The Paris Agreement allows for increased flexibility for countries to determine their mitigation targets in the form of nationally determined contributions (NDCs), recognizing countries’ differing needs and circumstances. While this bottom-up approach enables countries to deliver on their commitments through diverse interventions, recent UNFCCC reports have noted that countries are still far from the global Paris Agreement goal of reaching net-zero by 2050.
As of April 2021, there are 64 carbon pricing initiatives in operation and three scheduled for implementation covering over 21% of global GHG emissions. More countries are considering carbon pricing to meet the goals of the Paris Agreement.In addition, carbon pricing can offer significant cost savings and become an important source of revenue.
While carbon pricing policies and international carbon markets are increasingly diverse to accommodate countries’ NDCs and domestic priorities, the diversity of approaches limits comparability between climate actions and increases the complexity of market integration.
The World Bank developed two jurisdictional assessment tools under the Mitigation Action Assessment Protocol (MAAP) – the Domestic Carbon Pricing Instruments (MAAP-CPI) and the International Transfer Readiness (MAAP-ITR) in 2020. MAAP has been evolving since 2015 as a standardized tool for assessing diverse mitigation actions at the project and program level. As mitigation policies and instruments like carbon pricing and carbon markets become increasingly interlinked with a country’s overall strategy to meet their NDCs, the World Bank saw the need to develop a framework at the country level to guide countries on where to start implementing domestic and international carbon pricing mechanisms.
The tools help identify gaps and capacity building needs beyond project level assessments. Their features include an assessment of the regulatory and policy framework that countries must put in place, the institutional framework and processes needed for informed and consistent decision making, technical infrastructure requirements, alignment of mitigation activities and carbon pricing policy with other jurisdictional policies including the NDCs. The tools are a self-assessment and can be repeated in different moments to reflect the evolution of a country’s readiness for climate markets.
- The MAAP-CPI tool is meant to assess the level of development toward the design and implementation of CPIs. MAAP-CPI is designed to support countries in evaluating their ongoing efforts for CPI integration into the country’s overall policy package, and to assess the existing level of development of CPIs.
- MAAP-ITR aims to assess whether a country has the necessary institutional framework and infrastructure in place to participate in international carbon markets, such as Article 6 of the Paris Agreement, Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), and voluntary carbon markets. The first version of the MAAP-ITR has been piloted in 13 countries.
Using these tools, countries at different stages of policy and program development can self-evaluate the readiness and robustness of their carbon pricing policy and instruments, identify gaps and capacity building needs, track progress, and help improve their instruments over time. This could in turn increase trust and transparency across climate policies and actions in different countries and promote market integration in the long run.
These two new MAAP tools were piloted in countries with different climate policies and market-based mechanisms strategies, in collaboration with partners from the Partnership for Market Readiness (PMR) such as Chile’s Ministry of Energy, Mexico’s PMR program, Peru’s PMR program, and Senegal’s Ministry of Environment and Sustainable Development. The piloting experience showed that the tools can provide insight on strengths, critical areas for development, and help countries plan the timeline for design and implementation. The assessment framework provides the reasoning for the scoring of each indicator, and the quantified result in each module can give countries a sense of the effort needed to fill in gaps in key areas. The assessment process can prompt a policy dialogue across key stakeholders, since it involves document reviews, meetings, interviews, and consultation with experts.
Given the urgency for increased global climate action and the challenges in comparability of diverse climate actions, the development of tools such as MAAP-CPI and MAAP-ITR provide an opportunity to reflect on how to develop and implement carbon pricing and provide critical feedback on issues to consider when developing the next generation of international carbon markets. MAAP recognizes the diversity of conditions in countries that begin their carbon pricing journey and helps arrive at a transparent assessment of the level of readiness and identify areas for strengthening. The MAAP tools can help assess and benchmark climate actions, be used internally across key ministries and stakeholders, and enable learning-by-doing.
To start using the tools today, visit the MAAP page.
To learn more, watch the video of the MAAP-CPI and MAAP-ITR.
For more information on the MAAP tools, how they work and piloting experience, please refer to the recently released MAAP Summary report, “Enhancing Carbon Pricing & International Carbon Markets Readiness through the Mitigation Action Assessment Protocol”.