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Global Carbon Market - Chile

Photo by GIZ Chile

Background and Outlook

In Chile, the Global Carbon Market project provides support to the Chilean government in developing carbon pricing instruments and in exploring carbon finance mechanisms for use in climate action projects. These are to be used in implementing Chile’s nationally determined contributions (NDCs). 

At the beginning of 2020, Chile was one of the first countries to submit a revised NDC, thus raising its ambition compared with its original emission reduction target. It also aims to be carbon-neutral by 2050. The aim of achieving carbon-neutrality is also part of a draft climate change bill currently being discussed in the National Congress. Chile is currently in the process of developing a national emissions trading scheme (ETS).


Implementation

Chile’s national climate policies provide the basis for all project activities conducted there. The most important cooperation partner is the Chilean Energy Ministry, which plays the lead role with regard to carbon market instruments. Other important partners include the Environment Ministry, the Ministry of Finance and the Ministry of the Interior, which together with the Energy Ministry forms the Interministerial Task Force on Article 6.

The project assists the Task Force by means of studies, dialogue forums (including a roundtable on ETS), conferences and training on using mechanisms in climate change mitigation. Activities conducted as part of the project include in-depth technology needs assessments for specific, carbon-pricing-sensitive industry sectors, such as cement and steel. The aim here is to develop supportive instruments that aid the transition towards cleaner technologies. The project also offers climate finance-related training for state institutions and for stakeholders in the public and private sectors. Based on experience gained in Germany, the project also promotes the creation of a mandatory reporting platform (MRV). Another key aim is to promote dialogue between the government and civil society stakeholders. The project also supports the Carbon Pricing in the Americas initiative and boosts Chile’s presence on the international climate policy stage. 


Contributions of the Project

After five years of work, the Chilean component of the Global Carbon Market project ended. The project was implemented within the Renewable Energy Programme of GIZ together with the Ministry of Energy and focused on contributing to the fulfillment of greenhouse gas (GHG) mitigation targets committed to in the Paris Agreement by supporting the development of carbon pricing instruments and markets and the exploration of climate finance.

The project trained more than 2,200 people on the public-private collaboration for the application of future carbon pricing instruments and generated technical inputs to support decision-making by authorities, mitigation project developers, and CO2 emitters. In this way, the project successfully contributed to the inclusion of carbon markets in relevant policies, such as, for example, the update of the Chilean NDC and the draft Framework Law on Climate Change, or the Green Tax, which has strengthened Chile's position as a forerunner in international climate policy.

The project was developed in a national context of important advances in climate policy. In 2017 the green tax was implemented in Chile, in 2019 the country hosted and held the incoming presidency of COP25, in 2020 the Climate Change Framework Bill entered Congress, the NDC update was published and the tax reform that create the offset system was approved, while in the final year of the project, 2021, the Long-Term Climate Strategy was published and the longest COP presidency in the history of a COP ended due to the postponement by the COP26 pandemic.

Impacts:

  • Studies, outreach, and training on green taxes, compensation systems, financial instruments, and technology analysis
  • Support in public-private collaboration to accelerate the implementation of innovative technologies
  • Feasibility studies for carbon pricing instruments in the steel, cement, and mining industries
  • Validation of financial instruments for the development of new technologies (H2 green)
  • Support to the Article 6 Interministerial Task Force
  • Direct advice to the Senior Advisor for Article 6 negotiations at COP25.
  • Contribution to the discussion and creation of public climate policies
  • Positioning of Chile as a relevant actor at the international level
  • Side Events at COP25 and COP26

 

Global Carbon Market

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