by myself, Hans Bolscher, Jeroen van der Laan, Jelmer Hoogzaad & Jos Sijm
Update: The article can be downloaded for free for a limited time here.
Parties to the United Nations Framework Convention on Climate Change (UNFCCC) have decided to establish a ‘new market- based mechanism’ (NMM) to promote mitigation across ‘broad segments’ of developing countries’ economies but have so far defined only some broad outlines of how it is to function. This article in Climate Policy identifies key design options of the NMM based on a survey of the literature and reviews them against a range of assessment criteria. Furthermore, potential application of the NMM is analysed for five country-sector combinations. The analysis finds that lack of data and of institutions that could manage the NMM are key bottlenecks. In addition, the analysis reveals the existence of substantial no-regret reduction potential, suggesting that sectors may not be sensitive to the market incentives from an NMM. Governmental capacity building and Nationally Appropriate Mitigation Actions (NAMAs) might be more appropriate in the short term, preparing the ground for the adoption of market-based approaches at a later stage. NMM pilots could be based on supported NAMAs but should ideally generate tradable and compliance-grade emission credits in order to fully simulate the real-life conditions of an NMM.