New climate finance model in Morocco rewards low-carbon policies

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Morocco, the host of COP22 happening this week and next in Marrakech, is an example of a country that is working closely with the World Bank and other organizations to shift its economy onto a low carbon development path.

It just submitted its official climate plan, or nationally determined contribution, NDC, where it pledges a 42% reduction below business-as-usual emissions by 2030. This is 10 percentage points more ambitious than it previously laid out, ahead of Paris, and we see the plan affecting a growing number of sectors in the economy. Morocco plans a $13 billion expansion of wind, solar and hydroelectric power generation capacity and associated infrastructure that should see the country get 42% of its electricity from renewable sources by 2020, ramping up to 52% by 2030.

Morocco is well known for its investment in solar energy : the government is contracting a massive solar power plant in the Sahara Desert. NOOR I, launched earlier this year, is the first phase of a 510 MW plant that will ultimately supply clean energy to over one million Moroccans. It is already one of the world's biggest solar thermal power plants.

What is perhaps equally impressive is that Morocco also prioritizes reforming its fossil fuel subsidies and has successfully lifted nearly all its fossil fuel subsidies. Initial estimates indicate that the potential emission reductions from this reform is sizeable – over one million tons of carbon dioxide per year - and could more than double if the fiscal savings from removing subsidies are reinvested in clean projects.

Which is why we are eager to test a new climate finance approach, building on economy-wide policies, with the aim to dramatically scale up mitigation actions. If successful, this model will be replicated in other countries interested in similar reforms, carbon pricing instruments, and other green policies.

Through the Carbon Partnership Facility, the World Bank is looking to pilot the world’s first policy-level Monitoring, Reporting and Verification (MRV) infrastructure, which is a first step towards our end goal of developing a policy-based carbon finance (“crediting”) program for Morocco under a new World Bank initiative, the Transformative Carbon Asset Facility (TCAF). The program will cover energy pricing reform, energy efficiency, and renewable energy policies within the scope of Morocco’s National Energy Strategy.

The basis of the new approach is that it is payments based on results. Payments will be made if Morocco can show that actual greenhouse gas emissions have been reduced as a result of specific policies, resulting in carbon assets.

Policies – both across the economy as well as specific to a sector - play a key role in national mitigation strategies and climate plans, so a strong policy MRV methodology would be a key part of the national MRV systems, the NDC implementation processes, and in reporting results back to the UNFCCC. The fact that there will also be an ex-post policy evaluation will allow improvements to the policy design, looking ahead, enhancing its environmental efficiency.
While we have worked on many projects where carbon credits are created when projects lead to reduced emissions, this model is innovative and potentially ground-breaking because a payment is made if a policy change results in emission reductions, which allows for a shift to low-carbon growth on a much greater scale.
We look forward to continuing the discussion on this new Policy Crediting Program this week with our hosts in Morocco and hope the new approach to scaled up policy reforms can serve as a model for other countries implementing their ambitious climate plans.


Venkata Ramana Putti

Program Manager, Climate and Carbon Finance unit, World Bank

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