Axel van Trotsenburg, the World Bank's Senior Managing Director, addressed the need for accelerating climate action through high-integrity carbon markets in a recent speech. He acknowledged the leadership of Annette, Chris, and Rachel in the carbon market ecosystem and thanked Bloomberg Philanthropies and GFANZ for their support.
Van Trotsenburg highlighted the urgency of addressing climate change due to record-breaking temperatures and extreme weather events worldwide. He emphasized that "we can leave no stone unturned in the search for more financing and greater impact on climate."
He pointed out that carbon markets, both compliance and voluntary, are essential tools in combating global warming. These markets have gained prominence as they offer solutions like cutting emissions, creating jobs, providing clean energy, and protecting natural landscapes. However, he noted that carbon markets have faced setbacks due to confusion, lack of clear signals, and inadequate enforcement.
Van Trotsenburg called for better regulation, stronger validation, and consistent standards to establish a more ambitious framework for carbon markets. He stated that "at the World Bank, we recognize the potential of carbon markets – if done right."
The World Bank has been involved in advancing carbon markets for over two decades. It has supported more than 30 countries in establishing frameworks for carbon pricing and market mechanisms through its Partnership for Market Implementation. Additionally, it helps countries design programs generating high-integrity carbon credits in various sectors.
For instance, the ASCENT program aims to bring electricity to 100 million people in Africa by leveraging $5 billion from the World Bank and an additional $10 billion from other sources, including carbon markets. The World Bank is also developing financial products with MIGA and IFC to attract private capital for these markets.
Van Trotsenburg stressed the importance of addressing bottlenecks to unlock financing flows from high-integrity carbon markets. The recently published State and Trends of International Carbon Markets 2024 report identifies key issues needing resolution.
Trust is crucial in these markets—trust in environmental integrity, reward systems for emission reductions, and regulatory frameworks. Rebuilding trust involves elevating voices of all stakeholders including indigenous peoples and local communities who are often stewards of natural landscapes.
The Carbon Markets Engagement Roadmap launched at COP28 aims to partner with stakeholders to shape a trusted global carbon market. A working group has been convened with various organizations to address barriers collaboratively.
This blueprint will help countries establish foundations for high-integrity carbon markets with robust policies and safe market infrastructure aligned with international frameworks ensuring environmental, financial, and social integrity.
GFANZ’s framework presented at a recent roundtable aligns with ongoing efforts by the World Bank. Van Trotsenburg echoed President Banga’s remarks on this positive step towards connecting carbon markets.
While significant progress has been made, real impact will be seen when these initiatives are effectively implemented at country levels. At a recent Innovate4Climate Conference in Berlin three key points were emphasized: taking thoughtful risks with bold pilots; achieving broader stakeholder convergence on VCMs; aligning compliance and voluntary carbon markets.
These actions require strong coordination across integrity initiatives involving governments, private sector entities, civil society groups as well as Ministries of Finance which play an integral role in driving development narratives around carbon markets.
Van Trotsenburg concluded by calling for collective action stating "High-integrity carbon markets are within our reach but only if we work together."
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