Develops Trading Infrastructure & Mechanisms

• Proactive efforts and initiatives to market ERCs within local and global market (e.g., roadshow, trade conference, partnerships, trade desks).
• Use of both policy-based (e.g., establishing a national fund for the purchase of local ERCs) and non-policy based (e.g., creation of climate claims standards, engaging in education campaigns) to stimulate demand in local ERC projects
• [Best practice] Guidance provided to project developers regarding how ERCs should be priced based on the relevant dimensions (e.g., project type, co-benefits, etc.,) to enable higher value realization

Impact

Low-ERC demand will continue to grow in the short to medium term regardless of marketing initiatives/capacity development given increasing societal & investor pressure, and the introduction of compliance schemes in other markets. However, it is expected that this will grow in importance in the medium term as the global supply landscape scales.

Phase 3: Enabling long-term sustainability of the ERC ecosystem

Resources needed

High-Development of marketing capacity requires coordination of multiple agencies (finance, trade) etc., evolving trajectory of global demand also poses challenges to focus on specific capacity development

International trade mechanisms: Bilateral agreements or cooperation between countries to cooperate on ERCs, both for purely voluntary and Article 6-related ERCs

Exemplars

Japan. Japan’s Joint Crediting Mechanism (JCM) offered a partnership initiative with developing countries (e.g., Vietnam, Indonesia, Cambodia, Mexico, Bangladesh, etc.,) to actively develop a carbon credit ecosystem; offsets will contribute toward Japan's NDCs, and, in exchange, JCM diffuses leading carbon infrastructure to advance sustainable development.

Ghana. Ghana has formed bilateral agreements with Singapore, Sweden, Switzerland, and South Korea to supply carbon credits (ITMOs).

Carbon trade/exchange platform – Platform-based marketplace for both domestic and international trade of carbon credits.

A carbon trade or exchange platform is an optimal choice for countries with strong infrastructure to support the exchange platform, and as can be observed in its financial markets

Exemplars

China. China’s Beijing Green Exchange (CBGEX) functions as a public professional market platform for trading environmental equities like carbon credits, with over 1,000 trading members around China. Furthermore, the CBGEX and the European Energy Exchange (EEX) have formed a strategic partnership to jointly facilitate access to emissions trading in China and Europe.

ERC purchase fund – Establish a dedicated fund to purchase ERCs from local projects for any of the following use cases:

1. Claiming the emission reductions towards the country’s NDCs

2. Affirm the quality of the ERCs by the government before their marketing and eventual sale to potential off-takers

3. Pooling ERCs from smaller-scale projects to enable benefits of scale in marketing and sale activities

The fund may be established by the government with its own funds or in collaboration with development financing institutions or private funds.

Buyers of ERCs

Government, primarily through auctions hosted by statutory body, to implement the purchase of carbon credits for use against own NDCs.

Exemplars

Australia. Australia created the USD2.5Bn Emission Reduction Fund (ERF) and set the standards of what can be bought by the ERF, with a total 124 mtCO2e Australian Carbon Credit Units (ACCUs) purchased under ERF.

Spain. Spain created the Carbon Fund for a Sustainable Economy (FES-CO2) to purchase verified emission reductions of projects—budget not specified—included in Spain's EU200Bn investment target in a low-carbon transition by 2030.

Claims certification scheme – Develop or adopt standards for corporates seeking to make carbon-neutral or net-zero claims by purchasing ERCs and ensure inclusion of local ERC projects.

Buyers of ERCs

Companies, events, products, services that seek to achieve carbon neutrality (purchase of carbon credits used to offset emissions) and make claims to customers.

Exemplars

Australia. ACCUs are retired by companies to meet their voluntary emissions reduction targets/ abatement goals, driven by carbon-neutral claim standards such as Climate Active, a government-accredited voluntary carbon-neutral certification scheme.¹