Background and Objective
At the beginning of 2020, Chile was one of the first countries to submit a revised nationally determined contribution (NDC), thus raising its ambition compared with its original emission reduction target. Chile also aims to become 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. Furthermore, Chile is currently in the process of developing a national emissions trading scheme (ETS).
The Chilean component of the Global Carbon Market project was implemented from 2016 until the end of 2021. The project provided 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 NDC.
Chile’s national climate policies provided the basis for all project activities. The project’s most important cooperation partner was the Chilean Ministry of Energy, which plays the lead role with regard to carbon market instruments. Other important partners included the Ministry of the Environment, the Ministry of Finance and the Ministry of the Interior, which together form the Interministerial Task Force on Article 6.
The project assisted 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 was to develop supportive instruments that aid the transition towards cleaner technologies. The project also offered 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 promoted the creation of a mandatory reporting platform (MRV). Another key aim was to promote dialogue between the government and civil society stakeholders. The project also supported the Carbon Pricing in the Americas initiative and boosted 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 actively engaged 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 market-based instruments 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. During 2020, the Climate Change Framework Bill entered Congress, the NDC update was published and the tax reform that creates the offset system was approved. In the final year of the project, 2021, the Long-Term Climate Strategy was published.
Main project 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 (green hydrogen)
- 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 design of public climate policies
- Positioning of Chile as a relevant actor at the international level
- Side Events at COP25 and COP26