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Prerequisits for Ambitious New Market Mechanisms

JIKO Policy Paper 01/2013

(Photo: Sasol/mediaclubsouthafrica.com)

May 2013 - New Market Mechanisms (NMM) are meant to contribute to net mitigation effects beyond offsetting. Currently, several institutions are supporting the development of pilot projects for new market mechanisms. When designing these pilots, it will thus be important to test how NMMs like sectoral crediting can effectively support the goal of net emission reductions. A recent JIKO policy paper assesses different options to implement such environmental ambition in a sectoral crediting scheme. Discounting schemes, for example, offer the benefit of rewarding mitigation actions from the first tonne saved. However, this method is less suitable to move to high ambition as mitigation actions with higher costs may become unprofitable sooner than within other approaches.