Climate Finance, Carbon Market Mechanisms and Finance "Blending" as Instruments to Support NDC Achievement under the Paris Agreement
This paper considers the impacts of "finance blending" whereby climate finance is added to international carbon markets for offset trading. The paper first discusses climate finance and the carbon market as free-standing finance solutions...
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World Bank, Washington, DC
2019
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| Online Access: | http://documents.worldbank.org/curated/en/536271561468762308/Climate-Finance-Carbon-Market-Mechanisms-and-Finance-Blending-as-Instruments-to-Support-NDC-Achievement-under-the-Paris-Agreement http://hdl.handle.net/10986/31979 |
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okr-10986-319792022-09-20T00:12:49Z Climate Finance, Carbon Market Mechanisms and Finance "Blending" as Instruments to Support NDC Achievement under the Paris Agreement Strand, Jon CLIMATE CHANGE CLIMATE FINANCE CARBON POLICY GREENHOUSE GAS EMISSIONS BLENDED FINANCE FINANCE BLENDING ENERGY EFFICIENCY CARBON MARKET OFFSET TRADING This paper considers the impacts of "finance blending" whereby climate finance is added to international carbon markets for offset trading. The paper first discusses climate finance and the carbon market as free-standing finance solutions by high-income countries to increase mitigation in low-income countries. Climate finance solutions have advantages for high-income countries due to their greater flexibility and general efficiency. A favorable aspect of well-functioning offset markets is that all participating countries face a similar and robust carbon price. With finance blending and "all attribution to the carbon market," the market equilibrium is inefficient, as mitigation is excessive in low-income countries and too low in high-income countries. Instead, mitigation outcomes in the offset market should be attributed to the two finance types in proportion to their finance shares provided to the low-income countries through this market. When climate finance is added to the carbon market, the ambition level for emissions reductions for donor countries should be raised equivalently; otherwise, the added climate finance leads to no increase in global mitigation. When low-income country market participants have limited access to credit markets, climate finance can increase mitigation by supplying the capital required to implement efficient mitigation projects. 2019-06-26T20:24:24Z 2019-06-26T20:24:24Z 2019-06 Working Paper http://documents.worldbank.org/curated/en/536271561468762308/Climate-Finance-Carbon-Market-Mechanisms-and-Finance-Blending-as-Instruments-to-Support-NDC-Achievement-under-the-Paris-Agreement http://hdl.handle.net/10986/31979 English Policy Research Working Paper;No. 8914 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper |
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Digital Repository |
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Foreign Institution |
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Digital Repositories |
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World Bank Open Knowledge Repository |
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World Bank |
| language |
English |
| topic |
CLIMATE CHANGE CLIMATE FINANCE CARBON POLICY GREENHOUSE GAS EMISSIONS BLENDED FINANCE FINANCE BLENDING ENERGY EFFICIENCY CARBON MARKET OFFSET TRADING |
| spellingShingle |
CLIMATE CHANGE CLIMATE FINANCE CARBON POLICY GREENHOUSE GAS EMISSIONS BLENDED FINANCE FINANCE BLENDING ENERGY EFFICIENCY CARBON MARKET OFFSET TRADING Strand, Jon Climate Finance, Carbon Market Mechanisms and Finance "Blending" as Instruments to Support NDC Achievement under the Paris Agreement |
| relation |
Policy Research Working Paper;No. 8914 |
| description |
This paper considers the impacts of
"finance blending" whereby climate finance is
added to international carbon markets for offset trading.
The paper first discusses climate finance and the carbon
market as free-standing finance solutions by high-income
countries to increase mitigation in low-income countries.
Climate finance solutions have advantages for high-income
countries due to their greater flexibility and general
efficiency. A favorable aspect of well-functioning offset
markets is that all participating countries face a similar
and robust carbon price. With finance blending and "all
attribution to the carbon market," the market
equilibrium is inefficient, as mitigation is excessive in
low-income countries and too low in high-income countries.
Instead, mitigation outcomes in the offset market should be
attributed to the two finance types in proportion to their
finance shares provided to the low-income countries through
this market. When climate finance is added to the carbon
market, the ambition level for emissions reductions for
donor countries should be raised equivalently; otherwise,
the added climate finance leads to no increase in global
mitigation. When low-income country market participants have
limited access to credit markets, climate finance can
increase mitigation by supplying the capital required to
implement efficient mitigation projects. |
| format |
Working Paper |
| author |
Strand, Jon |
| author_facet |
Strand, Jon |
| author_sort |
Strand, Jon |
| title |
Climate Finance, Carbon Market Mechanisms and Finance "Blending" as Instruments to Support NDC Achievement under the Paris Agreement |
| title_short |
Climate Finance, Carbon Market Mechanisms and Finance "Blending" as Instruments to Support NDC Achievement under the Paris Agreement |
| title_full |
Climate Finance, Carbon Market Mechanisms and Finance "Blending" as Instruments to Support NDC Achievement under the Paris Agreement |
| title_fullStr |
Climate Finance, Carbon Market Mechanisms and Finance "Blending" as Instruments to Support NDC Achievement under the Paris Agreement |
| title_full_unstemmed |
Climate Finance, Carbon Market Mechanisms and Finance "Blending" as Instruments to Support NDC Achievement under the Paris Agreement |
| title_sort |
climate finance, carbon market mechanisms and finance "blending" as instruments to support ndc achievement under the paris agreement |
| publisher |
World Bank, Washington, DC |
| publishDate |
2019 |
| url |
http://documents.worldbank.org/curated/en/536271561468762308/Climate-Finance-Carbon-Market-Mechanisms-and-Finance-Blending-as-Instruments-to-Support-NDC-Achievement-under-the-Paris-Agreement http://hdl.handle.net/10986/31979 |
| _version_ |
1764475507790839808 |