In 2020, Chile made significant progress in design and implementation of carbon pricing instruments, which are intended to help the country fulfil its Nationally Determined Contributions in the context of the Paris Agreement. Among these mechanisms is the design of a national carbon tax with a possible offset provision which would generate demand for carbon credits from domestic projects.
Despite a slowdown in new projects and issuances likely a result of COVID-19, there are strong signals the market is starting to rebound.
While overall VCU issuances in 2020 were lower than in the previous years, there are signals that this trend has started to reverse itself. Q4/2020 saw an almost seven-fold increase in issuances (22,177 VCUs) compared to Q3 (3,199 VCUs).
All VCUs issued from Chilean projects in Q4/2020 were also retired (just as in Q3), having an immediate impact on climate mitigation.
While most VCS projects are in the energy sector (20 projects) and only 3 projects are in the AFOLU sector, AFOLU projects are performing strongly, having issued 34% of VCUs from Chilean projects in Q4 of 2020.
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*One VCU represents one tonne of carbon dioxide equivalent that was removed from the atmosphere or not emitted.
Greenhouse gas equivalencies for emission reductions and removals were calculated using the EPA Greenhouse Gas Equivalencies Calculator