COP21 acknowledges that carbon markets are needed to get countries on a low emissions development pathway

UN climate negotiators from 195 countries agreed on a historic climate change accord in Paris and the carbon markets have played a very important rol: The agreement acknowledges that markets are needed to get countries on a low emissions development pathway and enhance ambition to keep warming to well below 2 degrees. It paves the way for a renewed international carbon market that will look and be different.

Among other aspects, the agreement and accompanying decision include:
1) Recognition of voluntary cooperation to implement NDCs and achieve lower emissions using ‘internationally transferred mitigation outcomes’ or ITMOs – a new class of carbon assets; 2) Support for results-based payments to implement policy approaches; and 3) A UNFCCC-governed mechanism that will support mitigation and sustainable development post-2020, which enables international transfers of emission reductions while delivering overall mitigation in global emissions. That last bit will make it very different from the Clean Development Mechanism (CDM), but will be informed by the breadth of experience that the CDM helped create.

With this, countries will continue to design, test and implement market-based domestic carbon pricing initiatives. They will need to create the infrastructure necessary to compare and connect a wide range of climate actions. And they will have to get ready to trade ITMOs and emission reductions under the rules of the new sustainable development mechanism.
The World Bank Group is able and stands ready to support this every step of the way. The agreement provides a clear and strong signal to continue on the road we are on, leveraging 15 years of experience in piloting approaches to deliver new market and results-based carbon instruments, and help build capacity to implement market-based carbon pricing.

In addition to the nearly $3 billion managed in various carbon funds since 2000, we have the Partnership for Market Readiness that supports countries to establish market-based carbon pricing mechanisms as best suits their economic circumstances.

The recently launched Transformative Carbon Asset Facility, which was announced on the first day of COP21, will help create and monetize the next generation of carbon credits, including those achieved through policy actions.
And the Networked Carbon Markets initiative is working in partnership with many to help make the voluntary cooperation approaches workable, by establishing the basis to make them comparable and fungible.