Climate markets, if designed well, can reduce mitigation cost, mobilise the private sector, and raise collective climate ambition. According to a recent study, climate markets under Article 6 of the Paris Agreement could reduce the cost of implementing countries’ Nationally Determined Contributions (NDCs) by more than half (approximately $250 billion per year in 2030). While the bottom-up approach of Article 6.2 of the Paris Agreement presents an opportunity to broaden and deepen markets, it is very important to ensure that there is no double counting and maintenance of the environmental integrity of markets. Against this backdrop, the World Bank supported the development of the International Transfer Readiness (ITR) module under the Mitigation Action Assessment Protocol (MAAP) to reflect what experts consider to be best practices at the country level to maximise readiness for international market mechanisms under the Paris Agreement.
This paper discusses the ITR, its main findings, and their implications. Key messages include the following:
The ITR Module seeks to provide a starting point for identifying gaps and capacity building needs to develop the necessary institutional framework and infrastructure for climate markets under the Paris Agreement.
To date, ITR has been applied to 13 developed and developing countries. Pilot results showed that significant capacity building is still needed to align countries’ institutional frameworks and infrastructure with the Paris Rulebook and evolving procedures of Article 6. This capacity building is needed even for countries that have substantial experience in Kyoto markets.
Moving forward, the World Bank will continue to carry out a consultative process to explore how ITR assessments can help countries effectively identify capacity building needs, and thus facilitate broader capacity building efforts for Article 6.