RoleofPublicDevelopmentBanksinSupportingDomesticCarbonMarketsFebruary2025Copyright©2025ClimatePolicyInitiativeclimatepolicyinitiative.org.Allrightsreserved.CPIwelcomestheuseofitsmaterialfornoncommercialpurposes,suchaspolicydiscussionsoreducationalactivities,underaCreativeCommonsAttribution-NonCommercial-ShareAlike4.0International(CCBY-NC-SA4.0)License.Forcommercialuse,pleasecontactadminsf@cpiglobal.org.RoleofPublicDevelopmentBanksinSupportingDomesticCarbonMarketsACKNOWLEDGMENTSTheauthorswouldliketothanktheClimatePolicyInitiative(CPI)teamfortheiradviceandinternalreview,includingVikramWidge,NicolePinko,MridhuKhanna,ChrisGrant,JonathanFirst,andBarbaraBuchner.Wealsoappreciatereview,inputs,andguidancefromexpertsfromthefollowingorganizations:AfricanDevelopmentBank,AgenceFrançaisedeDéveloppement,ClimateVulnerableForumVulnerable20GroupDevelopmentBankofNigeria,Inter-AmericanDevelopmentBank,NacionalFinanciera,andtheWorldBank.AUTHORSMatthewSolomonmatthew.solomon@cpiglobal.orgKarlaD.GonzálezEsquincakarla.esquinca@cpiglobal.orgCONTACTMatthewSolomonmatthew.solomon@cpiglobal.orgABOUTCLIMATEPOLICYINITIATIVECPIisananalysisandadvisoryorganizationwithdeepexpertiseinfinanceandpolicy.Ourmissionistohelpgovernments,businesses,andfinancialinstitutionsdriveeconomicgrowthwhileaddressingclimatechange.CPIhassevenofficesaroundtheworldinBrazil,India,Indonesia,SouthAfrica,theUnitedKingdom,andtheUnitedStates.RoleofPublicDevelopmentBanksinSupportingDomesticCarbonMarketsiiiDESCRIPTORSSECTORCarbonmarketsREGIONGlobalKEYWORDSPublicdevelopmentbanks,carbonmarketsCONTACTMatthewSolomonmatthew.solomon@cpiglobal.orgMEDIACONTACTRobKahnrob.kahn@cpiglobal.orgRECOMMENDEDCITATIONCPI.2025.RoleofPublicDevelopmentBanksinSupportingDomesticCarbonMarketAdoption.Availableonline:https://www.climatepolicyinitiative.org/publication/role-of-public-development-banks-in-supporting-domestic-carbon-market-adoption/ivRoleofPublicDevelopmentBanksinSupportingDomesticCarbonMarketsCONTENTS1.Introduction12.Benefitsofdomesticcarbonmarkets42.1Directingfundstoemissionreductionprojects42.2Supportpipelineofcarboncreditsuppliers52.3Integrationwithglobalcarbonpricing63.Barrierstocountriesadoptingdomesticcarbonmarkets83.1Lackofbuy-inandstrategicintegration83.2Lackoftechnicalcapacity93.3Demand-siderestrictions93.4Supply-siderestrictions104.BarrierstoPDBsupportfordomesticcarbonmarkets124.1Limitedcapacity124.2Lackofhostcountrybuy-in124.3Financialbarrierstogreateraction135.PDBs’potentialroleindomesticcarbonmarketdevelopment145.1Strategicguidance155.2Technicalassistance175.3Supportcreditintegrity175.4Managerisk195.5Supportfinancialmechanismstofrontloadfinance196.Recommendations216.1FacilitatecoordinationwithotherPDBs216.2Sharebestpractices226.3Supportdevelopmentofcomprehensiveclimateanddevelopmentstrategies236.4Supportcapacitybuilding236.5Advanceinnovativepilotprojectstomanageriskandleveragecarbonrevenues237.Conclusion24RoleofPublicDevelopmentBanksinSupportingDomesticCarbonMarkets11.INTRODUCTIONTheworldneedstomobilizeapproximatelyUSD7.4trillionannuallyby2030tomeetdecarbonizationgoalsandavoidtheworstimpactsofclimatechange.1Emergingmarketsanddevelopingeconomies(EMDEs)faceaparticularlysignificantfinancinggap.EMDEs(excludingChina)requireoverUSD2trillionperyeartomeettheirclimatetargetsandtransitiontocleanerenergysystems.2However,thesecountriesareatad...
