The international carbon market is in a state of transition, moving away from project-based carbon market mechanisms like the Clean Development Mechanism (CDM) towards new international mechanisms which have yet to be defined and finalised. The poor demand for carbon certificates and the uncertainty surrounding the design of a New Market Mechanism (NMM) hinders the initiation of new reduction activities in developing countries via the carbon market. In this current phase, bilateral agreements could provide a basis to allow immediate implementation of pilot projects which would allow practical experience to be gained with sectoral approaches and also contribute towards the design process for an NMM.

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