The cap-and-trade concept is in relatively early stages of adoption in Latin America, with several countries considering implementing national schemes. Much of this work is being conducted with financial and technical support via the World Bank’s Partnership for Market Readiness (PMR), which is assisting a number of countries interested in and exploring building emissions markets.
Acre and Chiapas
The Brazilian state of Acre and the Mexican state of Chiapas signed a memorandum of understanding with the US state of California in November 2010 that would allow the two jurisdictions to provide offsets from Reduced Emissions from Deforestation and Degradation (REDD) projects to the state’s cap-and-trade program. California has so far limited its interest in REDD projects to these two Latin American states and all three jurisdictions will have to sign off on the rules and regulations that will govern how these forestry projects can gain entrance into California’s program.
The REDD+ Offset Working Group (ROW) was established in February 2011 to answer three central questions: what legal and institutional mechanisms are required to enable California to recognize international REDD-based emission offsets for compliance purposes, what are the key policy considerations a sectoral REDD program should address to achieve the level of performance needed for California to recognize the REDD-based offsets for compliance purposes, and what should be the basis for judging the performance of the states in reducing carbon removals from forests?
After two years of consultations with indigenous leaders, environmentalists, and government representatives, the ROWreleased its final recommendationsÃ‚Â on how to work international REDD+ offsets into California’s cap-and-trade program in July 2013.
Brazil has a voluntary commitment to reduce emissions by 36.1%-38.9% below business-as-usual by 2020 and is currently considering mitigation plans for a number of sectors, including forestry, agriculture and energy.
In December 2009, Brazil enacted the National Climate Change Policy, which set targets to cut deforestation rates 80% from 2008 to 2020 to avoid 4.8 billion tons of carbon dioxide (CO2) emissions during this period. Deforestation rates in the Brazilian Amazon declined 27% from August 2011 to July 2012, reaching the lowest rates ever recorded for the fourth consecutive year, according to the Brazilian Ministry of Environment.
Brazil, an implementing country participant of the Partnership for Market Readiness (PMR) , is considering an emissions trading scheme (ETS), as well as sectoral crediting approaches and a carbon tax, as part of this effort. Regional ETSs are also under consideration in SÃƒÂ£o Paolo and Rio de Janeiro.
Chile, an implementing country participant of the PMR, has pledged to reduce emissions by 20% below its business-as-usual emissions growth trajectory by 2020 with international support. The country is creating a roadmap for the design and eventual implementation of an ETS for the energy sector, according to the Ministry of Energy. The government is engaged in a number of activities, including evaluation of the economic impacts of the implementation of an ETS covering greenhouse gases (GHGs) at the national and sectoral levels and design and implementation of a Monitoring, Reporting and Verification (MRV) framework and registry for the system that allows for the recording and tracking of emissions and emission permit transactions.
Colombia is also an implementing country participant of the World Bank’s PMR, which will support the country as it explores which market mechanism would best regulate GHG emissions from the urban transport sector, chosen because of its projected future growth in emissions. The potential mechanism can draw lessons from the Clean Development Mechanism (CDM) program, which became a strong component of transport and climate change policy in Colombia, according to government officials.
In 2013, officials will engage in a number of activities in preparation for a potential market mechanism, including a market readiness assessment of Colombia’s urban transport sector, research on market instruments in the sector, a feasibility study on a scaled-up GHG crediting instrument and a feasibility assessment of a carbon tax or related measure as a national policy.
Costa Rica, an implementing country participant of the PMR, aims to achieve carbon neutrality by 2021, and developing a carbon market is key to the nation’s sustainability objectives, according to the World Bank’sÃ‚Â Mapping Carbon Pricing InitiativesÃ‚Â report. The carbon market will be developed in stages, starting with the preparation of key market infrastructure, including developing the offset unit and REDD+ integration. The second stage would be a voluntary participation stage followed by strengthening of market demand and international linkages, the report noted.
Mexico has pledged to reduce up to 30% of its emissions by 2020 compared to its baseline scenario, dependent on international support and participation in external markets. In April 2012, Mexico’s Congress passed a General Law on Climate Change, which provides the federal government with the authority to create programs, policies and actions to mitigate emissions, including an ETS. However, no further plans have been made public since the new government was elected in July 2012, according to the World Bank report.
Mexico is an implementing country under the World Bank’s PMR and is, through this vehicle, exploring the potential for credited Nationally Appropriate Mitigation Actions (NAMA), which enhance the scale of their emissions reduction activity, address entire sectors of the economy and allow the development of a series of co-benefits such as the development of national capacities. Three crediting NAMAs have been proposed by Mexico for PMR assistance, including urban transport, appliances and urban housing.
REDD+ Offset Working GroupÃ‚Â
Forest Trends’ Ecosystem Marketplace’s Scientific Advisory Panel Offers Blueprint For California REDD
The World Bank’s Mapping Carbon Pricing Initiatives report
https://www.thepmr.org/system/files/documents/Mapping Carbon Pricing Initiatives- Developments and Prospects.pdfÃ‚Â
The World Bank’s Partnership for Market ReadinessÃ‚Â
Latin American initiatives to prevent or reduce deforestation experienced a banner year in 2012, according to theState of the Voluntary Carbon Markets 2013Ã‚Â report published annually by Forest Trends’ Ecosystem Marketplace. Forestry was the region’s most popular greenhouse gas (GHG)-reducing activity that companies in Europe and the United States supported in return for carbon offsets. The distribution of clean cookstoves that reduce emissions by burning efficiently or not at all also rapidly gained momentum in countries like Peru, Haiti and Guatemala, where they reduced GHG emissions while sparing households from harmful smoke inhalation.
A full 7.3 million tonnes (MtCO2e) of carbon offsets were reduced and sold from Latin America-based projects in 2012, according to the report. The average price of those offsets saw a 27% drop, leading to a $21 million decline in overall market value Ã¢â‚¬â€œ but remained $2.40 per tonne (tCO2e) higher than the global average offset price.
European companies were once again the top purchasers of offsets generated in Latin America, behind 47% of all sales, but they increasingly shared the stage with buyers in Oceania and North America as the private sector in both regions began looking beyond domestic activities to support international emissions reductions projects.
Despite the lower market value, Latin American project developers reported strong demand for offsets from Reduced Emissions from Deforestation and Degradation (REDD) projects. Overall, forestry and land use project offsets represented 58% of all offset transactions in the region.
In a surprising twist, the second most popular Latin America-based GHG reduction activity was clean cookstove distribution, which generated a quarter of all offsets sold from Latin American projects Ã¢â‚¬â€œ and 28% of all clean cookstove offsets sold worldwide.
Renewable energy projects, namely large hydropower plants, were the third most popular source of offsets in Latin America in 2012, according to the report.
Costa Rica’s carbon neutrality target isn’t neutral on the voluntary carbon market. Its Ã¢â‚¬Å“C-NeutralÃ¢â‚¬Â Standard for achieving domestic carbon neutrality was the first measure launched in a long line of mitigation actions necessary to meet its 2021 deadline, according to Forest Trends’ Ecosystem Marketplace’sÃ‚Â Bringing it Home: Taking Stock of Government Engagement with the Voluntary Carbon MarketÃ‚Â report. The Standard recognizes Verified Carbon Standard (VCS), Gold Standard, and CDM credits for offsetting purposes, with VCS and Gold Standard credits lending international credibility and market flexibility to the program and its offset suppliers.
Colombia has been incubating a domestic voluntary trading platform, which – if it goes according to plan – will focus first on forest carbon credits. Observers still anticipate that it will take some time before trading will begin as there are still a number of issues to iron out, and it is uncertain how effective the platform will be without the force of compliance-based regulation.
Forest Trends’ Ecosystem Marketplace’s Maneuvering the Mosaic: State of the Voluntary Carbon Markets 2013 reportÃ‚Â
Forest Trends’ Ecosystem Marketplace’s Bringing it Home: Taking Stock of Government Engagement with the Voluntary Carbon Market reportÃ‚Â