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climate finance

Carbon markets in the Paris Agreement - an early holiday gift

Vikram Widge's picture
 Max Edkins / World Bank
COP21 conference center at Le Bourget, near Paris. Photo: Max Edkins / World Bank


Last Saturday, UN climate negotiators from 195 countries agreed on a historic climate change accord in Paris after two weeks of intense negotiations. While many of us were hoping for a hook that would support the use of markets, we were happily surprised to see the extent and detail on carbon markets that was ultimately included in the Paris Agreement.

The trillion dollar challenge

Abhishek Bhaskar's picture

 

According to the International Energy Agency (IEA), full implementation of countries’ submitted pledges for low-carbon development will require USD 13.5 trillion in investments in energy efficiency and low-carbon technologies from 2015 to 2030.  That’s almost USD 1 trillion every year. This means all hands need to be on the deck if the global community is to address one of the biggest development challenges of our times.

Time for financial institutions to mainstream climate

Jane Ebinger's picture



Today, a group of 26 financial institutions from across the globe, including the World Bank Group, launched five voluntary Principles for Mainstreaming Climate Action within Financial Institution. The Principles are meant to support and guide financial institutions moving forward in adapting to and promoting climate-smart development, and have been developed based on practices implemented by financial institutions worldwide over the last two decades. 

De-risking climate-smart investments

Rachel Stern's picture
 CIF / World Bank
The city of Ouarzazate in Morocco will host what will become one of the largest solar power plants in the world. Photo: CIF / World Bank


The investment needs for low-carbon, climate-resilience growth are substantial. Public resources can bridge viability gaps and cover risks that private actors are unable or unwilling to bear, while the private sector can bring the financial flows and innovation required to sustain progress. For this partnership to reach its full potential, investors need to be provided with the necessary signals, enabling environments, and incentives to confidently invest in emerging economies.  

Marching forward: China is creating the world’s largest market-based carbon pricing system

Vikram Widge's picture
China – the world largest emitter of greenhouse gases – is implementing a national carbon market in 2017

During his visit to Washington last week, China’s President Xi Jinping confirmed that the world’s largest greenhouse gas emitter, which has pledged to reduce its carbon intensity and reach a peak of overall emissions by 2030, will use a cap-and-trade market approach to help realize this. 
 
China already has 7 pilot markets in cities and provinces in place that cover 1 billion tons of greenhouse gas emissions annually. Under the national scheme, now to go live in 2017, this could increase to 4 billion tons according to Chinese researchers - making it the world’s largest national emissions trading system.

It’s an exciting step and demonstration of China’s commitment to achieve its low carbon goals. 

Faster track to better carbon prices

Grzegorz Peszko's picture
Carbon pricing instruments implemented or scheduled for implementation,
with sectoral coverage and GHG emissions covered.


​Many of my compatriots in Poland, where over 90 percent of power generation comes from burning coal, are concerned that the EU climate policy is a risky outlier.

​They worry that the EU Emissions Trading System may expose domestic industry to unfair competitition and cause companies to move production to countries where emission costs are lower, something called “leakage”.

The two reports recently released by the World Bank may change this perception.

Putting a price on carbon, one jurisdiction at a time

Thomas Kerr's picture
CPLC Design Meeting at World Bank Group Headquarters
Credits: Max Thabiso Edkins


This week, the World Bank Group released the latest version of our annual State and Trends of Carbon Pricing report. It reports that today,39 nations and 23 cities, states or regions are using a carbon price.

​This represents the equivalent of about 7 billion tons of carbon dioxide, or 12 percent of annual global greenhouse gas emissions.

Climate action does not require economic sacrifice

Rachel Kyte's picture

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Harvesting rice-fields in a White Thai village in Mai Chau, Hoa Binh province, northern Vietnam.
Harvesting rice-fields in a White Thai village in Mai Chau, Hoa Binh province, northern Vietnam.

More than two decades ago, the world agreed on the need to confront climate change.

The U.N. Framework Convention on Climate Change (UNFCCC) emerged in 1992, spawning a variety of negotiating forums with the goal of preventing catastrophic impacts from planetary warming caused mostly by polluting societies.

It's easy to overlook the progress that has occurred since, because we still have so far to go. Droughts, flooding and cyclones that already seem to be the norm are just the latest warnings of what is coming, and preventing much worse requires immediate and aggressive action to drastically reduce greenhouse-gas emissions.

Emissions trading in China: Early lessons from low-carbon pilots

Lasse Ringius's picture

 

A local emissions exchange in China. Lasse Ringius/IFC
A local emissions exchange in China. Photo: Lasse Ringius/IFC

 

China, the biggest source of CO2 emissions globally, accounts for more than 27 percent of the world's emissions. China is the first developing country to control CO2 emissions through a cap-and-trade system. Once a national carbon market is established, which could be as early as 2017, China will overtake the European Union (EU) to become the biggest carbon market in the world. The Chinese market will significantly alter the balance of power in global carbon markets in the mid-term. Significant challenges remain, and the IFC, a member of the World Bank Group, is helping China to overcome them with a project in Shenzhen that addresses key barriers to carbon trading.

Fundamentals of Emissions Markets

Once a liquid carbon market has been created, trading will mostly happen via forward and futures contracts. These instruments help companies to protect themselves against volatile prices and to hedge their carbon position. In the EU, exchange platforms emerged as one of the main mechanisms aimed at simplifying transactions, reducing risk and facilitating transparent pricing. As trading platforms, exchanges can facilitate price discovery and offer hedging products.

The financial sector and financial institutions (FI) play a fundamentally important role in an emissions trading system. It is to be expected that most companies in China will trade with the help of intermediaries; only large emitters will trade directly at an exchange. Thus, FIs will be in a position to offer trading-related services, as well as advisory products, to clients subject to mandatory CO2 regulation.

Going, going, gone – timeline of an innovative auction that aims to reduce methane emissions

Scott Cantor's picture
Pilot Auction Facility for Methane and Climate Change Mitigation (PAF)








Private investors bought price guarantees for 8.7 million tons of methane emission reduction in an innovative auction, attracting bidders from across the globe.
 
The Pilot Auction Facility for Methane and Climate Change Mitigation (PAF) provides support to businesses that invest in climate friendly projects.  The first pilot auction was held online on July 15, 2015, auctioning off price guarantees, or put options, targeting methane reducing projects. 
 
By providing a floor price for captured methane, the PAF offers private investors a financial incentive to fund carbon capture. Using an auction maximizes the impact of public funds dedicated to slowing climate change.
 
Here’s my journal entry from the day – July 15 – auction day (at last!)

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