Latin American Carbon Forum 2011 C ARBON TRADING BEYOND 2012: NEW APPROACHES AND EMERGING MARKET INSTRUMENTS Latin America Carbon Forum San José, Costa Rica September 27, 2011 Martina Bosi Carbon Finance Unit The World Bank

2 The climate challenge… demands action TODAY S DISCUSSION : NEW APPROACHES AND EMERGING MARKET INSTRUMENTS How to keep momentum in carbon market? Carbon markets can help identify and mobilize funding for least-cost mitigation options to achieve 2 C target. Carbon markets and carbon finance can be a key component in countries low emissions development/green growth strategies But regulatory gap: Uncertainties on post-2012 framework to meet climate change goals

3 4 pillars as spelled out by High-level Advisory Group on Climate Financing (AGF): Public sources (Budget of developed countries) Development bank instruments Carbon markets Private capital Send price signal directing capital flows to less carbon-intensive options Lower cost of meeting emission reduction targets through trading Catalyze low-carbon growth in developing countries > transactions of offsets (essentially private flows) > public funds through auctions / transaction taxes > crowd in private capital in support of $100 billion target Carbon markets in the context of climate finance $100 bn per annum by 2020 Compares to historic ~$10 bn p.a. of international climate finance Cancun Agreements, mobilize long- term finance to address needs of developing countries

4 Market-based mechanisms for GHG mitigation: General landscape International Domestic (or sub- national, or regional) Trading mechanisms (allocation of ex-ante allowances) Crediting mechanisms (issuance of ex-post credits) Linking ? e.g., EU Emissions Trading System e.g., Trading under Kyoto Protocol e.g., Clean Development Mechanism (CDM) e.g., Alberta (Canada)-based offsets eligible in Albertas trading scheme White (energy efficiency) certificates Green (renewable energy) certificates As well as indirect (non- GHG) schemes: GHG schemes

5 Current and Proposed Emissions Trading Systems… Operating Likely (?)Considering © OECD/IEA ConsideringUnder preparationOperating

Latin American Carbon Forum 2011 Crediting Programs and Standards… 3,450 registered projects in 72 countries 736 million CERs issued billion CERs expected by end of 2012 Large source of climate finance to developing countries: > $25 bn ( ) + leveraging investments Clean Development Mechanism Joint Implementation 282 registered projects (finally determined) 53 million ERUs issued ~260 million ERUs expected by end of 2012

Latin American Carbon Forum 2011 Cancún decision on newmarket mechanism(s) COP 16 Decision to consider establishment of 1 or more new market instruments at COP17 Maintain & build upon existing mechanisms, including KP mechanisms Elaboration during 2011 Parties and organizations have made submissions

8 Readiness for the new markets and emerging market instruments: key opportunities, challenges and needs? Can we build on experience & existing infrastructure or are we starting from scratch? What kind of mitigation actions is/should be targeted? Views/ outlook for linking with others markets and/or instruments? Some Questions for the Panel TODAY S DISCUSSION : NEW APPROACHES AND EMERGING MARKET INSTRUMENTS