CAF will articulate the creation of a carbon market in Latin America and the Caribbean

CAF -development bank of Latin America- will strengthen the carbon markets of its member countries and articulate the competitiveness of the supply of carbon credits, in order to reduce greenhouse gas emissions, mobilise new financial resources to address global warming and respond in a consistent and innovative way to international demand. 

Carbon markets consist of countries making voluntary or binding transfers of emission reductions to each other. Although they are not yet regulated, at COP26 in Glasgow, countries agreed to start activating the mechanisms necessary for them to function.

The objective of the Latin American and Caribbean Initiative for Carbon Market Development (ILACC) is to boost the global competitiveness of the supply of carbon credits generated in the region, strengthening the conditions for future voluntary and regulated markets and expanding their impact on the generation of employment, income, new technologies, green business clusters and the fight against poverty.

Among ILACC's immediate actions are the elaboration of a regional diagnosis on the carbon market, the launch of the ILACC Carbon Market Observatory, the formation of the Scientific Council, as well as the creation of the ILACC Regional Forum to expand multi-sectoral collaboration to diversify and broaden the base of climate projects generated in LAC.

"The region has great climate potential, especially thanks to its unique capacity to offer nature-based solutions, which have a key role to play in mitigating the effects of climate change. In this sense, the carbon market offers a historic opportunity for Latin America, perhaps even more important than other boom cycles experienced by the region associated with agribusiness and mining and hydrocarbons," says Jorge Arbache, CAF's Vice President for the Private Sector.

ILACC will also promote the development of the carbon market by strengthening the institutional capacities of its participants, as well as supporting the creation of regulations, incentives, transparency mechanisms, project financing and co-financing, resource allocation, market access and other aspects that contribute to establishing a good relationship between suppliers and buyers at a global level.

ILACC will work in the following areas:

1) Institutional capacity building of participating institutions, seeking to align interests and knowledge on the costs and benefits of the carbon market, and combine national efforts, with the challenges of forming a regional market.

2) Knowledge generation - addressing issues of regional interest to generate a roadmap oriented to the harmonisation of taxonomies, standards, verification methodologies and certifications, central elements for the efficient functioning of the carbon market.

3) Multi-sectoral dialogue to generate and disseminate knowledge that contributes to accelerate learning processes and reinforce private, public and civil society capacities, strengthening value chains. 

The ILACC initiative is aligned with CAF's strategy to become the green bank of Latin America and the Caribbean, which will result in US$25 billion in financing for green projects over the next five years. In addition, by 2026, 40% of CAF's operations will be related to green growth.