International market mechanisms after Paris

Discussion Paper

Our analysis suggests that the purpose of international carbon markets has changed. While increasing economic efficiency was more prominent during the first development phase of international carbon markets, raising mitigation ambition may become more important in the phase to come. In terms of the design of the two market mechanisms pursuant to Art. 6.2 and 6.4, negotiations have just started. Many fundamental or more technical questions still have to be negotiated and it is not yet clear which positions individual parties will take. Some of these questions are overarching and are similar for both mechanisms, e.g. the relationship to Nationally Determined Contribution (NDCs) or procedures to ensure robust accounting. Others, such as the nature of the Internationally Transferred Mitigation Outcomes (ITMOs) or governance issues are quite different and very specific for each of the mechanisms.

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