About
The Transformative Carbon Asset Facility (TCAF) is a climate protection scheme set up by the World Bank, in which the Climate Cent Foundation and the State Secretariat for Economic Affairs (SECO) are jointly participating with a share of 12.5 million USD each. Among the other investors are the governments of Germany (2 million USD), Great Britain (60 million GBP), Canada (3 million CAD), Norway (80 million USD) , Sweden ans Spain (25 million USD). The fund has a total endowment of around 210 million USD.
The countries involved in the TCAF aim to make use of the possibility set out in Article 6 of the Paris Agreement for signatory states to cooperate on a voluntary basis. Along with Norway and Sweden, the CCF plans to use the certified emission reductions achieved by TCAF-funded activities toward fulfilling national emission targets. Great Britain and the SECO, on the other hand, plan to use their resources toward climate finance, which explicitly precludes counting certificates toward national emission targets.
Current status
In June 2023, a historic milestone was reached as the first-ever contract was finalized for the sale of certificates issued in support of a greenhouse gas reduction initiative. The project "Innovative Carbon Resource Application for Energy Transition" (iCRAFT) in Uzbekistan introduced incentives aimed at reforming the existing energy subsidies in the central Asian country. These efforts were directed towards curbing the consumption of fossil fuels and, consequently, lowering CO₂ emissions.
Owing to its subsidized energy costs, Uzbekistan stands out as one of the economies with the highest energy consumption and emissions. It is one of the countries with the highest subsidies for energy producers; in 2020 this corresponded to 6.6% of its GDP. As a result, the end user prices for electricity and gas in Uzbekistan are among the lowest in the world, with the prices for electricity and gas covering only 70% and 50%, respectively, of the actual costs.
The low tariffs offer no incentive for energy savings and increases in efficiency for households and businesses. Therefore, by 2026, the government intends to reform the energy subsidies in such a way that the tariffs cover the costs in the electricity and the gas sectors. The funds from the TCAF (Transformative Carbon Asset Facility) will be used both to cushion the impact of the increase in energy prices for the lowest income users as well as to finance an awareness campaign to raise people's awareness of the necessity and advantages of cost-covering tariffs.
Based on these reforms, Uzbekistan is anticipated to reduce its greenhouse gas emissions in 2022-2027 by an estimated 60 million tonnes of CO₂ in total. Of this, around 2 million tonnes of CO₂ are attributed to the TCAF intervention, which is financed with USD 46.25 million.
A handful of further activities are currently in the pipeline, the potential funding of which is currently being considered. Despite the long-awaited success that has now been achieved in Uzbekistan, the aspiration of the World Bank to implement transformative climate mitigation activities by means of its crediting facility has not yet been realised to the degree anticipated. The methodological challenges together with the prolonged regulatory uncertainty about the implementation of Art. 6 of the Paris Agreement have weighed heavily on the process. However, in a series of technical papers, the TCAF has laid some important foundations for creating a market for transformative programmes under the Paris Agreement.
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