New Delhi [India], December 9 : The Asian Development Bank (ADB) has unveiled plans to commence operations of its Climate Action Catalyst Fund (CACF) on January 1, 2024.
According to ADB, Positioned as a trailblazing carbon fund under the Paris Agreement, the CACF aims to mobilize innovative carbon finance through the acquisition of carbon credits, intending to spur investments in transformative mitigation actions across ADB's developing member countries (DMCs).
In a significant departure from conventional carbon market practices, the CACF will provide upfront finance for high-impact climate mitigation actions, ensuring future delivery of carbon credits through long-term transactions.
This is a notable shift from the customary approach of payments upon delivery, which often entails extended timelines, delaying benefits to project owners.
ADB Director General for Climate Change and Sustainable Development, Bruno Carrasco, emphasized the urgency of financing to escalate the decarbonization of economies in Asia and the Pacific.
He stated, "We are nowhere near the levels of financing needed to scale up the decarbonization of economies in Asia and the Pacific. Carbon finance can play a critical role in incentivizing investments in climate mitigation projects in our region. The commencement of the CACF is another step towards helping our members cut emissions and raise their ambitions in a cost-effective way."
Under Article 6 of the Paris Agreement, the CACF enables cooperative approaches among nations, facilitating direct collaboration between countries.
This mechanism allows the transfer of carbon emissions reductions achieved through climate mitigation measures in one country to count towards the nationally determined contributions (NDCs) of another.
The Swedish Energy Agency has committed to contributing 300 million Swedish krona (approximately USD 27 million) to the fund, aiming to mobilize over USD 100 million in commitments from national and subnational government entities, as well as the private sector within ADB member countries.
Emphasizing the significance of collaborative efforts, Swedish Energy Agency Director General Robert Andren stated, "No country, region or institution can tackle the challenge of combating climate change alone. Instead, we must form partnerships and leverage our collective strengths to address the challenges of transitioning to a low-carbon economy. Today, we are proud to continue our journey of pioneering carbon markets' role together with ADB, contributing to a clean energy transition, low carbon development and increased ambition by countries."
The CACF prioritizes high-quality climate mitigation actions and environmental integrity, seeking to disseminate advanced low-carbon technologies and deliver sustainable development impacts for local communities in Asia and the Pacific.
The fund's overarching goal is to assist ADB DMCs in achieving and progressively elevating the targets outlined in their NDCs.
By engaging financing partners, the CACF provides a mechanism to meet compliance requirements and fulfil various purposes by purchasing carbon credits from a diverse portfolio of projects, programs, and scaled-up activities supported by ADB.
The launch of the CACF solidifies ADB's role as an early mover in operationalizing international carbon markets under Article 6.
The initial tranche of Article 6 transactions under the fund is poised to set examples for new stakeholders interested in participating in Article 6.
Additionally, the fund will offer a crucial price signal while contributing to the evolution of new international carbon markets under the Paris Agreement.
As the climate bank for Asia and the Pacific, ADB's carbon markets initiatives align with its broader efforts to bolster climate action and advocate for green growth in the region.
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