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Analysis of Current Developments in the Global Carbon Market

Background and Objective

The CDM has shown how effective project-based mitigation mechanisms can be. After some initial challenges with project registration, the capacities needed for efficient processing were built at all levels: at the UNFCCC Secretariat, in host country authorities and among project developers and auditors. The CDM reached peak performance in 2012, with more than 3,200 projects registered within the course of a single year. That peak also marked a turning point. As the European Union had not increased the contingent for eligible certificates generated by the flexible mechanisms for the trading period beginning in 2013 in its Emissions Trading Scheme (to date the most important source of demand for those certificates), the price for certificates effectively crashed. And for a long time, it was unclear as to whether and to what extent market-based mitigation activities would continue under the international climate regime. With the adoption of the Paris Agreement, the path is now clear for further use of international market mechanisms. Uncertainty still abounds, however, regarding the role the existing mechanisms will play – especially the CDM and the registered projects in its pipeline. Against this backdrop, the BMU was funding the project “Analysis of Current Developments in the Global Carbon Market”, which was being carried out by a consortium headed by the NewClimate Institute.
 

Implementation

The main aim of the project was to analyse both the current situation and the potential for existing and new climate change mitigation activities, and to use the results to draw up recommendations for action. To this end, the following research questions were examined in individual discussion papers:

Results and Outlook

The research results support the international climate negotiations and contribute to the further development of market-based instruments. They thus show possible ways of dealing with existing projects during the transition phase until the new climate change regime is implemented. Based on the results, recommendations for the design of new market-based instruments were also developed and the implications concerning the treatment of CDM projects beyond 2020 were outlined.

Analysis of Current Developments in the Global Carbon Market

Role of BMU: Research funding

Lifecycle: 2015 - 2018 (completed)

Implementation: NewClimate Institute

Other Organisations Involved: Öko-Inistut e.V., Lambert Schneider (SEI Associate)

Contact: Thomas Day, t.day@newclimate.org

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