Germany, Norway, Sweden, and Switzerland today announced a new US$500 million initiative, developed with the World Bank Group, that will find new ways to create incentives aimed at large scale cuts in greenhouse gas emissions in developing countries to combat climate change.
“We want to help developing countries find a credible pathway toward low carbon development,” said Jim Yong Kim, World Bank Group President. “This initiative is one such way because it will help countries create and pay for the next generation of carbon credits.”
The Transformative Carbon Asset Facility will help developing countries implement their plans to cut emissions by working with them to create new classes of carbon assets associated with reduced greenhouse gas emission reductions, including those achieved through policy actions.
The facility will measure and pay for emission cuts in large-scale programmes in areas like renewable energy, transport, energy efficiency, solid waste management, and low carbon cities. For example, it could make payments for emission reductions to countries that remove fossil fuel subsidies or embark on other reforms like simplifying regulations for renewable energy.
“Putting market forces to work is an efficient way of reducing emissions,” said Erna Solberg, Prime Minister of Norway. “We expect to achieve significant impact on the ground through the facility and ensure the sustainability of reducing emissions even beyond the facility’s initial support, for example, through carbon pricing instruments like emissions trading systems and carbon taxes, or stronger low-carbon policy standards and their enforcement.”
This new initiative is planned to start operations in 2016 with an initial expected commitment of more than US$250 million from contributing countries. The facility will remain open for additional contributions until a target of US$500 million is reached. It is expected that the new facility’s support will be provided alongside US$2 billion of investment and policy-related lending by the World Bank Group and other sources.
The facility will work alongside a range of global initiatives and national climate plans to help both developed and developing countries achieve their mitigation goals. It will pay for carbon assets with high environmental integrity and a strong likelihood to comply with future international rules, and will share its learning with the international community.
“Four countries are leading with their example and bridging one of the main challenges for developing countries to achieve low carbon growth,” said Felipe Calderón, Chair of the Global Commission on the Economy and Climate and former President of Mexico. “By working with developing countries to establish market-based carbon pricing policies and programmes, the facility can help achieve both better growth and a better climate for all.”