Contracting Carbon: The World Bank’s Blueprint for High-Integrity Climate Solutions

In a bold move to close the massive global climate finance gap, the World Bank and a coalition of research bodies, including the Climate Finance Mobilization Unit (SCCFM), Environmental and International Law Practice Group (LEGEN), and the International Development Association (IDA), have championed the use of Emission Reductions Purchase Agreements (ERPAs) under the BioCarbon Fund Initiative for Sustainable Forest Landscapes (ISFL). These contracts are emerging as powerful tools to unlock climate finance for countries tackling emissions through natural climate solutions. With annual climate investment needs in the trillions and only around $300 billion currently being mobilized, ERPAs offer a timely solution. They help nations monetize emissions reductions from reforestation, forest preservation, sustainable land use, and low-emission agriculture. By converting verified emissions reductions into tradable carbon credits, ERPAs create a clear pathway from climate action to tangible financial reward, particularly for low- and middle-income countries.

From Emissions Reductions to Carbon Revenue

An ERPA is not just a contract, it’s a financial and legal architecture that enables the purchase and sale of carbon credits. Under this model, the World Bank typically acts as the buyer (through ISFL), while the seller is the host country's designated program entity. The agreement outlines the entire transaction process, including how emissions reductions will be measured, verified, priced, and transferred; how revenue will be shared; and what legal rights and social safeguards must be in place. In Zambia’s Eastern Province, a case heavily featured in the report, this approach is paying dividends. The ERPA there provides for up to $30 million in payments for verified carbon credits, generated through a suite of activities: forest conservation, climate-smart agriculture, sustainable charcoal production, and the rollout of clean cookstoves. All verified credits are subjected to independent monitoring and validation under the ISFL’s rigorous standards. Once validated, they are recorded through the World Bank’s Carbon Assets Tracking System (CATS) and monetized. The revenue is then distributed via a Benefit Sharing Plan (BSP), ensuring funds flow back to local communities, traditional authorities, and participating government agencies.

Measuring What Matters: MRV and Integrity

Central to the ERPA process is the concept of MRV, measurement, reporting, and verification. It’s the backbone of credibility in emissions trading. In the Zambia program, MRV occurs at multiple administrative levels, including national, provincial, and district. A range of stakeholders contribute: the Forestry Department tracks forest cover, the Ministry of Agriculture monitors crop-related emissions, and the Ministry of Energy estimates emissions reductions from clean cooking technology. Local chiefdoms approve fieldwork, and data is aggregated and reviewed by the Zambia Environmental Management Agency (ZEMA). Independent third-party verifiers then certify the results. Verified emissions reductions are converted into carbon credits and either retained for the country's climate goals or sold into markets. This rigor ensures the credits represent real, measurable climate benefits, preventing double-counting or inflated claims, critical concerns in global carbon markets.

Built-In Resilience Against Climate and Market Risk

ERPAs go beyond accounting, they anticipate and buffer against risks. One of the standout features of the ISFL ERPA model is its Buffer ER mechanism. A portion of verified emissions reductions is withheld as a risk buffer, held in reserve to cover any future reversals, such as deforestation from wildfires or illegal logging, that could negate earlier gains. If such events occur, an equivalent volume of buffer credits is canceled, protecting the integrity of the entire carbon transaction. This mechanism also addresses uncertainties in measurement, creating a safety net that enhances investor and buyer confidence. If reversal risks drop over time due to strong implementation, some buffer credits may be released and sold. This flexibility makes the system adaptive and resilient.

Open Market Flexibility and Equitable Benefit Sharing

While ISFL ERPAs guarantee a minimum “floor price” (typically between $8–$10 per ton), they do not lock countries into those rates. Sellers can explore better deals from third-party buyers. If a higher offer emerges, the ISFL has the right of first refusal. Should the ISFL decline to match it, the host country can sell its carbon credits externally, provided the revenue is still shared via the BSP and the credits meet the same quality and reporting standards. Zambia’s BSP serves as a robust example: it allocates 55% of revenue to local communities and 45% to government and private sector implementers, depending on their role in generating emissions reductions. This ensures fairness and transparency, and fosters local ownership of climate efforts. Furthermore, the ERPA allows countries to use credits either for international sale or to meet their own Nationally Determined Contributions (NDCs) under the Paris Agreement, depending on the modality selected, climate finance or carbon finance.