s carbon tax on emissions is scheduled to go into effect in 2016, and by 2020 it aims to reduce its emissions below business-as-usual by 34 percent. The PMR is expected to approve a $5 million grant to South Africa at the next PMR assembly meeting in March 2015 to help implement the carbon tax, in particular focusing on how to use the tax revenue, how best to address competitiveness concerns, and how to implement the MRV system which is fundamental to verifying the emission reductions.

China has launched cap-and trade pilots in seven cities and provinces, which are together already trading 13.5 million tons of CO2 at a total value of RMB 512 million Yuan (approximately US$84 million) and are being used to inform a nationwide emissions trading system to launch as early as 2016. The PMR is supporting this preparation and design phase with an $8 million grant. As explained by Shu Wang of the Climate Change Department at NDRC at the conference, China is already working on a national registry and monitoring system.

Climate action is an economic issue

Climate change is about much more than environmental impact. The latest Intergovernmental Panel on Climate Change report makes clear that it is affecting countries’ economic growth, development, energy security, and their trade and competitiveness today, said Vikram Widge, head of climate finance and carbon finance at the World Bank Group.

“Putting a price on carbon needs both political leadership and a sound technical basis – which is what the PMR provides support for – to ensure the design of stable and predictable policies that will re-direct investment flows to low carbon resilient development,” he said.