Global Carbon Market – Chile

Project description

Title: Global Carbon Market
Commissioned by: German Federal Ministry for Economic Affairs and Climate Action (BMWK)
Country: Chile
Lead executing agency: Ministerio de Energia (Ministry of Energy)
Overall term: 2018 to 2023

Context

Thanks to an ambitious climate policy, Chile has become a pioneer in Latin America in recent years. In 2020, Chile was one of the first countries in the world to upgrade its Nationally Determined Contribution (NDC) under the Paris Agreement and aims to be climate-neutral by the middle of the century.

Carbon pricing is a key policy instrument by which the country aims to achieve its ambitious climate change agenda. This is why, in 2017, Chile introduced a nationwide “green” tax to reduce greenhouse gas emissions.

In addition to national measures, Chile intends in future to use global market mechanisms under Article 6 of the Paris Climate Agreement. Article 6 offers states the possibility of selling their CO2 reductions to other countries, which can count them towards their own climate targets.

Objective

The Chilean Government is continuing to develop carbon pricing instruments and is exploring the use of market mechanisms under Article 6 of the Paris Agreement.

Approach

The project supports the Chilean Government in its efforts to further develop the national CO2 tax: in 2020 a carbon offset scheme was introduced under which businesses can trade emission reduction certificates. This CO2 market is among the first in Latin America and will come into operation in 2023.

Through studies, analyses, workshops and conferences, the project is building the skills and capacities of decision-makers from the worlds of politics and business in carbon pricing and international market mechanisms.

The project is supporting the inter-ministerial task force in its efforts to develop a strategy for using Article 6 of the Paris Agreement. The task force acts under the aegis of the Ministry of Energy.

With the support of the project, Chile is able to contribute to international discussions on Article 6 through global initiatives, such as the Carbon Pricing Leadership Coalition (CPLC), and is driving regional and South-South cooperation.

Last update: September 2021