enhancing global climate ambition through markets December 14, 2017 Bangkok

1 WHY “Climate markets”

MARKETS ARE KEY TO ADDRESS CLIMATE CHALLENGES COST SAVINGS Market efficiencies reduce the costs of low carbon growth International cooperation through carbon markets can reduce the global cost of implementing NDCs by USD115 billion by 2030 and USD2 to 4 trillion by 2050 * RESOURCE MOBILIZATION Crowd-in public and private capital and leverage limited concessional resources $1 invested in emission reductions under the Clean Development Mechanism (CDM) benefitted $4.60 in underlying low carbon investment ** Political alignment *WBG “State and Trends of Carbon Pricing 2016; TIAM-Grantham ** WBG “State and Trends of the Carbon Market 2010” report

Paris – opportunity for CLIMATE markets Increasingly ambitious goals for mitigation action under NDCs converge with national development priorities Additional financing is needed for NDC implementation Markets are an effective means to deploy and mobilize finance and help countries increase their ambition

DEFINING “Climate markets” 2 DEFINING “Climate markets”

DEFINING “Climate markets” Systems of exchange for climate assets Assets to cover mitigation and/or adaptation Mitigation outcomes (MOs) – could include both tCO2e and other metrics Adaptation outcomes – climate markets should eventually address adaptation benefits Inclusive of all sectors (e.g., energy, urban, forestry, etc.) Connecting domestic and/or international markets *Non-market approaches (like some carbon pricing mechanisms) are related to markets. While not covered directly by this strategy, they are complementary and in many circumstances their components can also contribute to the creation and use of markets.

Systems of Exchange Supply Demand Infrastructure Assets Policy & Regulation Infrastructure Enforcement of national goals within industries/sectors Accounting Trading & Settlement Finance Buyers Bonds & guarantees Trust funds Platforms, registries, regulatory framework for transfers

3 DEMAND

MOVE NDCs to POLICIES AND REGULATIONS Domestic climate markets are being put in place (coupled or not with taxation) and the trend is continuous growth Country and Regional approaches (Pacific Alliance) THESE ARE TWO EXAMPLES. WHAT DO THEY SHOW: Bottom-up, combined with the collaboration and linking/networking markets in mind MOVE FROM EUROPE CENTERED TO MICs HOWEVER: IT WILL REQUIRE MASSIVE (TENS OF BILLIONS) OF INVESTMENT TO BUILD CAPACITY and building the networking of markets

FINANCING DEVELOP AND TEST FINANCIAL PRODUCTS (risk mitigation) Bonds, guarantees, mezzanine finance INVEST 4 CLIMATE Build partnership Deal structuring Knowledge sharing LINK CLIMATE FINANCE WITH MARKETS Support well-designed and balanced domestic policies and market creation Climate finance can be used more strategically to support well-designed and balanced domestic policies and market creation Through cost efficiency and the ability to attract and use private capital, markets will eventually allow climate finance to be used for different purposes Climate markets will be designed with stronger environmental integrity than what we saw in the past and sufficient stability and predictability for private and public investors MOVE NDCs goals TO POLICY AND REGULATIONS in countries/regions - In ASIA PACIFIC: SINGAPORE: carbon tax; CHINA: ETS going live soon; Korea, NZ, Australia Thailand – large potential to network - In the AMERICAS: We saw last week in Paris the launch of the Carbon Pricing in the Americas cooperative framework; Leaders of Canada, Chile, Colombia, Costa Rica, México, California and Washington states, and 5 provinces of Canada Among other things, commit to collaborate towards strengthening systems MRV of GHG with the ultimate goal of setting the necessary foundations to link their carbon markets; THESE ARE TWO EXAMPLES. WHAT DO THEY SHOW: Bottom-up, combined with the collaboration and linking/networking markets in mind MOVE FROM EUROPE CENTERED TO MICs HOWEVER: IT WILL REQUIRE MASSIVE (TENS OF BILLIONS) OF INVESTMENT TO BUILD CAPACITY and building the networking of markets

4 SUPPLY

monetize the climate co-benefits $40b Total IBRD/ IDA commitment per year 2020 $4b (36%) adaptation co-benefits Analytical/knowledge work to monetize adaptation co-benefit using a result based finance framework - results by 2020 $11.2b climate co-benefits (28%) $7.2b (64%) mitigation co-benefits $500-700m/yr climate finance RBF payment in 2020 for climate assets $ MO Funds Climate finance

5 INFRASTRUCTURE

LOTs to do… FUNGIBILITY TRADE Assessment and comparability of MOs Assessment of climate ambition in NDCs TRADE Registries, exchange, settlement Disruptive technologies