MAAP SUMMARY REPORT 2021 Introduction SUMMARY REPORT ENHANCING CARBON PRICING & INTERNATIONAL CARBON MARKET READINESS THROUGH THE MITIGATION ACTION ASSESSMENT PROTOCOL MAAP SUMMARY REPORT 2021 Introduction © 2021 International Bank for Reconstruction and Acknowledgements Development / The World Bank The assessments were supported by the World Carbon 1818 H Street NW, Washington DC 20433 Markets and Innovation Practice (SCCMI). The team Telephone: 202-473-1000 from the World Bank included (in alphabetical order): Internet: www.worldbank.org Marcos Castro, Harikumar Gadde, Keisuke Iyadomi, Juan Mata, Rachel Mok, Miguel Rescalvo, Florencia This work is a product of the staff of The World Sánchez Zunino, and Chandra Shekhar Sinha. Bank with external contributions. The findings, interpretations, and conclusions expressed in this We would like to thank the following persons (in work do not necessarily reflect the views of The alphabetical order) who collaborated with the team World Bank, its Board of Executive Directors, or the on this pilot exercise and the assessment framework. governments they represent. Without their support, the pilot assessments would not have been possible. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, Ximena Aristizábal (PMR Mexico); Libasse Ba (Senegal’s colors, denominations, and other information shown National Climate Change Committee); Francisco on any map in this work do not imply any judgment Dall’Orso León (Chile’s Ministry of Energy); El Hadji on the part of The World Bank concerning the Mbaye Diagne (Senegal’s National Climate Change legal status of any territory or the endorsement or Committee); Papa L. Diouf (Senegal’s Ministry of acceptance of such boundaries. Environment and Sustainable Development); Lorenzo Eguren (PMR Peru); Manuel García (PMR Peru); Hugo Rights and Permissions González-Manrique (PMR Mexico); Marlen Görner (PMR The material in this work is subject to copyright. Chile); Carlos Maldonado (PMR Mexico); Fatma Niang Because the World Bank encourages dissemination (Senegal’s Ministry of Environment and Sustainable of its knowledge, this work may be reproduced, in Development); Babacar Sarr (Consultant); Madeleine whole or in part, for noncommercial purposes if full Sarr (Senegal’s Ministry of Environment and Sustainable attribution to this work is given. Development); Ousmane Sarr (Senegal’s National Attribution Climate Change Committee); and Juan Pedro Searle Please cite the work as follows: “Summary (Chile’s Ministry of Energy). Report: Identifying capacity building needs for carbon pricing and international carbon market development through the Mitigation Action Assessment Protocol (MAAP)” by the World Bank, Washington, DC. Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; email: pubrights@worldbank.org MAAP SUMMARY REPORT 2021 Introduction Contents Overview 1 Context 3 Carbon pricing 3 – International carbon markets 5 – Vision of the MAAP 5 – MAAP-CPI assessment framework 9 – MAAP-ITR assessment framework 9 Objectives of the Pilot Assessments 11 Lessons learned 13 MAAP online interface 17 Concluding remarks and recommended next steps 19 Annexures 21 SUMMARY REPORT ENHANCING CARBON PRICING & INTERNATIONAL CARBON MARKET READINESS THROUGH THE MITIGATION ACTION ASSESSMENT PROTOCOL 1 MAAP SUMMARY REPORT 2021 Overview Overview Putting a price on carbon could be an indispensable part of a The World Bank initiated the development of the Mitigation country’s strategy to reduce emissions in an efficient way. Many Action Assessment Protocol (MAAP) in 2015 to drive meaningful countries are evaluating the potential role of domestic carbon assessment of diverse climate actions. In 2020, with the support pricing instruments to support their broader decarbonization of the Partnership for Market Readiness (PMR), the World Bank strategies. Carbon pricing needs to operate as part of a broader supported the development of two additional versions of MAAP, policy mix to be effective, and the development of carbon pricing the International Transfer Readiness (MAAP-ITR) and the Domestic instruments is a dynamic process requiring adjustments and Carbon Pricing Instruments (MAAP-CPI). MAAP-ITR aims to assess reviews over time. the level of readiness to participate in international transactions (particularly Article 6.2). MAAP-CPI seeks to assess the level Furthermore, putting a price on carbon through international of development of countries’ efforts toward the design and carbon markets could also offer significant cost benefits and implementation of CPIs. By applying MAAP the user can identify enable flexibility in achieving emission reduction targets. Article 6 capacity building needs and priority actions. of the Paris Agreement provides a potential basis for bottom-up carbon market linkage. Beyond Article 6, the Carbon Offsetting Pilots results showed that MAAP provides a transparent and rela- and Reduction Scheme for International Aviation (CORSIA) and tively easy-to-use framework to help countries identify strengths voluntary carbon markets provide additional avenues to explore and opportunities for improvement. Future implementation of the the role of carbon markets. tool will seek to address identified challenges such as collecting evidence, identifying capacity building priorities, and providing Under the Paris Agreement, carbon pricing policies and guidance on communication strategies. This report summarizes international carbon markets are increasingly developed bottom- key findings and lessons learned from pilots. up1 and are diverse in nature to accommodate countries’ domestic priorities. While this bottom-up development promotes innovation, the diversity of approaches reduces transparency between climate actions and increases the complexity of market integration. A standardized framework is needed to assess countries’ capacity building needs to participate in carbon pricing and international carbon markets. 1 Under the bottom-up architecture of the Paris Agreement, countries determine their mitigation goals and pledge Nationally Determined Contributions. This is in contrast to a top-down approach where an international climate agreement is managed by a strong multilateral institution and based on legally binding commitments for emission reductions or finance for as many national governments as possible. 2 MAAP SUMMARY REPORT 2021 Context 1. Context 1.1 CARBON PRICING Carbon pricing is critical for the Paris Agreement goal of decarbonization and has multiple co-benefits including generating Carbon pricing is any policy that creates a direct and explicit fiscal revenues and catalyzing investments. Many countries and price on greenhouse gas (GHG) emissions. By making pollution private sector entities are factoring in the potential role of carbon more expensive, economic actors are incentivized to account for pricing instruments (CPIs) as a part of their decarbonization the costs of their emissions when making commercial decisions. strategies. Ambitious climate action will require a significant Carbon prices often cover only some of a jurisdiction’s emissions, shift in investment patterns and behaviors, and innovation in and there are often a range of barriers to emissions mitigation technologies, infrastructure, financing, and practice. A well- that carbon pricing alone cannot address. This means that a designed carbon price could be a cost-effective way to abate GHG comprehensive policy package is required to reduce emissions. emissions by helping such a transformational shift and innovation.6 CPIs generally take the form of a carbon tax or an Emissions There is evidence of growing momentum on carbon pricing – 97 Trading System (ETS).2 out of 190 nationally determined contributions (NDCs) mention carbon pricing, and there are now 61 CPIs in place or scheduled • Carbon taxes are those that explicitly put a price on GHG for implementation, consisting of 31 ETSs and 30 carbon taxes.7 emissions or that use a metric directly based on carbon (that is, a uniform price per tCO2e or per unit of fuel based on its The choice and design of carbon pricing depends on local con- carbon content).3 They force emitters to internalize the cost of text and is a dynamic and time-consuming process requiring pollution by implementing a compulsory charge proportional to stakeholder engagement, adjustments, and reviews over time. the emissions associated with activities and goods, creating a The design and implementation of a carbon pricing instrument financial incentive for emission reduction. should be a part of an integrated set of policies that are linked to development priorities. In the design and implementation of • ETSs (also called cap-and-trade systems) work by placing a carbon pricing, the political and economic considerations are crit- quantitative limit (a cap) on the amount of GHG emissions from ical. If these considerations are not carefully accounted for, carbon specific sectors of the economy.4 Regulated entities are required pricing can be misaligned with other policies, have regressive to surrender one “allowance” for each unit of emissions for impact or carbon leakage, negatively affect competitiveness, or which they are responsible.5 Regulated entities either acquire have impact on government revenues. allowances from auctions, are allocated allowances for free, or purchase them from other regulated entities in a secondary market. The carbon price will vary with changes in allowance supply and demand. C arbon pricing – in combination with other coordinated policies – will play a critical role in bringing economic efficiency to climate action while contributing to sustainable development. 2 World Bank (2021) Carbon pricing assessment and decision making: A guide to adopting a carbon price. 3 State and Trends of Carbon Pricing, 2016. 4 Baseline and credit systems are a subtype of ETS, using an emissions intensity-based cap set at either a firm or industry level and calculated net liabilities or credits based on a performance-based standard. 5 One allowance typically equates to one ton (1,000 kg) of carbon dioxide equivalent, or one short ton (907 kg) of carbon dioxide equivalent in some systems in the US. 6 World Bank (2018), “Carbon Markets under the Kyoto Protocol”, https://openknowledge.worldbank.org/bitstream/handle/10986/31210/133140-19-12-2018-17-11-20- CarbonMarketsUnderKPWeb.pdf?sequence=1&isAllowed=y 7 World Bank, “Carbon Pricing Dashboard”, https://carbonpricingdashboard.worldbank.org/ 3 MAAP SUMMARY REPORT 2021 Context FIGURE 1. CARBON PRICING INITIATIVES IMPLEMENTED, SCHEDULED FOR IMPLEMENTATION, AND UNDER CONSIDERATION (ETS AND CARBON TAX) (STATE AND TRENDS, 2020) Sweden Beijing Newfoundland Alberta and Labrador Norway Finland Tianjin Saitama Denmark Tokyo Germany Shanghai The Netherlands Hubei Manitoba UK Chongqing Estonia Latvia Fujian Ireland Poland Guangdong Taiwan Québec Ukraine Luxembourg Shenzhen Saskatchewan Ontario RGGI Spain Montenegro Pennsylvania TCI Portugal Prince Virginia Edward Island France Austria Nova Scotia Slovenia Catalonia Singapore New Brunswick Liechtenstein Massachusetts Switzerland Northwest Territories Canada Iceland EU British Republic Columbia Kazakhstan of Korea Washington Oregon Japan California China Turkey Mexico Senegal Thailand Vietnam Colombia Côte d’Ivoire Indonesia Brazil Rio de Janeiro São Paulo Australia Chile Argentina South Africa New Zealand ETS implemented or scheduled for implementation ETS and carbon tax implemented or scheduled Carbon tax implemented or scheduled for implementation Carbon tax implemented or scheduled, ETS under consideration ETS or carbon tax under consideration ETS implemented or scheduled, ETS or carbon tax under consideration ETS and carbon tax implemented or scheduled, ETS or carbon tax under consideration The large circles represent cooperation initiatives on carbon pricing between subnational jurisdictions. The small circles represent carbon pricing initiatives in cities. Note: Carbon pricing initiatives are considered “scheduled for implementation” once they have been formally adopted through legislat Carbon pricing initiatives are considered “under consideration” if the government has announced its intention to work towards the implementation of a carbon pricing initiative nd carbon taxes according to how they operate technically. ETS not only refers to cap-and-trade systems, but also baseline-and-credit systems as seen in British Columbia an 4 MAAP SUMMARY REPORT 2021 Context 1.2 INTERNATIONAL CARBON It is critical to lay the foundation for post-2020 international carbon MARKETS markets in the next few years given that the Paris Agreement has left the key definition and architecture to future negotiations It has been estimated that international carbon markets, if while the NDC implementation period has already started. designed well, could reduce the cost of implementing countries’ Furthermore, while negotiations on international carbon markets NDCs by more than half to $250 billion per annum in 2030, or are ongoing, countries should not wait to abate emissions but increase the amount of emissions removed by 5 GtCO2 a year seek to implement domestic mitigation policies, especially carbon in 2030, at no additional cost.8 Article 6 of the Paris Agreement pricing, as soon as possible. Therefore, it is now more important recognizes voluntary cooperation for the implementation of than ever to design new concepts that could enhance impact, NDCs, and the draft negotiation text suggests that there would be enable scaled-up action, and build countries’ capacity to fully two types of carbon markets. Article 6.2 will likely have flexibility utilize the opportunity presented by international carbon markets for bilateral or plurilateral arrangements between Parties, and CPIs to meet climate goals and raise ambition. relying on assets generated and transferred under a variety of mechanisms, procedures, and protocols. Article 6.4, in contrast, 1.3 VISION OF THE MAAP will likely involve a higher level of supervision by Parties to the Climate ambition skyrocketed in 2020 and is expected to continue Paris Agreement. Beyond international carbon markets under to grow. To date, more than 121 countries and 1,000 companies Article 6, the International Civil Aviation Organization (ICAO) have pledged net zero carbon emissions.11 Thirty Parties, has also decided to establish a global market-based mechanism, representing 44 countries and 14.5% of global GHG emissions, in the form of the CORSIA to help achieve ICAO’s global goal of have adopted net-zero targets in law or policy.12 Under the Paris carbon-neutral growth from 2020 onwards. Despite the potential Agreement, countries have agreed to reach net zero by 2050 and impact of the COVID-19 pandemic on air travel, this is expected agree to communicate updated NDCs every five years. Despite to contribute to global demand for carbon offsets and to play a this growing momentum, countries are still far from reaching the key role in supporting the development of the next generation global goal. To reach the 1.5°C temperature target, global net CO2 of carbon markets. Other voluntary market mechanisms are also must decline by ~45% from 2010 levels by 2030. emerging, potentially providing additional avenues for countries to explore the role of the private sector in contributing toward Putting a price on carbon, either through a domestic carbon climate goals. There are more than 14,500 registered crediting pricing instrument or international carbon markets, could play an projects, generating almost 4 billion tCO2e of cumulative carbon important role in driving innovation across sectors and facilitating credits.9 Crediting activity is starting to shift or scale up beyond an orderly transition towards low carbon by addressing market projects generated from the Kyoto mechanisms, such as the Clean failures. Nonetheless, while the current bottom-up development Development Mechanism (CDM) to program, sectoral, or policy of carbon pricing and international carbon markets promotes level. Companies remain active in voluntary markets, with credits innovation, the diversity of approaches reduces transparency from independent crediting mechanisms responsible for almost between climate actions and increases the complexity of market two-thirds of all credits issued in 2019. Several countries are also integration. A standardized framework is needed to track progress linking their carbon crediting schemes for compliance purposes on carbon pricing and international carbon market development. with a carbon tax or ETS. Governments are also developing In the short run, such a standardized framework could support domestic crediting mechanisms. Not only do these projects the development of more robust carbon pricing and international generate local benefits, but carbon credits also give companies carbon market policies, through either a self-evaluation or flexibility to meet their compliance on climate commitments.10 independent assessment. As the application of a standardized 8 IETA, University of Maryland and CPLC (2019), “The Economic Potential of Article 6 of the Paris Agreement and Implementation Challenges,” https://www.ieta.org/resources/ International_WG/Article6/CLPC_A6%20report_no%20crops.pdf 9 World Bank (2020), “State and Trends of Carbon Pricing 2020” https://openknowledge.worldbank.org/bitstream/handle/10986/33809/9781464815867.pdf?sequence=4&isAllowed=y 10 World Bank (2020), “State and Trends of Carbon Pricing 2020” https://openknowledge.worldbank.org/bitstream/handle/10986/33809/9781464815867.pdf?sequence=4&isAllowed=y 11 UNFCCC, “Climate Ambition Alliance: Net Zero 2050”, https://climateaction.unfccc.int/views/cooperative-initiative-details.html?id=94 12 Climate Watch, “Net-Zero Tracker”, https://www.climatewatchdata.org/net-zero-tracker?indicator=nz_year&showEUCountries=true 5 MAAP SUMMARY REPORT 2021 Context framework is scaled up, these assessments could also increase trust and transparency across decentralized policies, and facilitate international cooperation and knowledge sharing (see Figure 2). Against this backdrop, the World Bank’s Networked Carbon Markets (NCM) initiative started the development of the MAAP in 2015 to drive meaningful assessment of diverse climate actions. The main goal of MAAP is to provide a standardized framework to evaluate the risks and performance of climate actions and policies. MAAP takes a scales- based approach to provide a more nuanced assessment of the relative strengths and weaknesses of climate actions. The modules are composed of a series of key indicators, each reflecting best practices. Each indicator includes a checklist of activities, and the scores assigned to each indicator depend on the extent to which these activities have been achieved. Each module is independent from the others, enabling users to add or Carbon pricing is any remove modules based on their own interests and needs. policy that creates a direct and explicit price on GHG emissions. FIGURE 2. STRATEGIC OBJECTIVES OF MAAP LONG TERM • Build trust and transparency in decentralized MEDIUM TERM carbon pricing instruments • Enhanced • Promote transparency of international climate policies carbon market and actions cooperation The main goal of in different MAAP is to provide SHORT TERM countries a standardized • Design of robust framework to climate actions evaluate the risks and and policies performance of climate • Self-evaluation actions and policies. • Benchmarking 6 MAAP SUMMARY REPORT 2021 Context FIGURE 3. METHODOLOGICAL FRAMEWORK OF MAAP Mitigation Management Financial Development International Domestic Carbon Action Program Entity Structure Benefits Transfer Readiness Pricing Instrument Definition Management Financial Sustainable CPI Policy Transparency & Scope Framework Coherence Development & Planning Objectives & Targets Double CPI Objectives Financial & Financial & Targets Investment Stakeholders Counting Regulatory Planning & Prevention & Policy CC Program Monitoring Participation Frameworks Planning Management of Financial Mitigation Flows Monitoring of Activity Institutional Infrastruc- Development alignment with Framework Document Control ture at the Benefits NDCs Program CPI Design Level Environmen- and Technical Emissions Reduction tal Integrity Infrastruc- ture Monitoring & Reporting PROJECT/PROGRAM LEVEL JURISDICTION LEVEL MAAP has four modules that focus on project or program-level • Assessing the level of capacity required to participate in assessments, specifically in relation to mitigation action design, international climate markets for countries that are developing the management entity, financial structure, and development international carbon markets strategies, including Article 6 and benefits. The project/program-level framework is currently used CORSIA; as an online interface, and has been developed with the support of more than 40 partners, including governments, multilateral • Helping countries to identify the gaps and to use MAAP development banks, the private sector, and civil society groups. key indicators to identify critical next steps in the design and implementation process; With the support of the Partnership for Market Readiness (PMR), the World Bank expanded and piloted two additional versions of • Identifying capacity building needs. This could be used to MAAP: MAAP-CPI and an updated version of the MAAP-ITR to support countries’ readiness and technical work programs, help countries assess, prepare, and participate in domestic CPIs as well as developing countries’ roadmaps for implementing and international carbon markets. domestic CPIs; MAAP-CPI and MAAP-ITR seek to increase transparency and • Informing countries’ analytical work to advance policymakers’ comparability of different climate policies and actions to inform understanding on how best to integrate CPIs and international targeted capacity building, especially in the context of bottom- carbon markets into their existing sectoral and national policy up market mechanisms of the Paris Agreement. The annex of this landscape and support countries’ NDCs. report describes the frameworks in more detail. The design principles for this work are as follows: The expected value added by this work with PMR’s support includes: • MAAP is designed to support countries at various stages of policy development so that progress can be tracked over time. During • Assisting countries in understanding where they stand in the the early design stage, MAAP can help countries understand design and implementation processes of CPIs; the key building blocks of a CPI development process. At a later stage, MAAP could be used to assess how well the instruments have been implemented. 7 MAAP SUMMARY REPORT 2021 Context • MAAP is not instrument specific. Instead, it seeks to assess the and international carbon markets at various stages of the process. robustness of common building blocks for CPIs and international As previously mentioned, MAAP was developed to help countries carbon markets. Other PMR guides (such as those shown in understand their readiness in the design and implementation figure 4) support supplemental assessments to provide more processes; by doing so, countries can also identify the gaps and instrument-specific design recommendations. use MAAP key indicators to identify how to make progress in the design and implementation process. • While there is no standardized way to design CPIs and international carbon markets, MAAP seeks to provide a In the carbon pricing design and implementation process, the CPI checklist of common building blocks based on international Assessment and Decision-Making Guidebook can support early best practices. However, countries do not necessarily need to discussions by helping to develop the case for carbon pricing and achieve full scores on MAAP to participate in carbon pricing and to analyze the CPI options available. Subsequently, the MAAP tool international carbon markets. Instead, the tool strives to help can provide a deeper assessment of the key gaps and capacity- countries track their progress and, based on lessons learned, building needs. The MAAP assessment is likely most useful at adjust their policies over time. the design and implementation stages (i.e., when the country has done some groundwork to consider potential CPI options), rather The framework builds on existing technical work and country than at the very early stage of CPI consideration. Nonetheless, experience, including PMR’s Market Readiness Proposal (MRP) and at earlier stages, MAAP scores can provide a point of reference the World Bank’s FASTER principles for carbon pricing. As shown to highlight the key best practices that the country should strive in figure 4, the World Bank has developed a range of tools and towards over time. guides, including MAAP, which can be used in a complementary manner to support the development of carbon pricing instruments FIGURE 4. COMPLEMENTARY TOOLS AND KNOWLEDGE PRODUCTS FOR CARBON PRICING PREPARING FOR CARBON PRICING DESIGN AND IMPLEMENTATION CARBON CARBON CREDITING PRICING PRICING GUIDE ASSESSMENT ASSESSMENT AND DECISION TOOL MAKING (CPAT) (FORTHCOMING) (FORTHCOMING) MRV AND REGISTRY MANAGING COSTS AND BENEFITS CO-BENEFITS GUIDE (FORTHCOMING) 8 MAAP SUMMARY REPORT 2021 Context 1.4 MAAP-CPI ASSESSMENT module, “CPI Design and Technical Infrastructure,” is a more FRAMEWORK specific assessment of the technical and environmental aspects of the CPI. These indicators assess the technical architecture, The MAAP-CPI tool is meant to assess the level of development documentation, and financial sustainability for the CPI. Overall, toward the design and implementation of CPIs. MAAP-CPI is module 1 is relevant to the broader policy landscape and can be designed to support countries in evaluating their ongoing efforts replicated for different assessments in a country, while modules 2, for CPI integration into the country’s overall policy package, and 3, and 4 are for individual CPI evaluation. to assess the existing level of development of CPIs in order to identify gaps and priority actions. The tool builds directly on the 1.5 MAAP-ITR ASSESSMENT existing MAAP framework as well as PMR’s technical documents FRAMEWORK and country programs. MAAP ITR aims to assess whether a country has the necessary MAAP-CPI is divided into four modules, as shown in figure 5 institutional framework and infrastructure in place to participate below. The first two modules, “CPI Policy & Planning” and in international carbon markets, such as Article 6 (particularly 6.2), “CPI Regulatory & Policy Frameworks,” consider the broader CORSIA, and voluntary carbon markets. Indicators are grouped political, economic, and social context in which the policy occurs. into the following modules, as shown in figure 6. The modules assess the policies and processes being designed The first two modules, “Party Readiness” and “Article 6 or implemented to operationalize the CPI, and evaluate the Implementation,” assess whether the country has the necessary robustness of resources, rules, and incentives that are in place. institutional framework and infrastructure in place for international The third module, “Institutional Framework,” contributes to transfers under Article 6.2. The “Party Readiness” module assesses analytical work to advance policymakers’ integration of CPIs into the robustness of institutional frameworks and infrastructure their existing sectoral and national policy landscape, defining clear for existing climate markets. On the other hand, the Article 6 roles and responsibilities. This module assesses coordination with implementation module assesses the infrastructure and processes relevant stakeholders in the development and implementation that are put in place specifically for international transfers under of CPIs. Overall, the first three modules evaluate the enabling Article 6. The indicators under “Article 6 Implementation” are environment that countries are implementing to participate in most applicable to Parties with ongoing piloting activities. CPIs by identifying the level of domestic development in the institutional frameworks, processes, and infrastructure. The fourth FIGURE 5. MODULES UNDER CPI • CPI definition and scope CPI Policy & Planning • Planning • CPI legal mandate CPI Regulatory & • CPI operational rules Policy Frameworks • CPI incentives for support • CPI management structure Institutional Framework • Roles and responsibilities • Stakeholders’ participation • CPI objectives and targets • CPI design principles CPI Design and Technical • CPI financial mechanisms for support Infrastructure • CPI contribution to sustainable development • MRV CPI processes and infrastructure 9 MAAP SUMMARY REPORT 2021 Context Indicators that are grouped under these two modules are further The extent to which NDCs provide a clear and complete picture categorized into four assessment areas, as defined below: of a country’s climate commitment is critical for ensuring the environmental integrity of international transfers under Article • Country-level environmental integrity. This criterion assesses 6. Against this backdrop, existing indicators from the “Party the processes that countries are designing and implementing Readiness” and “Article 6 Implementation” modules are extracted to ensure that transfers of units between Parties do not to form a score on “NDC Completeness.” lead to an overall increase in global GHG emissions and that any international transferable unit generated as a result of Furthermore, the tool provides a score on “Unit Transfer cooperative approaches is real, permanent, and verifiable. Authorization,” based on scoring using existing key indicators related to the host country’s capacity for authorizing international • Alignment of mitigation activities with the NDC. The transfers. This is intended to help understand the minimum alignment of traded activities with the issuing Party’s NDC is key requirements for hosting projects for international cooperation to ensuring that the activity is conducted in priority areas. under Article 6.2, CORSIA, or voluntary carbon offset projects where corresponding adjustments apply. This includes aspects • Double Counting Prevention. A country should have the related to the institutional capacity, authorization process, tracking required infrastructure to track all ongoing units and activities and registration of units, and the processes to do corresponding at the national and subnational level related to GHG emissions, adjustments, where applicable. including those that may be transferred internationally. The mechanisms should have documented procedures for The first version of MAAP ITR has been piloted in 13 countries. registering activities and dealing with potential double counting A summary report and blog have been published to summarize of emissions reductions. key results and lessons. MAAP ITR has since been updated with the support of PMR. Overall, pilot results showed that significant • Transparency. This assesses the extent to which the country is capacity building is still needed to align countries’ institutional complying with the requirements established, among others, frameworks and infrastructure with the Paris Rulebook and in the Modalities, Procedures, and Guidelines (MPGs) for the the evolving procedures of Article 6. This capacity building is Transparency Framework referred to in Article 13 of the Paris needed even for countries that have substantial experience in Agreement. Key indicators include those related to the quality Kyoto markets, seeing that the Article 6 rulebook has not been of information related mitigation strategies and policies, the finalized yet, and therefore, official readiness for Article 6 cannot Party’s NDC, reporting requirements for the GHG inventory and be considered “complete” in any country. for tracking the NDC implementation. FIGURE 6. MODULES UNDER MAAP ITR Transparency • As per Article 13’s “Enhanced Transparency Framework” Double Counting Prevention • Double claiming, double issuance, double registration and double use Mitigation Activity Alignment • Actions should be taken to ensure alignment with the with NDCs Issuing Party’s NDCs • Does not lead to an overall increase in global GHG emissions Environmental Integrity and that ITMOs are real, permanent, and verifiable 10 MAAP SUMMARY REPORT 2021 Objectives 2. Objectives of the Pilot Assessments PMR and NCM are expanding and piloting the updated MAAP- With the aim of assessing the two additional versions of MAAP CPI and MAAP-ITR tools to assess the level of development of in countries with different climate policies and market-based carbon pricing policies and instruments in the countries as well mechanisms strategies, the ITR and CPI tools were piloted in as their readiness to enter into international transactions in the collaboration with partners from Chile’s Ministry of Energy, future. This assessment identifies gaps in countries’ institutional Mexico’s PMR program,13 Peru’s PMR program and Senegal’s frameworks, processes, and infrastructure. The pilot assessments Ministry of Environment and Sustainable Development. As aim to consultatively explore how MAAP can help countries 1, countries selected for piloting are at described in table  effectively identify gaps in their institutional frameworks and various stages of carbon pricing and international carbon market infrastructure for markets and facilitate broader capacity-building development. efforts for domestic carbon pricing instruments and international carbon markets. TABLE 1. PILOT COUNTRIES’ LANDSCAPE OF MARKET-BASED INSTRUMENTS CHILE MEXICO PERU SENEGAL DOMESTIC CARBON CARBON TAX CARBON TAX DOMESTIC CARBON DOMESTIC: CARBON PRICING IS BEING IMPLEMENTED; IMPLEMENTED; PRICING: ASSESSING TAX CONSIDERED DESIGN OR OFFSETTING ETS FIRST PHASE THE IMPACT OF SCHEDULED FOR SYSTEM UNDER OPERATING CARBON PRICE ON IMPLEMENTATION DEVELOPMENT; SEVERAL SECTORS OF TRADABLE THE ECONOMY PERFORMANCE STANDARD PROGRAM PROPOSED IN BILL ARTICLE 6 PILOTS YES YES YES YES OR ARTICLE 6 (AGREEMENT SIGNED STRATEGY UNDER WITH SWITZERLAND DEVELOPMENT TO PILOT ARTICLE 6) UPDATE THE NDCS NDC UPDATED; NDC UPDATED; NDC UPDATED; NDC UPDATED; (AND INCLUDES INTENDS TO USE INCLUDES ETS AS CONSIDERS THE USE REFERENCE TO REFERENCE TO INTERNATIONAL A MULTISECTORAL OF INTERNATIONAL INTERNATIONAL CARBON PRICING) MARKETS-BASED ACTION TO MITIGATE CARBON MARKET MARKETS MECHANISMS GHG EMISSIONS MECHANISMS 13 In this instance, the assessment was conducted as part of an internal exercise that did not involve government agencies. 11 MAAP SUMMARY REPORT 2021 Objectives Expected outcomes of the pilot assessment identified by the pilot • Inform technical and financial assistance priorities, as well as countries include: future country-funding proposals. The assessment creates an objective baseline for future work and can identify work streams • Support of countries that are developing strategies for for international cooperation (e.g., PMI). The tools provide a carbon pricing and international carbon markets. The tools comprehensive assessment of the status of the country’s carbon supply useful insights during the design and implementation pricing and international carbon market development, and allow phase of national carbon pricing instruments, guiding discussion for increased trust and transparency to access new sources of on critical elements to be considered (for instance, the regulatory funding. framework and the infrastructure needed). A prompt assessment can ensure that the domestic infrastructure is aligned with While the piloting process differed from country to country, the international best practices and facilitate potential participation standard approach involves six stages as outlined below. The in international markets, i.e., through linking instruments or use assessment is usually led or supported by a local expert, and the of Article 6. assessment is reviewed and discussed with relevant government counterparts. For more information refer to Annex III. • Identify broader country capacity building needs at the regulatory, institutional, and infrastructural levels. The assessment provides for a self-check regarding design and implementation of carbon pricing instruments and clarifies the priority areas. FIGURE 7. PILOTING PROCESS Document Information Preliminary Review and Final Monitor and and data analysis assessment discussion assessment evaluation gathering and review 12 MAAP SUMMARY REPORT 2021 Lessons learned 3. Lessons learned MAAP provides a transparent and Beyond the technical design of individual policies, MAAP-CPI and MAAP-ITR also encourages the assessor14 to consider broader relatively easy-to-use framework aspects that are critical to the success of carbon pricing and Policy choices have to be made in line with country priorities international carbon markets, such as the country’s political will (e.g., the use of revenues for offsetting other taxes versus direct and level of institutional coordination. This allows the user to take payments to households) and MAAP tools can help consider all a holistic and coordinated approach when developing their carbon critical aspects when moving through these critical choices. MAAP pricing and international carbon market policies. For example, for provides a transparent and relatively easy-to-use framework, and MAAP-CPI, a key value-add of the tool is that it does not only directly builds on existing country experience and knowledge cover technical issues, but also assesses critical issues that have products that are produced by PMR. The assessment has a actually inhibited carbon pricing development in the past (e.g., transparent framework that provides the reasoning for the scoring political barriers, lack of communication and regressive impacts). of each indicator and there is a guidance document to assist the For MAAP-ITR, the tool places an equally strong emphasis on process. The online version of the tools that will be launched governance, planning and stakeholder consultation. during the first semester of 2021 will enhance transparency by allowing results to be shared with selected users. The tool can help identify strengths Both the ITR and CPI tools have proved useful in ensuring that and opportunities for improvement critical building blocks are considered at various stages of Through a review of the key elements of design and implemen- policy development for domestic carbon pricing instruments tation, the tools can provide insight on critical areas for and international carbon markets. A key objective of MAAP- development and help countries plan the timeline for design CPI and MAAP-ITR is to help countries track their progress. The and implementation. By analyzing the score obtained for each process helps counterparts fully consider what the key gaps and key indicator and assessment area, countries can quickly assess capacity building priorities are, and the way the key indicators are the required effort to achieve a higher score. Depending on structured enables the users to quickly identify priority actions. the indicator evaluated, this effort can be translated as capacity building, technology or infrastructure development, or other next steps. This score gap can give countries a sense of the effort “MAAP ITR & CPI are tools for combined needed to fill in gaps in key areas. assessment of country NDC readiness, For instance, for a country implementing the MAAP-ITR tool with ET readiness, and CPI readiness to better low scores in “Transparency” and “Double counting prevention,” understand the current situation, and it can clarify the areas to prioritize, using the evaluation guidance evaluate and plan the necessary efforts to to plan the next steps in terms of infrastructure or institutional improve it. To be effective it must be used on needs. Understanding that the score is a snapshot of the current a regular basis and the lessons learned must situation and that low scores should not be interpreted negatively, be implemented.” Babacar Sarr, the score can also help countries track progress of different elements through time. For a country like Senegal in the initial Senegal Consultant stages of the CPI development, a standardized assessment like The assessor is the person leading the MAAP process. The assessment is usually led or supported by a local expert, and the assessment is reviewed and discussed with relevant 14 government counterparts. 13 MAAP SUMMARY REPORT 2021 Lessons learned MAAP can provide a collective understanding of the key areas of • Internal discussions and international exchange; development and clarify which public institutions and stakeholders will be essential in the next steps. • Stakeholder exchanges; Once the strengths and opportunities for improvement are • Influence from political opportunities (what can or cannot be identified, evaluating when to repeat the assessment is also a approved); relevant decision. In Mexico’s case, relevant information was being discussed at the moment of the assessment, such as the • Reflection in design choices that are not explicitly explained in NDC update and the Special Climate Change Program (PECC). documentation. Therefore, important data was about to arise in the short-term. In addition, for information related to Article 6 there are multiple The timing of upcoming assessments should be scheduled so that ongoing initiatives but little finalized and published information. the newest data is available at the time of developing the new Since Article 6 is not yet operational, the section on “Article 6 iteration of the assessment. implementation” represents a snapshot of the development at the moment. “When applied in the early development For instance, Mexico has been working on different infrastructure stages of a CPI or a strategy to participate in elements needed for the ETS: the system’s registry, offset international markets, though it might not be protocols, and the auction platform. The challenge for countries necessary to evaluate every detailed question like Mexico in the process of implementing initiatives is that of the modules, it can be of significant help to initiatives might be under discussion or in advanced stages go through the areas of action included in the of design, but the process is yet to be formalized, and critical information might not be publicly available yet. It is also important modules, in order to identify aspects to be to consider that political changes may hamper the implementation considered in the development of the CPI or of what is currently planned and the government’s appropriation international carbon market participation. This of such reports. can enable the country to include all relevant aspects from the start.” There is a need to coordinate with Marlen Görner, PMR Chile other development projects Countries implementing the MAAP tools are likely implementing a Collecting the evidence for the range of capacity building projects beyond MAAP. It is important to recognize the complementarities and role of MAAP in this rating of scoring parameters context, and how the tools fit in the broader strategy of the can be challenging with ongoing country. MAAP can be complementary to other initiatives, for instance by identifying key priority actions or demonstrating developments results by tracking progress over time. The MAAP tool could also Identifying and providing the documents to support the ratings complement instrument-specific assessments. The coordination can be an additional challenge when the country is in the design of the MAAP with other capacity-building projects should not phase and there are ongoing discussions. Decisions usually involve oppose but support given the dynamic nature of tool that can be multiple stages, where information might not be documented or easily updated. The government’s challenge is to take ownership publicly available. Countries reported that in some cases, it was of the tool and give it continuity despite internal changes. hard to find written proof (evidence) or information as decisions were made based on: 14 MAAP SUMMARY REPORT 2021 Lessons learned Stakeholder consultation is key to ensure coordination, but it is For those who conduct the assessment, the tool also has a learning important to consider an adequate timeline to get feedback process. Given the learning period in using the tools, the piloting on the assessment and its objectives. For example, in Senegal assessment was developed collaboratively between the country there are several concurrent development projects (e.g., experts and the World Bank team to provide assistance during United Nations Framework Convention on Climate Change the assessment. During this initial phase of implementation of Collaborative Instruments for Ambitious Climate Action, KliK), the new tools, internal preparatory discussions with government and the assessment should identify the main objectives of counterparts allowed pilot countries to have a clear idea of how the ongoing engagements, as the results would not be useful if the assessment should be done. The process of implementing the tool recommendations are conflicting. It is critical to ensure coordi- in turn helped build countries’ capacity to their capacity-building nation with other development initiatives or capacity building needs through MAAP. It also increased their understanding of projects to ensure consistency of recommendations. Given that what are considered to be critical aspects of any carbon pricing stakeholder consultation is critical, it is important to estimate how instrument or international carbon pricing market mechanism. long it will take for the country to conduct the assessment, in order Moving forward, it will be critical to train assessors so that they to plan how often the tool will be updated. can apply the tool adequately. Providing translations in other languages (Spanish, French, Chinese, etc.) might also be useful for Discussion and iteration are necessary facilitating stakeholder engagement in the countries. for an insightful scoring process Sharing the results can help As mentioned above, the score that MAAP provides is not bad or good per se, and a significant benefit of implementing the tool communication with stakeholders is around the discussions needed to define the score for each and provide insightful feedback indicator. The assessment process can prompt a policy dialogue MAAP-ITR and MAAP-CPI piloting approaches allow for across key stakeholders, since it involves document reviews, consultations to receive feedback from relevant government meetings, interviews, and consultation with experts. It is critical to counterparts on the preliminary results and a workshop to make sure all relevant stakeholders are consulted during the MAAP discuss how the assessment informs broader carbon pricing and assessments. All relevant government agencies and individuals international carbon market strategies. These two instances are should be identified in time and included in the discussion and critical to gather feedback and update the assessment results as iteration process. needed. Sharing the results and identifying stakeholders’ insights and main concerns can help develop effective communication Piloting countries have reported that agreeing on a score, strategies to improve acceptability among stakeholders, including especially for the yes/no indicators, can generate extensive the private sector. Clear communication around the policies internal discussions. It is important that the team discusses the is critical, particularly due to political economy considerations stringency expected and refers to the “Assessor Guidelines for (regressive, competitiveness, etc.). MAAP can help address these the MAAP-ITR Module under Article 6.2 of the PA” to overcome issues of political support and communication. potential difficulties in the scoring process. Overall, It is important that evaluators in charge of the assessment are familiar with the climate policy context as well as with the details of the specific policy instrument to be designed/implemented. “In Mexico’s case, the initial exercise was carried out within the team, so it was easy to recognize the importance of evaluating with different stakeholders to have a more comprehensive analysis. This considering that although the initial examination is rigorous, the voice [of] those who implement climate policy is necessary and enriching.” Carlos Maldonado, PMR Mexico 15 MAAP SUMMARY REPORT 2021 Lessons learned MAAP-CPI provides the most useful insights when applied to one specific carbon pricing instrument “MAAP - ITR allowed For countries with different carbon pricing instruments in different stages of implementing us to have a complete the assessment, separating some of the modules for each instrument will provide the most evaluation of our useful insights. While some of the modules are an assessment of the country landscape (e.g., progress, weaknesses the MAAP CPI module 1 regarding “Policy & Planning”), most indicators are specific to the and gaps thanks to carbon pricing instrument being discussed or implemented. The structure of MAAP-CPI a set of criteria that encourages countries to consider that different policies complement each other, ensuring address the main that carbon pricing is considered as part of a broader coordinated policy package. elements to consider For example, since 2013 Chile has been conducting a series of studies on the design and to achieve a successful implementation of carbon pricing instruments in the country, with a demonstrated political ITMO. As a standardized commitment. Chile has three carbon pricing instruments in various stages: a carbon tax assessment tool, it has fully operational since 2017; a carbon tax reform in 2020, including legal mandate for an the potential to give offsetting system that is currently under implementation and will enter into force in 2023; a comparative vision and a baseline and crediting system as part of a Climate Change Framework Bill (currently between countries on under discussion in Congress). In order for MAAP-CPI to capture the capacity and their efforts to access institutional gaps, the tool was applied to the carbon tax reform, including the offsetting system, as its current development stage allows for the most benefit to be extracted international markets from the MAAP evaluation of the development process, and as an average of the three within the framework instruments might not represent the country context. of Article 6, which not only facilitates south- MAAP-ITR is particularly useful for countries that south exchange, but also to direct international are developing Article 6 pilots assistance.” MAAP-ITR is particularly useful for countries that are conducting Article 6 pilots. It is Lorenzo Eguren, intended to facilitate learning-by-doing and to inform negotiations on Article 6. For PMR Peru governments that are approaching Article 6 of the Paris Agreement for the first time, the MAAP ITR serves as an agenda that will help build capacities if attended by experts. Coordination and capacity building are essential to address Article 6 cooperative approaches. The tool facilitates localizing where to focus on the next steps, such as developing workshops, courses, or different activities to prepare the country better. The ITR pilot assessments highlighted that substantial capacity building is still needed to ensure readiness for Article 6, even for countries with considerable experience in Kyoto markets. The bottom-up nature of the Paris Agreement means that countries who wish to participate would need significantly higher levels of preparation for markets. For example, it is critical for countries to develop robust MRV systems at different levels, and develop or have access to a registry in order to ensure that the traded units are legitimate and are not double counted. Countries also need to develop systems to ensure corresponding adjustment is made against traded assets. The pilot assessments also highlighted that institutional coordination is key to ensure international transfer readiness. Decision-making at the national level requires coordination across relevant ministries and stakeholders, particularly for questions such as the eligibility of projects for international transfer, the process for authorizing transfer, and the country’s progress with meeting its own NDC goals. 16 MAAP SUMMARY REPORT 2021 MAAP online interface 4. MAAP Online Interface MAAP-ITR and MAAP-CPI have been integrated into the MAAP online interface to increase the usability and accessibility of the tool. Some of the key functionalities include online assessments; a platform to store key documents (with the option to add documents as evidence); filtering and comparing assessments; and tracking progress over time by comparison of the visualization tools to facilitate benchmarking. The platform enables countries to easily track their progress over time, use visualization tools to facilitate benchmarking, and store key documents as evidence for the allocated scores. To start using please visit https://maap.worldbank.org. MAAP online Store key Filtering Tracking assessment documents assessments progress over time 17 MAAP SUMMARY REPORT 2021 MAAP online interface FIGURE 8. MAAP ONLINE INTERFACE 18 MAAP SUMMARY REPORT 2021 Conclusions 5. Concluding Remarks and Recommended Next Steps The World Bank is committed to carbon pricing as part of the overall and guidance document will be essential as PMI launches in early climate agenda in pursuit of its two goals of poverty removal and 2021 to support countries embarking on the carbon pricing move shared prosperity. Climate change is a threat multiplier, and the from readiness to rollout. World Bank is committed to playing an important role in helping countries integrate climate action into their core development For MAAP-ITR, a learning-by-doing approach will be critical for agendas. Making the right investments now can unlock short term effective participation in international carbon markets. MAAP- gains – jobs and economic growth – as well as deliver longer term ITR has proven useful in guiding technical discussion around benefits for people, including decarbonization and resilience. participation in international climate markets, providing a Domestic carbon pricing will be essential for the achievement of framework to guide the testing and piloting activities. There the Paris Agreement goals and carbon markets can help mobilize are already several piloting efforts to address some of the key international climate finance effectively to support investment in challenges of international climate markets, and emerging the transition to low carbon. Given the urgency of increased global initiatives have built upon others’ experiences and are taking a climate action and the challenges in international negotiations, learning-by-doing approach to build a new generation of carbon development of tools such as MAAP ITR and MAAP CPI provide an markets. Countries’ collaboration will be key for a gradual opportunity to reflect on how to develop and implement carbon convergence of diverse market instruments and systems, and pricing and enable learning-by-doing. participation in initiatives like the Climate Market Club. Article 6 pilots could be critical in identifying issues to consider when For MAAP-CPI, understanding existing opportunities and developing the next generation of international carbon markets. priorities is crucial to implementing carbon pricing aligned with the broader development agenda. Putting a price on carbon Moving forward, the World Bank will continue to collaborate must and can be fair and just, but needs a pragmatic approach with partners and clients to update the modules to reflect the to deal with equity issues and potential regressive impacts (e.g., latest negotiation outcomes. The World Bank will also work with how to use carbon revenues). Effective communication strategies countries, such as through the PMI program,15 to explore how are essential to share the multiple co-benefits of carbon pricing the ITR and CPI modules can be used to ease broader capacity- with a broader group of stakeholders. In this context, MAAP- building efforts for Article 6 readiness. The World Bank will CPI could be coordinated with other PMR tools available that continue to collaborate with any country that participated in the address specific topics such as “Using Carbon Revenues” and the first round of pilot assessments, if the country has updated its “Guide to Communicating Carbon Pricing.” There is also a need policies since the previous assessment, in addition to piloting the for instrument-specific assessments, and PMR provides a range of tools with additional countries. tools to support this process. Alignment with the PMR technical 15 Partnership for Market Implementation. https://www.worldbank.org/en/topic/climatechange/brief/partnership-for-market-implementation 19 MAAP SUMMARY REPORT 2021 Conclusions WORLD BANK GOALS The World Bank is committed to carbon pricing as part of the overall climate agenda in pursuit of its two goals of poverty removal and shared prosperity. POVE R T Y 2030 PR OS P E RIT Y 20 MAAP SUMMARY REPORT 2021 Annexures ANNEX I: MAAP International Transfer Readiness The ITR Module is currently used as an MS Office Excel tool and is example, “double counting prevention” assesses the registry accompanied by a Guidance Document that describes the means requirements for mitigation activities intended to be transferred, of assessment. The ITR Module is composed of a series of key while “environmental integrity” evaluates the robustness of the indicators, each reflecting best practices for ensuring international country’s registry for tracking units. transfer readiness. Each indicator includes a checklist of activities, and the scores assigned to each indicator depend on the extent to Complementing the assessment of the “Party Readiness” and which these activities have been achieved. “Article 6 Implementation” submodules, the ITR Module also includes a submodule on assessing “NDC Completeness.” This By design, some scoring parameters are covered using several includes requirements to facilitate the clarity, transparency, indicators to ensure that the assessor has considered certain and understanding of NDCs (as listed in Annex 1 of Decision 4/ important processes and infrastructure (e.g., registries and CMA.1), which forms an important foundation to ensure countries’ MRV) in the context of different aspects of readiness. For readiness to transfer internationally. FIGURE 9. FRAMEWORK OF THE “NDC COMPLETENESS” SUBMODULE SCORING PARAMETER Quantifiable information on the NDC reference point (including, as appropriate, a base year). Time frames and/or periods for implementation for the NDC and mitigation activities, including mitigation activities to generate Article 6.2 mitigation units. Scope and coverage of the NDC and mitigation activities for implementation, including those aiming at international transfers under Article 6.2 cooperative approaches. The NDC describes the planning process for the preparation and update of the NDC. The NDC provides information on the implementation plans for the preparation and update of the NDC. Evidence that the Party has analyzed and considered, when appropriate, reviews of the NDC and the Party’s efforts for a point’s implementation. The NDC includes information on how the Party considers that its NDC is fair and ambitious, and contributes to the objectives of Article 2 of the Paris Agreement as per items E.4.1a-e (see Party’s readiness sheet). The NDC includes a description of all assumptions and methodological approaches for estimating and accounting of anthropogenic GHG and removals corresponding to the Party’s NDC, and assumptions and methodological approaches used for accounting for the implementation of policies and measures or strategies in the NDC as per items E4.2a-e (see Party’s readiness sheet) and as per the requirements in Annex I of Decision16 -/CMA.1. Summary Report: Identifying capacity building needs for carbon pricing and international carbon market development through the Mitigation Action Assessment Protocol 16 (MAAP)” by the World Bank, Washington, DC. 21 MAAP SUMMARY REPORT 2021 Annexures FIGURE 10. FRAMEWORK OF THE “PARTY READINESS” AND “ARTICLE 6 IMPLEMENTATION” SUBMODULES PARTY ARTICLE 6 AREA NAME KEY INDICATOR READINESS IMPLEMENTATION TRANSPARENCY GHG MITIGATION STRATEGY • As per Article 13’s “Enhanced Transparency POLICY INSTRUMENTS AND ACTIVITIES GENERATING MITIGATION Framework” REPORTING WITHIN THE NATIONAL INVENTORY INFORMATION NEEDED TO TRACK PROGRESS TOWARDS NDCS RELATED TO MITIGATION INFORMATION RELATED TO PARTICIPATION IN COOPERATIVE APPROACHES UNDER ARTICLE 6 DOUBLE COUNTING DOCUMENTED PROCEDURES FOR DOUBLE PREVENTION COUNTING PREVENTION • Double claiming, MONITORING AND REPORTING INITIAL double issuance, REQUIREMENTS double registration and double use IMPLEMENTATION OF A REGISTRY FOR TRACKING OF INTERNATIONALLY TRANSFERABLE UNITS CORRESPONDING ADJUSTMENT PROVISIONS ALIGNMENT OF MITIGATION ACTIVITIES ALIGNMENT WITH ISSUING MITIGATION ACTIVITIES PARTY’S NDC WITH NDCS SCOPE GOVERNANCE STRUCTURE FOR DEVELOPMENT, • Actions should be taken PLANNING, ACCOUNTING OF NDCS AND to ensure alignment with MITIGATION ACTIVITIES the Issuing Party’s NDCs DEFINITION OF NDC TARGETS AND MITIGATION ACTIVITIES PLANNING OF NDCS AND MITIGATION ACTIVITIES ENVIRONMENTAL AMBITION OF NDC TARGET INTEGRITY • Does not lead to an ACCOUNTING OF NDC overall increase in global GHG emissions QUANTIFICATION OF INTERNATIONALLY and that Internationally TRANSFERABLE UNITS Transferred Mitigation Outcomes are real, QUALITY OF UNITS TO BE TRANSFERRED permanent, and verifiable NATURE AND SCOPE OF ARTICLE 6 UNITS FOR ROBUST ACCOUNTING REGISTRY FOR TRACKING OF INTERNATIONALLY TRANSFERABLE UNITS 22 MAAP SUMMARY REPORT 2021 Annexures Annex II: CPI Assessment FIGURE 11. MODULES, AREAS, AND INDICATORS UNDER CPI MODULE AREA KEY INDICATOR Carbon pricing policy scope and objectives of the country CPI/s initiatives CPI/s policy impact assessment process Alignment of the CPI/s policy scope and the jurisdictional priorities on CPI POLICY climate change DEFINITION & SCOPE CPI policy contribution to sustainable development Contribution to transformational change CPI POLICY & PLANNING Boundaries of the CPI/s in terms of geographical area of implementation, sectors of the economy and GHG CPI/s policy planning to achieve established targets Barriers for implementation PLANNING Risk analysis for implementation, risk management and mitigation plan Resources available for implementation CPI approval by relevant authorities CPI compliance with regulatory requirements CPI LEGAL Legal mandate of the CPI management entity MANDATE Jurisdictional commitment towards CPI CPI REGULATORY & POLICY CPI’s compliance enforcement provisions FRAMEWORKS CPI operational and management documented system CPI OPERATIONAL RULES CPI´s MRV enforcement mechanism Alignment of economic support policies CPI INCENTIVES FOR SUPPORT Financial incentives for CPI participants INSTITUTIONAL Identification of CPI management entity, relevant stakeholders and MRV FRAMEWORK supporting entities CPI management structure and capacity including inter-institutional or CPI MANAGEMENT sectorial coordinating capabilities STRUCTURE CPI’s contribution to strengthening public policy, institutional growth and capacity building of the actors/stakeholders involved CPI institutional capabilities for participation and compliance enforcement 23 MAAP SUMMARY REPORT 2021 Annexures MODULE AREA KEY INDICATOR Roles, responsibilities and authorities within the CPI management entity, participants, monitoring and support entities, and other stakeholders. ROLES & RESPONSIBILITIES CPI management entity´s MRV capability OF PARTICIPANTS INSTITUTIONAL Coordination between the CPI management entity and entities responsible for MRV FRAMEWORK CPI includes the participation of relevant stakeholders STAKEHOLDERS CPI mechanisms for stakeholder’s participation PARTICIPATION Communication, capacity, and motivation strengthened within civil society Definition of CPI’s objectives & targets CPI’S OBJECTIVES CPI’s specific targets of GHG emissions reduction (NDC alignment) AND TARGETS Planning of individual CPI(s) Estimation of GHG impact of the CPI CPI GENERAL CPI architecture DESIGN PRINCIPLES Cooperation with other international CPI/s GHG emissions/emissions reduction quantification protocols CPI financial value chain Financial sustainability of the CPI CPI funding reliance on the national budget CPI FINANCIAL MECHANISMS Use of CPI revenues FOR SUPPORT CPI financial stakeholders CPI DESIGN AND TECHNICAL CPI specifies financial indicators according to its scope, boundaries and sector INFRASTRUCTURE involved CPI´s consideration of Social Responsibility Principles CPI CPI’s economic impacts of its implementation CONTRIBUTION TO SUSTAINABLE Identification and mitigation of potential negative environmental, social, or DEVELOPMENT economic impacts Monitoring of possible negative impacts of the CPI The CPI Key performance indicators process The CPI emissions and/or emissions reduction MRV requirements Publication of MR findings and quality of disclosure MRV CPI PROCESSES AND Monitoring and reporting procedures and infrastructure INFRASTRUCTURE Verification provisions CPI provisions for registry and tracking of emissions, emissions reductions, compliance & transactions 24 MAAP SUMMARY REPORT 2021 Annexures Annex III: Pilot Process Each pilot assessment generally involved the following activities: • Workshops: A virtual workshop is organized with relevant government counterparts to present the results and discuss • Preliminary assessment: The Assessor, with input from local possible next steps for developing the country’s broader carbon experts and relevant government counterparts, gathers data pricing and Article 6 strategy. and documents from different sources. Ideally, the Assessor should already have a good understanding of the local policy • Final assessment: The final assessment will incorporate the context. Because some of the information needed for the feedback from the workshop and outline key opportunities to CPI and ITR tools may not be available from publicly available strengthen capacity building to enhance the country’s access to sources and official documents, government counterparts may carbon pricing and climate markets. A final assessment report be asked to provide additional information needed to conduct with the main findings and recommendations is then prepared the assessment. The Assessor then reviews the obtained and shared with relevant government authorities. material, conducts a preliminary assessment, and justifies the subitem scores with specific reference to the obtained data and documents. • Consultation: The Assessor presents the preliminary results to relevant government counterparts and receives feedback from them. If needed, the Assessor requests complementary information to refine the assessment. The Assessor adjusts and completes the scoring justification of each subitem. FIGURE 12. PILOTING PROCESS AND EXPECTED OUTCOME Document and data gathering Monitor and Information analysis evaluation and review Assessment Assessment (final version) (preliminary version) Consultation and workshops 25 MAAP SUMMARY REPORT 2021 Annexures Annex IV: PMR-supported MAAP Program Key Activities The PMR-supported activity was initiated in July 2020. Activities to • Apply MAAP to identify capacity building needs for carbon support the development of MAAP-CPI and MAAP-ITR framework pricing and international carbon market development. were as follows: This involves a preliminary assessment with the support of local experts and government counterparts; consultation and • Update the methodology for the MAAP International workshops; and a final assessment to identify opportunities to Transfer Readiness (ITR) tool: The first version of MAAP- strengthen capacity building. ITR was developed in 2019. MAAP-ITR was updated to reflect negotiation outcomes, ongoing developments of CORSIA, and • Integrate MAAP-ITR and MAAP-CPI into the MAAP online feedback from peer review and consultations. interface. Update the MAAP online interface to integrate the MAAP-ITR and MAAP-CPI framework to increase the usability • Update MAAP to assess gaps and capacity building needs and accessibility of the tool. for domestic carbon pricing instruments (CPI). Build on PMR’s knowledge base and adjust MAAP to identify key building blocks • Outreach. Develop communication and learning materials, for carbon pricing development. launch the updated online interface, organize webinar, publish summary report and blog to socialize the tool and share lessons • Consultation and identification of pilot process. Develop learned. a selection criteria and conduct consultations to select key countries. 26 MAAP SUMMARY REPORT 2021 Introduction PMR Secretariat • 1818 H Street, NW. Washington, DC, 20433 • www.thepmr.org • pmrsecretariat@worldbank.org