Norway to Join ADB’s First of Its Kind Article 6 Carbon Fund

BAKU, AZERBAIJAN (20 November 2024) — Norway has announced it will contribute to ADB’s Climate Action Catalyst Fund (CACF) — a novel carbon fund under Article 6 of the Paris Agreement, providing a strong boost to international carbon markets.

Norway’s Ministry of Climate and Environment has expressed its intent to provide up to $50 million to the CACF, which began operations in January. The fund will provide carbon finance to developing countries in Asia and the Pacific to support mitigation projects which can generate tradable credits under Article 6.

“Climate change is the world’s biggest market failure,” said ADB Climate Change and Sustainable Development Senior Director Toru Kubo. “Buoyed by recent progress on Article 6 at COP29, the growth of this fund will help build momentum by sending a strong price signal to the market.”

The fund aims to catalyze investments in transformative mitigation measures in ADB’s developing member countries across Asia and the Pacific, with the first transaction expected in 2025. CAFC is innovative in the way it is able to provide up-front payment to emissions cutting activities for the future delivery of carbon credits under long-term transactions.

Payments in carbon markets usually occur upon delivery, which means project owners in developing countries cannot rely on carbon finance for initial investments and must wait for years to receive rewards from their climate action.

On the first day of COP29, countries reached agreement on standards for the generation of carbon credits under Article 6.4 of the Paris Agreement, or Paris Agreement Crediting Mechanism. The Article 6 mechanism is estimated to potentially reduce the cost of implementing national climate plans by $250 billion per year in 2030 through cross-border market cooperation.

Norway’s Ministry of Climate and Environment has highlighted how the fund will help Norway gain access to a supply of high-quality mitigation projects in the Asia and Pacific region, while promoting clean energy and low-carbon investments in the host countries.

“The climate crisis is too pressing to be solved by single countries acting alone,” said Norway’s Ministry of Climate and Environment Senior Adviser Malin Meyer. “The beauty of carbon markets is how they can catalyze the private sector in helping countries transition to green, low-carbon economies which benefit their citizens and the planet.”

CACF, which began operations with a contribution from the Swedish Energy Agency of 300 million Swedish krona (approximately $27 million), aims to raise over $100 million in commitments from national and subnational government entities, and the private sector in ADB members.

"Together with ADB and partnering countries we intend to invest in clean energy technologies and innovative solutions on the ground in Asia and the Pacific, thus promoting emission reductions and sustainable development with the use of carbon finance,” said Swedish Energy Agency Head of International Climate Cooperation Sandra Lindström.

ADB’s inaugural Asia-Pacific Climate Report released before COP29 details how ADB members can benefit from purchasing carbon credits on international carbon markets, especially when the cost of reducing domestic emissions is high.

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 69 members—49 from the region.