New carbon market approach: World Bank facility promotes innovative activities

December 2015 - At the climate change conference in Paris, Norway, Germany, Sweden and Switzerland have announced that they are the first funders of the World Bank Transformative Carbon Asset Facility (TCAF). The initiative is designed to promote new forms of market-based emission reduction activity.

The TCAF aims to attract funder contributions amounting to USD 500 million. This is expected to generate climate investment worth some USD 2 billion. The TCAF focuses on sectoral-level activities, thus overcoming the project-based approach. The idea is to mobilise more broader-based climate investment.

The big challenge in all of this is that partner countries’ activities must be in relation to INDCs, that is to the own contributions the Parties have pledged for the Paris agreement. This is expected to strengthen national climate change policy in the respective partner countries and secure strategic success in efforts towards low-carbon development.

The outcome of the Paris negotiations will be taken into account in the further design of the TCAF and, in turn, experience gathered with the new facility will influence the rules that constitute the new climate change agreement.