The Nordic Partnership Initiative by the Nordic Environment Finance Corporation (NEFCO) is supporting the Government of Peru with the design and implementation of a programme to reduce greenhouse gas emissions from the solid waste sector.
Article 6 of the Paris Agreement encourages international cooperation between countries to realise deeper cuts in greenhouse gas emissions than they would be able to achieve on their own. The modalities and procedures for this article are under development, and it has not yet been used in practice. This cooperation between the Nordic countries and Peru will be the first occasion in which countries join forces to reduce greenhouse gas emissions under article 6 of the Paris Agreement.
Peru has pledged in its Nationally Determined Contribution (NDC) to reduce emissions by 20% below business-as-usual in 2030 through a combination of public and private domestic funding sources, and 30% below BAU when assisted with international support.
The Nordic Partnership Initiative is supporting the Peruvian Government with the design and implementation of the country’s Solid Waste Sector Nationally Appropriate Mitigation Action (SWS NAMA), which is expected to directly contribute to the achievement of Peru’s NDC. The Peruvian waste sector is the third largest contributor to national greenhouse gas emissions, with solid waste accounting for 77% of the sector’s emissions. By building on the mitigation programme in the solid waste sector, Peru can tap into new opportunities presented under the emerging international carbon markets, and in particular the cooperative approaches established under Article 6 of the Paris Agreement.
Peru’s willingness to engage in an Article 6 transaction is likely to depend on whether the transaction assists the country in achieving its own NDC and incentivizes the private sector to further invest in the country’s solid waste sector. This requires careful steering between the risk of transferring emission reductions needed to achieve the Peruvian NDC and finding new revenue streams to improve market readiness and reduce the investment risks associated with solid waste programmes.
This study proposes a conceptual Pilot Cooperative Arrangement that delivers an overall structure for Peru and a partner country to voluntarily engage in the transfer of Internationally Transferred Mitigation Outcomes (ITMOs) from the SWS NAMA. While the proposed approach focuses on having a partner country acting as a possible (co-) funder and buyer of ITMOs, adjustments could be made to tailor the approach to the needs of private sector buyers.
Client: Climate Focus, in a contract with the Nordic Environment Finance Corporation