Global economic prospects and its impact on climate policies, with a special focus on carbon pricing

The latest IPCC warning that we are not on track to achieve the Paris Agreement goals calls for us to employ all possible economic tools to accelerate the decarbonization of our economies.

Carbon markets are highly effective in sending the right pricing and risk signals to reallocate capital according to the climate imperative.

As such, carbon pricing can reinforce the impact of sectoral policies and help redirect global finance flows to foster climate investment at scale and avert catastrophic climate impact.

While the OECD finds COVID-19 economic strains have not drastically derailed carbon pricing plans, pricing levels and coverage are still too low to achieve the Paris Agreement.

To support developing countries efforts to leverage carbon pricing to finance climate action at scale, GCF helps create an enabling policy and institutional environment for carbon pricing; accelerate climate pricing innovations; and de-risk first mover high impact projects leveraging carbon pricing that would otherwise not have been regarded as bankable.

For example, GCF is helping Kazakhstan establish a domestic carbon market to boost renewables.

Similarly, GCF is partnering with EBRD to finance the USD 1 billion High Impact Programme for the Corporate Sector - which uses carbon credits to decarbonise heavy industry in 7 countries across Eastern Europe, the Middle East and North Africa.

Following the adoption of the Article 6 rules at COP 26, GCF believes that carbon markets will remain an important tool to price carbon and mobilise resources to finance climate-friendly investment in developing countries.

We will support developing countries in their efforts to further develop their carbon markets.