Feasibility Assessment of Carbon Pricing Instruments in Papua New Guinea

The Collaborative Instrument for Ambitious Climate Action (CiACA) initiative

Carbon pricing is a straightforward approach for addressing Greenhouse Gas (GHG) emissions as it puts a price on carbon, creating an incentive for investments into more climate-friendly solutions. A growing number of Parties are considering carbon pricing instruments as an approach for implementing their climate action under the Paris Agreement, even among those which did not mention carbon pricing instruments in their NDC proposal. The Paris Agreement explicitly recognizes the important role of providing incentives for emission reduction activities, including tools such as domestic policies and carbon pricing (decision 1/CP21 para. 136).
In addition, as the Paris Agreement enables cooperative action among countries, jurisdictions are also considering putting in place carbon pricing/market approaches to enable future participation in regional and global carbon markets for a variety of reasons: selling mitigation units, attracting funding for their mitigation actions, and achieving their targets more flexibly and more cost-effectively.
The CiACA initiative was launched during the 22nd Conference of the Parties (COP22) in Marrakesh, with the objective to support Parties in the development of carbon pricing approaches for implementing their NDCs under the Paris Agreement while fostering collaboration. The initiative is purely on a voluntary basis and does not create obligations for jurisdictions supported or for its donors. It is currently funded from voluntary contributions provided by the Governments of Germany through the Federal Ministry for the Environment, Climate Action, Nature Conservation and Nuclear Safety (BMUKN). The initiative is jointly managed by the UNFCCC Secretariat and its Regional Collaboration Centres (RCCs).

National context

Papua New Guinea (PNG), located in the Pacific region, is a forest-rich country with immense potential for carbon sequestration. PNG’s Nationally Determined Contributions (NDC 2.0) prioritizes emissions reductions in energy, forestry, and land use, with a goal of net zero emissions by 2050. The NDC also includes targets to reduce emissions from deforestation and forest degradation, with increased ambition for domestic mitigation aligned with Article 6 of the Paris Agreement. PNG has been a key player in the REDD+ markets. However, the country also witnessed several challenges in REDD+ market participation including land disputes, greenwashing and dubious benefit sharing arrangements. In March 2022, the government imposed a moratorium on Voluntary Carbon Market (VCM) projects until it finalized the regulatory framework around carbon markets. The moratorium was recently lifted in April 2025 as the regulatory framework nears finalization.
At present, PNG does not have a Carbon Pricing Instrument (CPI) such as a carbon tax or levy exclusively targeting GHG emissions. Section 4 of the Climate Change (Management) (Amendment) Act 2023 of PNG establishes a Fuel Levy Rate (FLR) which is calculated by multiplying the Carbon Levy Rate (CLR) per unit of carbon content with the Carbon Emission Factor (CEF) of the fuel type. Schedule 1 of the Act specifies the CLR and the FLR applicable to various fuel types. Schedule 3 of the Act specifies carbon market fees. An application fee of PGK 1,000 is applicable to Voluntary Carbon Market (VCM) and Sustainable Development Mechanism (SDM) projects. VCM and SDM permit fees are also detailed in the Schedule. Schedule 4 describes the ‘Green Fee’ of PGK 50 applicable to all foreign passport holders. The fee serves as a form of climate financing, with funds generated being used to support the Climate Change and Development Authority’s (CCDA) climate change mitigation and adaptation programs within PNG, aiming to protect the country's biodiversity and fund sustainable initiatives. Since June 2024, PNG has also introduced a 7% fee on any carbon credit sale to raise finance for priority actions.
This proposed CiACA assignment originates from a strategic need to assess the feasibility of a domestic CPI, particularly a carbon tax or levy, that aligns with PNG’s national goals while ensuring environmental integrity, community participation, and future market linkage readiness. A carbon tax or levy can serve as an effective tool for PNG to mobilize climate finance by generating predictable revenue streams that can be allocated toward the implementation of its NDC priorities.
The CCDA is the national counterpart for this proposed assignment and serves as PNG’s designated national authority (DNA) on climate change policy and carbon markets. Other relevant stakeholders include the PNG Forest Authority, Ministry of Environment and Conservation, Incorporated Landowner Groups (ILGs), civil society organizations, development partners (e.g. UNDP, FAO), and international market actors engaged under bilateral arrangements. Previous relevant efforts include the development of PNG’s REDD+ National Strategy, its participation in the Forest Carbon Partnership Facility (FCPF), and Article 6 readiness work with Singapore.

Objectives

The primary objective of this assignment is to conduct a feasibility assessment of a domestic CPI such as a carbon tax or levy, and its potential applicability in PNG, taking into account the country’s NDC priorities, legal and regulatory framework and governance structures. Specifically, the assignment will;

• Assess the institutional and regulatory gaps of the relevant institutions in operationalizing domestic CPI in PNG and propose recommendations to address the gaps.
• Provide recommendations on CPI as a mechanism to generate predictable domestic revenue stream and finance priority actions under PNG’s NDC and long-term net-zero commitments.
• Conduct stakeholder consultations with government agencies, landowner groups, private sector actors, and development partners to identify challenges and opportunities in implementing a domestic CPI in PNG.
• Conduct a comprehensive assessment of potential carbon pricing options for PNG, including a carbon tax or levy, tailored to the country’s economic structure, governance context, and climate policy priorities.

Scope of work

The Consultant shall be responsible for the following tasks. Under this assignment, the consultant is required to ensure broad and inclusive participation of all relevant stakeholder in any workshops or consultation conducted as part of the assignment, if applicable.

1. Kickoff meeting (or inception workshop) and Work plan
   • The consultant will, upon signing the contract, hold a virtual kick-off meeting with the project team to present the workplan highlighting their understanding of the task at hand, methodological approaches for successful execution of the necessary tasks and to agree on timelines for submitting the expected deliverables.
2. Situational Analysis and Stakeholder Mapping
   • Overview current GHG emission profile of PNG and map the most emission-intensive sectors of the economy based on most recent and credible data sources.
   • Review existing national policies, legal frameworks (e.g. CCMA 2015), REDD+ strategies, institutional mandates, and other current and upcoming regulations. The review shall encompass but not be limited to PNG’s climate and fiscal policies, including the CCMA 2015 (and Amendment (2024)), REDD+ strategies, upcoming carbon market regulations, the Article 6 Implementation Agreement with Singapore, Joint Crediting Mechanism (JCM) regulations in the country and any other relevant act, policy or regulation to ensure compatibility with CPI and identify legislative gaps which would impact implementation of CPI.
   • Assess institutional readiness for CPI design, monitoring, reporting, enforcement, and revenue management. Identify legal, technical, institutional, and capacity gaps in operationalizing domestic CPI and suggest recommendations to bridge the gaps.
   • Identify and map all key stakeholders in the design and implementation of CPI in PNG, covering national and provincial government bodies, customary landowner groups, civil society and development partners, as well as private-sector and international market actors.
3. Feasibility Assessment of carbon pricing instrument
   • Assess feasibility of different carbon pricing options, including carbon tax or levy. At a minimum, the analysis should:
   i. Propose CPI: Building on the situational analysis, propose a suitable CPI for PNG such as a carbon tax or levy, by outlining the rationale for its introduction, examining global and regional precedents in comparable developing economies, and evaluating the pros and cons of proposed option and alternatives in PNG’s specific context. The assessment will explain why the recommended instrument is most appropriate to advance PNG’s NDC targets and mobilize sustainable climate finance.
   ii. Economic Impacts: Evaluate effects of introducing the CPI on key sectors (such as land-use, agriculture, energy, forestry, transport), potential revenue generation, and implications for competitiveness and investment.
   iii. Social and Equity Considerations: Examine impacts of introducing CPI on vulnerable communities, women and customary landowners, and potential for revenue recycling or compensatory measures.
   vi. Environmental Integrity: Determine expected emission reductions, alignment with PNG’s NDC targets, and complementarity of CPI with fee structure for REDD+ and Article 6 activities.
   v. Regional and International Linkages: Consider compatibility with regional or international CPIs and bilateral agreements, including possible future integration with international carbon markets.
   vi. Stakeholder Acceptance: Gauge political will and support among government, private sector, civil society, and landowner groups through consultations.
   vii. Risk Analysis: Identify potential barriers, such as market volatility, legal disputes, or implementation delays, and propose mitigation measures.
4. Stakeholder Consultations
   • Design and conduct consultations with key national and subnational stakeholders to gather input and build ownership.
   • Incorporate feedback into feasibility assessment and validate assumptions.
5. Roadmap and Recommendations
   • Develop a phased roadmap for domestic CPI in PNG, identifying short, medium, and long-term actions in line with international best practices.
   • Include recommendations for pilot design, institutional arrangements, capacity-building, and market readiness steps.
6. Validation workshop
   • In-person workshop to present the key findings, proposed CPI options, and preliminary roadmap to national and subnational stakeholders.
   • Gather feedback from participants including government agencies, civil society, and development partners to ensure the relevance, practicality, and inclusiveness of the proposed recommendations.
7. Submission of final report
   Upon successful completion of the validation workshop, the consultant shall submit a final report containing comprehensive, consolidated, and synthesized information on elements reviewed and information obtained from stakeholders. This report must present a comprehensive, evidence-based feasibility assessment of domestic CPI in PNG based on national context. The final report should include:
   • Executive Summary outlining key findings and strategic recommendations
   • Situational Analysis of PNG’s national circumstances, institutional and regulatory frameworks, existing gaps and recommendations to address the gaps towards effective CPI implementation.
   • Feasibility assessment of the CPI in context of the institutional and regulatory framework and country’s development priorities.
   • Stakeholder consultation outcomes, including summary of inputs from stakeholders identified during the situational analysis
   • Roadmap and recommendations derived from international best practices and addressing identified capacity-building needs.
   • Annexes, including references, consultation materials, institutional maps, and any supporting analysis or data
   • The final report must be written in English, submitted in both editable (Word) and non-editable (PDF) formats, and should be suitable for publication on the CiACA section of the UNFCCC website.
   • The final report will be published in the CiACA website under the UNFCCC website https://unfccc.int/about-us/regional-collaboration-centres/the-collaborative-instruments-for-ambitious-climate-action-ciaca

Deliverables

Deliverable / Timeline / Payment schedule [%]
1. Work plan (including inception report) / Within [02] weeks after signing the contract / [10]
2. Situational analysis / Within [05] weeks after signing the contract / [10]
3. Technical feasibility of CPI options / Within [08] weeks after signing the contract / [15]
4. Roadmap and recommendations and Stakeholder consultation results / Within [10] weeks after signing the contract / [10]
5. Validation workshop report / Within [12] weeks after signing the contract / [15]
6. Final study report / Within [14] weeks after signing the contract / [40]
*All deliverables, including the final report, must be submitted in English.

Qualifications and competencies

Academic background:
The consultant(s) must possess an advanced university degree (Master’s level or higher) in climate policy, environmental economics, environmental science, sustainable development, public policy, or a related field. A strong academic foundation in climate change mitigation, carbon markets, or land-use governance will be considered a significant asset.

Required professional expertise
Competency Area: Description
Carbon Pricing and Climate Finance Expertise: Experience in the design, assessment, or evaluation of CPIs or related climate finance mechanisms.
National Policy and Regulatory Knowledge: Knowledge of national regulatory and institutional framework including the NDCs, climate change policy, carbon market regulations and MRV frameworks etc.
International Climate Policy Familiarity: Familiarity with international climate policy frameworks, including the Paris Agreement and carbon market mechanisms.
Policy and Institutional Analysis Experience: Experience in conducting policy and institutional analysis in the context of environmental or climate-related assignments.
Stakeholder Engagement Skills: Demonstrated ability to conduct multi-stakeholder consultations and synthesize inputs from diverse government and non-government stakeholders.
Analytical and Communication Competence: Strong analytical, communication, and technical report-writing skills.
Language proficiency: Fluency in English required; knowledge of national language is an asset