Canada is among six countries preparing the first carbon trades under the landmark Paris Agreement on climate change, part of an effort to unlock as much as $4 billion for the fight against global warming.
According to the World Bank Group – which is overseeing the program – the nations are assessing projects to cut greenhouse-gases in exchange for emission credits that can be used to comply with goals they set under the United Nations pact sealed in 2015.
“We are now in the selection process of programs to be endorsed,” the World Bank said in a response to questions from Bloomberg News. The other countries contributing money to the bank’s $200 million Transformative Carbon Asset Facility are Germany, Norway, Sweden and Switzerland.
A minimum contribution of $25 million is required for organizations to participate in selecting programs to be used under the system. Canada and Germany may not initially be part of that process because they are listed as giving only a few million dollars each.
The Paris deal recognized that the world “can achieve greater and faster climate action by cooperating” through markets, Jennifer Gearey, a spokeswoman for Environment and Climate Change Canada, told Bloomberg News.
While Canada is still considering “whether and how” it will use international carbon markets to meet its 2030 Paris emission targets, the TCAF may reveal how they can “catalyze scaled-up public and private investment,” she said by email.
With a target to raise $500 million, the World Bank program would help encourage private companies and development banks to contribute many times more for projects aimed at reducing emissions. The work is a rare sign of new demand in UN carbon markets and would revive a program choked off because the European Union limited its use of imported credits as it repaired its carbon market.
The bank’s program will demonstrate how international collaboration can help spur private investment to meet the target set out in the Paris deal, which is to limit temperature increases to less than 2 degrees Celsius above pre-industrial levels, the U.K. government told Bloomberg News, which is paying 60 million pounds ($76 million) into it.
The fund will help “strengthen the international carbon market, develop innovative ways to cut carbon emissions and encourage private investment,” according to an emailed reply to questions from Bloomberg News to the British Department for Business, Energy and Industrial Strategy.
The U.K. is exiting the EU and has climate targets fixed in law.
The nations are pressing ahead despite pushback from some business and consumer groups resisting higher economic costs from carbon prices. Still, the point of the programs is that only polluting goods and services go up in price.
The World Bank facility will build on the Certified Emission Reductions established by the UN in the 1990s, which have been trading near zero for six years.
Carbon markets are one of the tools economists say can help give companies and nations an incentive for cutting the pollution that causes global warming. The first market to create CERs — the Clean Development Mechanism — spurred spending in emerging nations on wind farms and efficiency measures to rein in greenhouse gases. While EU companies such as German utility RWE AG used credits to comply with the region’s carbon market, the use of CERs was limited by the EU’s rules.