The United Nations Development Programme (UNDP) has urged Sri Lanka to urgently operationalise and regularise its policy framework on carbon trading, warning that private capital will only flow into markets with strong predictability and clear institutional systems.
Delivering the keynote address at the Sri Lanka Climate Summit 2026, organised by the Ceylon Chamber of Commerce, UNDP Resident Representative in Sri Lanka Azusa Kubota said that although global private climate finance has already exceeded the trillion-dollar mark, Sri Lanka’s industries are still waiting for clear policy signals to access these funds.
She stressed that “ambition on paper is not enough” and must be supported by strong implementation systems, financing mechanisms, and institutional credibility, noting that investors and businesses need clarity on the country’s macroeconomic direction and sectoral transition priorities.
Kubota added that to attract private participation in carbon markets, the government must establish a detailed and technical operational framework covering project approvals, a secure carbon registry system, strict accounting rules to prevent double counting of emission reductions, and transparent benefit-sharing mechanisms.
She further explained that uncertainty in regulations, slow licensing processes, and overlapping responsibilities across ministries discourage private investment and delay market development.
Highlighting Sri Lanka’s climate commitments, she pointed to the country’s Nationally Determined Contributions (NDCs) 3.0, which target a 20 percent reduction in greenhouse gas emissions by 2035 and reaffirm the goal of carbon neutrality by 2050, noting that implementation now needs to move beyond consultation into active execution.
Kubota also warned that while climate-related damage in Sri Lanka already exceeds Rs. 50 billion annually, reconstruction costs identified in the Post-Disaster Needs Assessment are estimated at over Rs. 1,000 billion over three years, underscoring the urgency of resilient and climate-smart rebuilding.
She cautioned that rebuilding infrastructure to past standards risks repeating future losses, and instead emphasized resilience-focused development that strengthens supply chains, reduces long-term costs, and improves economic stability.
She further noted that recent policy uncertainty, including stalled progress on a national carbon trading system and restrictions on renewable energy developers entering carbon credit agreements, has weakened investor confidence and limited potential foreign exchange earnings.
Kubota concluded that data reporting systems must be used as practical tools to reduce investment risk rather than as administrative requirements, and called for clearer revenue models, reduced policy overlap, and stronger de-risking mechanisms to transform climate action into an economic opportunity for Sri Lanka.
