How can Iceland raise its climate ambition through the Paris Agreement-aligned carbon market?

The Ministry of Foreign Affairs of Iceland and Nefco arranged a multistakeholder workshop in Reykjavik on 14 September to present the role of the Paris Agreement Article 6 mechanism in the new era of carbon market cooperation. The aim was also to show how Nordic experiences of the last two decades could be used to boost Icelandic climate ambition through the use of carbon markets.

The Nordic countries have pioneered in international carbon markets and sustainable development for over twenty years. Now both governments and companies have an excellent opportunity to take a leadership role in fostering a new generation of carbon market cooperation. Most of the Nordic countries are currently looking into developing their own national frameworks and regulation policies.

Iceland has set ambitious climate targets – such as carbon neutrality and full energy conversion no later than 2040 – to meet its Paris Agreement commitments. Therefore, the country is keen on exploring ways to develop and foster new and exciting partnerships provided within the Article 6 mechanism framework. Iceland invited Nefco to present its carbon markets activities, which provided cross-sectoral workshop participants with new insights and an opportunity to learn about the new generation of carbon market cooperation.

Moderator of the event Ash Sharma, Vice President of Special Funds at Nefco, described the lessons learnt from Nefco’s pioneering experience with carbon market-based approaches and outlined the transition from the Kyoto Protocol to the new era of the Paris Agreement. Throughout the workshop, he emphasised the role of partnerships.

Sweden is working on an Article 6 activity portfolio through the Swedish Energy Agency (SEA), and is developing framework agreements with Ghana, Nepal and the Dominican Republic. In their work, SEA see the importance of ensuring environmental integrity in Article 6 activities. SEA will also integrate gender as a crucial aspect in Article 6 activities. Emma Åberg, Program Manager at SEA, concluded her presentation by saying that the host country dialogues are key in this work.

Norway also has a long history of working with carbon credit programmes and actors since the Kyoto Protocol era. Norway is having a direct dialogue with the governments in various host countries on Article 6 collaboration explains Malin Mayer, Senior Advisor at the Ministry of Climate and Environment of Norway. Mayer particularly highlighted the importance of additionality in Article 6 activities.

The workshop, attended by 36 diverse Icelandic stakeholders from government, industry, municipalities, civil society, and voluntary market actors, highlighted the importance of knowledge sharing between key actors in the Nordics. The role of domestic policy-making towards the use of carbon markets in Iceland could be influenced by the Nordic experience, something Nefco, together with the Nordic countries and the Nordic Council of Ministers, through its Nordic Initiative for Cooperative Approaches (NICA) platform, has been actively working with since 2018, with the active participation of Iceland as well.

As described by Kari Hämekoski, Senior Programme Manager at Nefco, NICA is currently supporting the operationalisation of international market-based collaboration under Article 6 to support sustainable development and encourage more ambitious climate action through capacity building and is considering pilot activities in Eastern Africa.

A Nordic approach to carbon market cooperation that addresses the new participation requirements of the Paris Agreement, designed to meet international criteria while promoting Nordic priorities has been developed within the NICA framework. More information available in a summary report for pilot activity development.

Since 2003, Nefco has established and managed several groundbreaking carbon funds to meet the compliance needs of Nordic governments and companies, totalling EUR 280 million in assets over time and generating over 31.6 million carbon credits. Projects were implemented in a wide range of sectors and geographies, providing a testing ground for innovative, market-based approaches. The implemented projects made a significant contribution to broader green growth benefits, including sustainable development and green technology transfer in several developing countries.

Upcoming event

Nefco is arranging a high-level seminar on 12 October on how to boost global carbon market cooperation under the Paris Agreement and to increase understanding of these opportunities. The seminar is particularly useful for actors that are involved in climate action and carbon market cooperation, including public and private sector and NGOs. See our seminar page for more information and register by 28 September to follow the live stream.

Further reading

For further information, please contact:

Ash Sharma, Vice President of Special Funds at Nefco, +358 10 618 06 53

Kari Hämekoski, Senior Programme Manager at Nefco, +358 10 618 0660

Benedikt Höskuldsson, Special Envoy for Climate at the Ministry of Foreign Affairs of Iceland, +354 545 8988

Photo: Workshop at the Ministry of Foreign Affairs of Iceland on 14 September 2022 – Ministry of Foreign Affairs of Iceland

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