The Ministry of Economy and Finance (MOEF) and the United Nations Framework Convention on Climate Change (UNFCCC) Secretariat co-hosted the “Republic of Korea-UNFCCC Asia Needs based Finance Investment Forum” in Global Knowledge Exchange & Development Center from November 28 to 29. The Forum was attended by 126 participants, including representatives from 11 developing countries in Asia, financial institutions, major international organizations related to climate*, and private companies.
* Green Climate Fund (GCF), Global Environment Facility (GEF), Adaptation Fund (AF), Global Green Growth Institute (GGGI), and Asian Forest Cooperation Organization (AFoCO), etc.
At the forum, MOEF and the UNFCCC Secretariat agreed to jointly develop a “Global Voluntary Carbon Mechanism*” in preparation for the launch of the international carbon market, and announced future directions for its implementation. In addition, multilateral development banks and multilateral climate funds under the UNFCCC presented various plans to support climate change response projects in Asian developing countries.
* Global Voluntary Carbon Mechanism (GVCM) aligned with the Paris Agreement
1. Development of cooperation measures for the GVCM
On November 28, Director General for Development Finance Bureau at MOEF Jisung Moon, and Director of Means of Implementation at the UNFCCC Secretariat Sophie De Coninck, signed a Statement of Intent (SOI) for the development of the GVCM.
The SOI outlines the goal of “establishing an internationally recognized carbon market model aligned with Article 6 of the Paris Agreement” and states that “the UNFCCC Secretariat will cooperate with MOEF to promote the GVCM”. The SOI includes the following five key areas of cooperation:
1) Developing a robust carbon pricing mechanism that aligns with each country’s policies
2) Facilitating international trading of carbon credits through compliance with Article 6 of the Paris Agreement
3) Seeking to building capacity in developing countries to participate in the international carbon market
4) Exploring ways to leverage private sector investment to scale up climate action
5) Establishing an efficient carbon market infrastructure that benefits developing countries
Under the SOI, both participants agreed on the preparation of the Memorandum of Understanding (MOU) that includes specific cooperation projects by February 2025 to build the foundation for promoting the GVCM.
2. Discussions on strategies for climate change response projects in Asian developing countries
Meanwhile, multilateral climate funds and multilateral development banks heavily discussed support measures for climate change response projects in developing nations in Asia over two days with officials from 11 Asian countries. As a result, agreements were reached on financial support measures for sectors such as marine conservation, electric mobility (e-mobility), and agriculture.
3. Future plans
MOEF and the UNFCCC Secretariat agreed on the necessity of regularizing the Climate Change Response Investment Forum. The Ministry plans to promptly materialize the GVCM while making multifaceted efforts to shore up collaboration among Korean companies, officials from developing countries, and multilateral climate funds.
[Annex. A Plan for the Establishment of GVCM ]
* (GVCM) Global Voluntary Carbon Mechanism aligned with the Paris Agreement
1. Definition of Voluntary Carbon Market (VCM) and VCM trends
▶ (Definition) A decentralized market where private actors voluntarily buy and sell carbon credits that represent removals or reductions of greenhouse gases (GHGs) in the atmosphere.
▶ (Trends) Recognition of potential as the tool of mobilizing finance and emission reduction
- (USA) Released “Voluntary Carbon Markets Joint Policy Statement and Principles”
- (G7 Climate, Energy and Environment Ministers’ Meeting) Adopted “Principles of High Integrity Carbon Markets”
- (APEC) “We appreciate the complementary role that voluntary carbon markets…”
(2023 APEC Finance Ministers’ Meeting)
2. Challenges Facing the VCM
▶ (Lack of Integrity for Carbon Credit) The lack of unified international standard arouses concerns over the credibility.
▶ (Lack of Funding Mechanisms) Private companies bear the entire financial burden with considerable risks.
▶ (Limited Participation in Developing Countries) Most projects in the Asia-Pacific; Project development led by companies in the EU or the U.S.
3. Korea’s Potential in Carbon Markets
▶ (Potential Demand) Carbon-intensive manufacturing industries are expected to make potential carbon credit demand.
▶ (Unique Experience) First Emission Trading System (ETS) in Asia (2015).
▶ (High Technology) Korea’s innovative technology (e.g. H2, CCUS) can generate high-quality carbon credits.
4. Future Directions
▶ Leveraging Korea’s potential and maximizing the advantages of VCM à Development and Expansion of GVCM.
1) (Ensuring Credibility) Cooperation with the UNFCCC to set new carbon credit standards
2) (Securing Integrity) Partnership with MDBs for designating and implementing international carbon reduction projects
3) (Facilitating Private Investment) Projects co-financed by the public and private sectors in developing countries à Closing the financing gap and mitigating the risk of private investment.
Please refer to the attached files.
