SPAR6C Program – Analysis of voluntary carbon markets in Colombia

Date documents can be requested until : 30 May 2025 16:00
Title : SPAR6C Program – Analysis of voluntary carbon markets in Colombia
Procurement No. : 100012781
Process : RFP
Description : Global Green Growth Institute for its projects in Colombia is inviting only Colombian registered companies to submit their bids for the tender “SPAR6C Program – Analysis of voluntary carbon markets in Colombia”

ELIGIBILITY:
• Service providers (in case of consortium, at least the lead entity) must be a legal entity incorporated and registered in Colombia and/or able to receive payment in Colombia.
• The entity should not be directly involved in voluntary carbon markets in Colombia, to rule put any possible conflict of interest (In this regard, please fill out and sign Annex 2 – Declaration of non-involvement in Colombian voluntary carbon markets0

NOTE TO FINANCIAL PROPOSAL:
The budget should include:
• Staff: the team is expected to consist of between 3 and 5 expert staff members. The expected skillset of the team is outlined in Section 5 of this document.
• Access to at least one of the data providers (MSCI, Allied Offset). This should include access for the firm or servicer provider and one more user to be shared between GGGI and DNP.
The budget should not include:
• The costs of organising any workshop (e.g. renting a space), as these will be covered by GGGI
• Payment of VAT, as the project has the Certificate of Common Utility of the Government of Colombia under the Colombian Presidential Agency for International Cooperation (APC-Colombia), which provides tax exemptions to the project and the consultants or consulting firms that are participating in the implementation of the project.

PROJECT BACKGROUND AND OBJECTIVES:

Context of the Program
The Paris Agreement provides a comprehensive framework for signatory Parties to reach an ambitious commitment to limit the increase in global average temperature to well below 2°C, and to pursue efforts to limit the increase to 1.5°C in a cooperative manner. This framework covers several instruments including cooperative approaches under Article 6 which allows for the potential development of international carbon transactions.

The Supporting Preparedness for Article 6 Cooperation (SPAR6C) Program, funded by the International Climate Initiative (IKI) of the German Government, is a five-year, 20M EUR Program, whose implementation began in Q2 2022. Its objective is to use Article 6 (A6) cooperative approaches to engage the private sector in NDC implementation and to raise ambition. This will enable cost-efficient, flexible, high-integrity carbon markets with positive sustainability impacts. SPAR6C is supporting Colombia in developing it is institutional, regulatory, and technical framework and capacities to embark on Article 6 transactions of ITMOs during the NDC implementation period 2020-2030. The program's first stage has been the development of a Readiness and Needs Assessment (RNA) for implementing Article 6, which examines the country's capacities and systems to consolidate a strategy, and guiding principles, institutional and procedural framework, and monitoring tools related to Article 6.

Article 6 promises to generate significant amounts of carbon finance to host countries. Therefore, it is important to examine how much finance has been flowing through the voluntary carbon market as a precedent. In Colombia, in particular, the voluntary carbon market (VCM) has flourished because of the carbon tax offset mechanism, which allows companies with carbon tax obligations, primarily transportation and fossil fuel companies, to offset their tax obligations by cancelling carbon credits of VCM projects in Colombia. The market has grown substantially since the mechanism started in 2017. Nowadays, as well, Colombian projects, standards, developers and verifiers are reaching the international market. The Colombian VCM is one of the largest in the world by volume of credits sold and retired, counting with 200 active projects in this market as of the first half of 2024 according to main reporting sources (Verra, GoldStandard, Berkeley, Alianza Pacífico, International Database on REDD+ projects and Programmes, Ecoregistry, among others). Of these, 171 are registered on the National Registry for the Reduction of Greenhouse Gas Emissions (RENARE for its initials in Spanish) as of September 30, 2024. The MRV of projects is mandatory (Resolution 1447 of 2018 of the Ministry of Environment and Sustainable Development) for all mitigation initiatives in the country, including carbon market mechanisms.
Regarding voluntary market stakeholders, based on the RNA report prepared by GGGI (2023), 10 associated validation and verification organizations (VBOs) were found; more than 30 project development entities; and at least 10 carbon standards or GHG certification programs, both nationally and internationally, participated in these markets. It is worth mentioning that these voluntary carbon markets at the national level were strongly encouraged by the non- causation mechanism of the carbon tax.
The National Planning Department (DNP) is in charge of the Monitoring, Reporting and Verification (MRV) of climate finance in Colombia (Financiamiento climático general en cifras (dnp.gov.co)), a key task for the assessment of compliance with Article 2 c) of the Paris Agreement “Making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development”. The DNP has made significant advances in tracking international cooperation finances, as well as public investment, with climate markers for investment budgets. Their online platform tracks public-sector mitigation and adaptation investment by year, region and sector. However, the DNP is still lagging behind in the measurement and tracking of private climate investment and finances, as there are looser MRV requirements for private-sector action in voluntary markets. Therefore, DNP have indicated that they would like SPAR6C to support the tracking of voluntary carbon market finances in Colombia to estimate the size of the market, the financial flows involved, its trends and its potential. Other analysis in this context include Asocarbono’s regular update of VCM projects and carbon tax. Allied Offset’s, MSCI and Standard & Poors databases provide raw data as well as limited public reports and some paid-for subscription services with important data to achieve goals of this consultant to build financial flow of type project. Yet, there still is a need for aggregate data at the country level and a granular, comprehensive picture of private-sector investment in VCM.

Allied Offset and MSCI are largest database for the voluntary carbon market that can be consulted from different aggregation level and variables of VCM as number and typology of projects, projects by country, prices, quality, buyers, transactions, brokers, transactions, retirements and more, that can contribute in the development of consultancy to build financial flows and features of VCM in Colombia.

Project Description and Objective

For SPAR6C, assessing the size, functioning and profitability of the voluntary carbon market is important to estimate the potential for Article 6. Information on prices, price trends and relationship to standards, vintage, project ratings and other variables can help us detect market trends that can be useful in prioritizing projects, sectors or attributes, particularly for buyer countries that have strong linkages with the private sector or for CORSIA. It is also important to understand the transaction costs in VCM projects, as an indicator that can be useful for A6 Transactions. The information on the volume of credits being sold to buyers abroad (unauthorized VCM credits) will also give an important indication of the amount of mitigation being claimed abroad. Colombia as part of the Paris Agreement promotes transparency and avoid double counting and it is expected that the corresponding adjustments will be applied in the future if the reduction is transferred to meet the goals of another country.
Another added value of this project is to also support DNP including the characterisation of voluntary carbon markets in the MRV of climate finance.
The main objectives of this work can be summarised with the following three questions:

What is the financial size and characterization of Colombia’s VCM? To answer this question, the consulting firm or service provider will analyse databases of VCM projects in Colombia, covering the period from 2021 to 2024 as a minimum.

What are the sources of investment into VCM, and how is the investment distributed across actors in the VCM? How have these investments changed over time, and what factors have driven those changes? To answer this question, the consultant will provide a value-chain analysis of VCM projects, and a suggested methodology for DNP to evaluate the market in the future.

What is the best way to track the financing of the VCM in the future? The consultant will build a methodology for the tracking of voluntary market finances and economic resources associated with the voluntary carbon market project cycle in Colombia. This way, it seeks to strengthen transparency and the MRV system of financing at the national level.

GGGI has identified at least two market intelligence platforms that offer comparable information to respond to these questions (Allied Offsets, MSCI). The firm or service provider will understand the offers of each of these services and subscribe to at least one of these platforms to access the data directly. Appropriate access to the information should be included in the consultant´s work plan and budget, and the consultant should outline in their strategy how they will ensure the dataset they use is comprehensive and minimises the risk of under-registration of VCM projects.

Two (2) dimensions are defined to assess the results and the service provider performance: Key Performance Indicators (KPI) and Service Level Agreement (SLA). It is proposed to have three (3) criteria to evaluate the products and to assess the outcome of the consultancy:

1. Quality: related to the quality of the design and compliance with the requirements described by GGGI. To evaluate this criteria 3 scores will be given: 1. does not meet; 2. meets requirements; 3. exceeds requirement.
2. Efficiency and productivity: related to the time required for development and compliance with deadlines. To evaluate this criteria 2 scores will be given: 1. does not meet; 2. meets requirements.
3. Impact and results: related to the satisfaction of GGGI with the product developed and the capacity transferred. To evaluate this criteria 3 scores will be given: 1. Not at all satisfied 2. Satisfied 3. Very satisfied - exceeds requirements.

This proposal will be delivered by the Supporting Preparedness for Article 6 Cooperation (SPAR6C) Program as an important input for consultation with the DNP.

All information contained and developed in the consultancy may not be shared or published without the respective authorization of GGGI.

PROPOSED ACTIVITIES & SCOPE OF WORK:
1) Proposed Activities for the Overall Project

This consultancy is expected to develop 5 main activities:

1. Analyse volume of financing and cost data on VCM in Colombia, using statistical tools to visualise data and fill any gap or limitation.
2. Analyse price fluctuations in VCM in Colombia, determining the main variables correlated with price.
3. Develop a map of the relevant actors for the flows of financing and investment in the VCM in Colombia, outlining their role and the relevance. Include a characterisation of national and international buyers, as well as profit distribution.
4. An in-depth analysis of the financial flows in the VCM, including maps and time series with respective data tables.
5. A reproduceable methodology to track financial flows related with the development and implementation of carbon credit projects in Colombia and a suggested methodology for DNP to track including the source of the financing, and how to disaggregate costs.

2) Scope of Work

The work developed will provide information on the mobilisation of resources from the private sector for the implementation of mitigation actions in the voluntary carbon market. The firm or service provider will need access to data platforms on the voluntary carbon market, and will complement those with semi-structured interviews, corporate financial disclosure reports and other sources of data suggested by the consulting firm or service provider. Additionally, to the quantitative and qualitative outputs, the firm or service provider will also produce a reproduceable methodological guide and suggestions to improve the tracking of publicly funded VCM projects.

The analysis will be useful mainly in two contexts. For the DNP, it is crucial to understand the financial flows in the voluntary carbon market for the MRV of carbon market projects and understanding trends in VCM that can impact the overall carbon finance of the country. In the context of SPAR6C’s, this analysis will be a key milestone to understand any funding gaps for the participation of Colombia’s carbon markets in Art. 6 of the Paris Agreement and where private sector appetite lays in VCM.

For more details, please refer to the Terms of Reference (TOR) document attached.

IMPORTANT TIMELINES:
Please note that the procurement RFP closing time is Friday 30 May 2025 (16.00 Hrs Korean Standard Time)
If any bidder has any request for clarification on the TOR or any part of the tender documents, GGGI will be happy to clarify if they are received on or before 7 days before the deadline (namely: if the tender submission deadline is 16:00 30 MAY 2025 KST, then the due date for submission of request for clarification is 16:00 23 MAY 2025 KST).

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