Working together for low-emission development

Carbon Pricing and Markets are important tools for Decarbonisation.

This year marks the fifth anniversary of the Paris Agreement, which was signed in December 2015 at the international climate conference in Paris (COP 21). The agreement is considered a historic step, as after many years of negotiations, all countries committed themselves to making the global economy more climate-friendly. Until then, only a few industrialised countries had committed themselves to reducing emissions. In recent years, there has been growing interest worldwide in introducing CO2 price instruments, such as emissions trading systems or CO2 taxes, to promote low-emission development. Article 6 of the Paris Agreement gives countries the opportunity of working together to achieve their nationally determined contributions. It is with this in mind, that the IKI project "Partnership for Market Readiness" and its successor programme "Partnership for Market Implementation" come to play. In an interview, Dr. Venkata Ramana Putti, Programme Manager of the Carbon Markets and Innovation Unit at the World Bank, provides insights into the project work worldwide. 

What is the general objective of the Partnership for Market Readiness (PMR) Project? 

Dr. Venkata Ramana Putti: The PMR’s initial work program of ‘readiness’ focused on establishing the feasibility of specific carbon pricing instruments in selected countries; creating the necessary domestic architecture for implementation and capacity building. At the overall program level, the PMR also developed a strong technical and analytical knowledge program that informed the country activities. Thus, the initial emphasis has been on helping countries realize their domestic mitigation potential. The advent of the Paris Agreement in 2015 helped change the narrative on markets and through Article 6 created the possibility of developing a global carbon market and further, applying bottom-up, cooperative approaches to facilitate such development. Submission of INDCs by Parties to the Paris Agreement with voluntary targets for GHG emissions reduction was also a significant development in this regard. In line with these developments, the PMR also reoriented some of the activities to assist countries in incorporating the provisions from the Paris Agreement.

What exactly does that mean?

Accordingly, through its Policy Analysis work program, the PMR supported five countries in developing their INDCs, published technical/analytical reports on key issues in operationalizing Article 6, provided a global platform through its assemblies, technical workshops and other events to debate relevant topics and facilitated participation of the PMR countries in other initiatives. More importantly, the implementing countries have been encouraged to align the ongoing readiness programs with the overall climate action policies and programs that have emerged as part of the country climate ambition, as reflected in the NDCs and other policies.

What economic approaches does the project apply?

The objective of the PMR is based on the premise that pricing carbon and making the polluters pay that price is economically one of the most efficient ways to mitigate greenhouse gas emissions, and the interventions can contribute to other developmental benefits (e.g. reduction in air pollution, increase in use of clean technologies, sustainable business practices, etc.). At the same time, it is also critical to understand potential negative impacts such programs could have in the short run (e.g. on jobs, incomes, energy access to the poor, etc.) and develop ways to address those issues to build sustainable interventions. Thus, a robust analysis and scenario building through modelling exercises to look at all the implications across different economic sectors have been an integral part of the feasibility studies leading up to countries making choices on the type of carbon pricing instruments/policies to pursue.
 

Currently, the successor programme "Partnership for Market Implementation (PMI)" is being launched. What are the main changes in the programme? 

The main change, as the name suggests, is that the PMI will assist countries in actually implementing carbon pricing programs as a ‘step up’ from the readiness work carried out under the PMR. Thus, the motto of the PMI is ‘from readiness to implementation’, and several countries that received technical assistance under the PMR are expected to apply for PMI support to go to the next level. There will also be a window under PMI to support new countries, which wish to develop their readiness for carbon pricing through technical assistance. Furthermore, the PMI can also support carbon-pricing activities at the regional or subnational level in the spirit of Article 6.2, as precursors to an eventual global carbon market regime. The PMI is designed to be a 10-year program and has a target of helping at least 10 countries in their full implementation, and another 20 countries in their readiness, all to be in place by 2025. 

How is the Paris Agreement be reflected in the new programme? 

Overall, the transition from PMR to PMI aims to be part of an accelerated process of climate action to enhance countries’ climate ambition towards achieving the Paris goals and a sustainable future. From this perspective, the PMI has two objectives: supporting countries in implementing their domestic carbon pricing programs; and, facilitating countries’ participation in the international carbon markets. In this regard, the program envisages supporting those countries with a demonstrated political commitment to use carbon pricing/markets as part of their mitigation menu. It will support activities that help concretely reflect the role of carbon pricing in countries’ NDC targets. Learning from the PMR experience, the program will also emphasize development of implementation activities as part of a broader climate policy framework that includes not just NDCs but also pathways to net-zero targets and other climate actions.

What are the success factors for the programme in cooperating with countries on carbon pricing? 

As concluded by two independent evaluations, the PMR is perhaps the most consequential global programme supporting emerging economies and developing countries and is acknowledged by participating countries for its contribution to their mitigation actions. Some of the key factors contributing to the positive results are a non-prescriptive and non-political stance, adapting to evolving conditions, and a true partnership model. 

Read more about the project.