The World Bank and partners including Singapore on Wednesday launched a global tracking system to clean up the opaque market for carbon credits and help developing countries raise much-needed climate finance quickly and more cheaply.
Carbon credits generated by activities such as planting forests or pulling climate-damaging carbon dioxide from the air are sold to polluters to offset their emissions as a way of helping them reach net-zero emissions to limit global warming.
While governments wrangle over the rules for trading so-called compliance credits, projects are being launched to generate new credits and countries are setting up registers to track them.
Private sector efforts have sprung up offering credits for voluntary carbon markets, while a range of registries such as Verra and Gold Standard are accrediting and tracking them.
The voluntary market for $2 billion has remained small. Critics cite concerns about poor market transparency, a limited supply of credits and questions about the quality of projects.
The new database called the Climate Action Data Trust CAD Trust aims to address these issues by collating all the project and carbon credit data in one place and making it free for the public.
According to Chandra Shekhar Sinha, an adviser for the Climate Change Group at the World Bank, said the goal was to create a global data layer that allows people to get a better sense of what's happening across the world, across different countries, across different countries.
We're able to track it, avoid double-counting and figure out what are the innovations taking place, and hopefully create a race to the top at the same time as lowering barriers to entry for market participants.
The CAD Trust, co-founded with the International Emissions Trading Association IETA, will provide a platform listing various existing carbon offset registries to make it easier for companies and countries to share data.
Sonam Tashi, the chief planning office at Bhutan's Ministry of Economic Affairs, told Reuters that the new CAD Trust portal would allow the country to save around $1 million in initial costs for accessing the market, compared to the costs of setting up its own systems.
It really helps us leapfrog the whole learning process. He said that it brings us up to speed with what is required within the carbon markets.
He said that Bhutan is in talks with potential buyers who want to know how carbon credits are being registered, verified and monitored.
The World Bank facility will help us, Tashi said. The CAD Trust meets the technical requirements of host countries and buyers. He said that Bhutan would be able to start selling credits in 2023 if the country hadn't been able to access the facility.