Project: Global Carbon Market
Federal Ministry for the Environment, Nature Conservation and Nuclear Safety
Principal:
Federal Ministry for the Environment, Nature Conservation and Nuclear Safety
Country:
Chile
Partner:
Chilean Ministry
Duration:
07/ 2018 – 12/ 2021
Contact:
Context and background
In recent years Chile has taken on a proactive international role in the fight against climate change. Hardly any other country feels the effects of climate change more strongly than Chile, which is well aware of its vulnerable situation. In order to mitigate the consequences, which are already clearly noticeable, Chile has signed up to adhere to the important international climate protection agreements. For example, the Kyoto Protocol and the Treaty of Paris have been ratified.
Part of the Paris Agreement includes the elaboration of a voluntary national CO2 reduction plan (Nationally Determined Contributions, abbreviated NDC). At the beginning of 2017, Chile adopted its NDC with the goal of reducing CO2 emissions per unit of GDP by 30% by 2030, compared to 2007. A further increase of up to 45% is possible with international financial support.
In 2013, Chile began planning the introduction of an Emission Trading System (ETS) together with the World Bank’s Partnership for Market Readiness program. Just one year later, a legislative reform was launched, which included the introduction of an emissions tax (Spanish: Impuesto verde). The tax started in 2017 and applies to particulate matter as well as NOx, CO2 and SO2 emissions from thermal plants with at least 50 MWt capacity. The cost per ton of CO2 emissions is the equivalent of 5 US dollars.
CO2 emissions in Chile
According to the Chilean Environmental Ministry, Chile’s annual CO2 emissions amount to around 110 million tCO2. Per capita, Chile’s CO2 emissions are well below the OECD average, even though they have risen in recent years. Chile wants to be completely CO2-neutral by 2050.
On behalf of the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU), the German Society for International Cooperation (GIZ) is supporting the Chilean government in developing and introducing various guidelines and legislative initiatives within the framework of the CDM/JI Initiative with the goal of achieving the standards set by the NDC. The main partner is the Chilean Ministry of Energy.
The project includes a global component with similar activities in Uganda, Tunisia and India.
The project aims to support the Chilean government in developing carbon pricing instruments, as well as creating financial incentives in the market to achieve self-imposed targets under the Paris Agreement. This agreement dictates that the project should provide the necessary knowledge for decision makers in both the public and private sectors. This also includes the preparation and introduction of prevention measures aimed at the Chilean market. In addition, the country is represented at the international level as a pioneer in climate protection.
The project focuses on three pillars:
- Strengthening capacities of the public sector to make best use of carbon pricing policies and market potentials.
- Enabling an active participation of the private sector in carbon markets, by building capacity and raising awareness.
- Consolidating the international position of Chile in global discussions on carbon pricing.
In the public sector, activities such as strategic advisory services, inter-ministerial cooperation, experience exchanges, support for international dialogue, and the creation of an instrument to support decision-making should take place. Also, ETS workshops will be used to build capacities at both national and regional levels to introduce an emissions trading system.
The private sector will be involved in a discourse that analyses technology gaps, platforms, networks and exchanges with other international parties. The focus here is on preparing companies for changes in the market and the resulting opportunities. In particular, the analysis of climate technology gaps, also at the level of small and medium-sized enterprises (SMEs), should help here.
At the international level, Chile’s experiences and successes must be made visible. Given this, dialogues on topics such as carbon prices or climate financing, with a focus on the Latin American region, will be developed. This positioning is achieved through publications and active participation in international conferences or network events. At the heart of these activities is a willingness to engage in dialogue and cooperation. Initiatives such as the Pacific Alliance and the Carbon Pricing of the Americas are a suitable framework for this.
On the one hand, a cross-sectoral coordination process is to take place around the introduction of the NDC. In addition, 80 persons directly from the public sector as well as 50 additional stakeholders from the public sector will be advised and trained in workshops.
In addition, two analyses and the associated concept for financing instruments to support carbon market-driven technology change are to be implemented. This involves training 50 private actors, mainly from local banks and funds.
Chile’s experiences and successes will also be presented during at least three international events and in three publications with international reach. Additionally, an annual meeting will be held at the regional level to discuss progress with neighboring countries.