The Pacific Alliance and climate change
The Latin America and the Caribbean region is moving quickly to introduce market incentives as a component of their climate change mitigation policy, for example, 24 countries have identified fiscal measures as a tool to implement their Nationally Determined Contributions (NDCs). However, without a doubt, the Pacific Alliance countries are leading the region.
The Pacific Alliance is a regional trade agreement seeking to create a common market between its member countries -Chile, Colombia, Mexico, Peru- with the objective of promoting sustainable development. Three of these countries -Chile, Mexico and Colombia- have already implemented carbon taxes, and Mexico has gone even further, agreeing to link to the Western Climate Initiative in the near future. Moreover, in several declarations and statements, the Alliance has confirmed its commitment with both climate mitigation and market based instruments.
This summer, in Cali, Colombia, the Pacific Alliance Presidents went even further, making an explicit commitment to promote a green growth strategy to face the challenges of climate change, as well as moving towards a voluntary carbon market for the region – including a common system to monitor, report and verify (MRV) emission reductions. Specifically, the Cali declaration asserts the leaders’ conviction to pursue a green growth strategy “as the only avenue to face the challenges of climate change that especially affects the region”.
The Alliance President’s commitment to intensify efforts to work on a common MRV system is essential since the possibility of moving towards a regional market necessarily requires agreement on an institutional infrastructure that allows for trading or crediting emissions reductions. For this reason the Presidents mandated the Pacific Alliance Environment and Green Growth Group (PAEGGG), created in July 2016, to work on proposals on MRV and carbon markets.
With the support of the World Bank, through the PMR (Program of Market Readiness) program, the PAEGGG hired an initial scoping study to assess the different MRV initiatives of the Alliance countries. The objective of the study is to identify the necessary steps to move towards a common, or at least a comparable, system across the region.
Although, at the national level, different countries are implementing different types of instruments to comply with their mitigation commitments, undoubtedly regional collaboration is necessary to take advantage of global trading schemes. A carbon market presents enormous opportunities for this region, not only can such a system reduce national emissions at a lower cost, but because the region accounts for only around 7% of global emissions, and holds considerable forest reserves, there is the possibility of offering offsets or compensations at the global level. Such initiatives will allow these countries to access resources for investment in new technologies, and support further emissions reductions and productivity gains.
The Pacific Alliance countries have taken on the challenges of climate change and the commitments of the Paris Agreement seriously. They are introducing a series of instruments and policies to comply with their NDCs. The implementation of carbon pricing and the possibility of developing voluntary markets in emissions trading is part of a regional strategy to achieve significant reductions at lower costs while accessing appropriate technology. This regional effort demonstrates that with the support of the global community, middle income countries, such as the members of the Pacific Alliance can make significant steps towards reducing their climate footprint.
The original blog can be found at: https://blogs.worldbank.org/climatechange/pacific-alliance-and-climate-change
Rodrigo Pizarro Gariazzo is an economist from the London School of Economics & Political Science. He holds a Master of Science from the University of North Carolina in Economics and Ph.D. in Environmental Studies from Stanford University. He was executive director of the Terram Foundation and has served as a professor in the Department of Public Policy at the University of Santiago de Chile. In March of 2016 he assumed the position of Head of the Division of Information and Environmental Economics of the Ministry of the Environment of Chile, a division that works among other topics to generate information and management tools and to support the Ministry's biodiversity and ecosystem services policy.