1. 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. 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. 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. 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. 5 Current and Proposed Emissions Trading Systems… Operating Likely (?)Considering © OECD/IEA - 2010 ConsideringUnder preparationOperating

6. Latin American Carbon Forum 2011 Crediting Programs and Standards… 3,450 registered projects in 72 countries 736 million CERs issued 1-1.3 billion CERs expected by end of 2012 Large source of climate finance to developing countries: > $25 bn (2002-09) + leveraging investments Clean Development Mechanism Joint Implementation 282 registered projects (finally determined) 53 million ERUs issued ~260 million ERUs expected by end of 2012

7. 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. 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