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Models to Implement New or Transform Existing Market Mechanisms

(Photo by Boris Stromar on Unsplash)
(Photo by Boris Stromar on Unsplash)

After a long period in which the international negotiations on the global carbon market appeared to have reached an impasse, the adoption of the Paris Agreement breathed new life into the negotiation process. However, the Agreement only provides the overarching framework and the details concerning implementation for the period beyond 2020 have still to be worked out. This poses a great challenge with regard to negotiations concerning the global carbon market because, other than with several other areas, there has been no consensus reached so far as to how the mechanism is expected to work. Although a whole range of very different models are on the table, it remains unclear as to what role the existing mechanisms, and especially the CDM, might play under the Paris Agreement.

Against this backdrop, a consortium comprising Öko-Institut, the Stockholm Environment Institute and INFRAS was commissioned with a research project on Models to Implement New or Transform Existing Market Mechanisms under a new UNFCCC Climate Change Agreement. The project takes an in-depth look at issues concerning the transition from the world of Kyoto Protocol mechanisms to the new climate change regime under the Paris Agreement and focuses in particular on the environmental integrity of future climate change mitigation instruments. For example, how can emission reductions be correctly calculated, accounted for and counted towards the nationally determined contributions (NDCs) of countries that import such emission reductions in order to meet their own targets? Or to put it another way: how can those emission reductions be transferred from one country to another? In the event they are transferred, it must be ensured that they are not counted towards multiple NDCs, thereby weakening the contributions of the countries involved.

When beginning the project, the team analysed the nationally determined contributions (NDCs) submitted so far and assessed the various types of NDCs identified in terms of their suitability for market mechanism use under Article 6 of the Paris Agreement (the discussion paper can be viewed here). They then used the findings of previous work to develop approaches and proposals for accounting rules which enable emission reductions to be used between countries in line with their respective NDC types while also ensuring environmental integrity (the discussion paper can be viewed here). In a further project phase, the research team looked at the various cooperative approaches contained in Article 6 and analysed their interrelationships (the discussion paper can be viewed here). The results of the research project are to be used to support the international debate and will also flow into the UNFCCC negotiation process.

Models to Implement New or Transform Existing Market Mechanisms

Implementation: Öko-Institut e.V.

Other Organisations Involved: Stockholm Environment Institute, INFRAS AG

Project Duration: 2016-2018

Contact: Jakob Graichen, j.graichen@oeko.de