Evaluation and design of domestic and international carbon market mechanisms, with the mission to support the successful transition from existing to emerging mechanisms.

x% of the world's heavy polluting industries are now covered under carbon market mechanisms.
Many of the world’s heavy polluting industries are now covered under carbon market mechanisms.
Carbon market mechanisms are becoming an increasingly popular instrument for international and domestic climate change mitigation efforts. In particular, national and sub-national programmes have shown significant growth in recent years, going some way to make up for uncertainty of international markets under the Kyoto Protocol. Moreover, the 2015 Paris Agreement established a new market mechanism to assist Parties in achieving nationally determined contributions, raising ambition and supporting sustainable development. The exact rules of this mechanism are yet to be determined.

NewClimate Institute is highly active in the analysis, evaluation and design of domestic and international market mechanisms. We evaluate past mechanisms and reflect the lessons learned to the design and development of future mechanisms including those that deliver an overall mitigation impact, which is explicitly stated in the 2015 Paris Agreement. Our experts combine years of experience working in various capacities with the Clean Development Mechanism (CDM) and the Joint Implementation (JI) programme, and have provided support and advice to international policy makers for the emerging New Market Mechanism (NMM) and Framework for Various Approaches (FVA) concepts.

Key contacts

Carsten Warnecke
Carsten Warnecke
Thomas Day

Return to all expertise

Associated projects

Evaluating the state of the CDM

Evaluation of the present implementation status of CDM projects and identification of support measures to keep CDM projects mitigating. Return to all expertise and projects The Clean Development Mechanism (CDM) was introduced by the Kyoto Protocol and has developed into one of the most important international carbon market instruments. The CDM stimulated investments in greenhouse… Read More

Bilateral agreements as basis towards piloting sectoral market mechanisms

Opportunities provided by bilateral agreements for piloting market-based approaches at sectoral levels. The research work analyses how bilateral agreements between countries could be used to pilot international carbon market activities on sectoral levels to ensure a minimum activity level in this transition period from existing to new mechanisms. Return to all expertise and projects The… Read More

Results-based financing in Carbon Markets – connecting market and non-market based approaches

Current situation of results-based financing (RBF) approaches in climate policy.

Carbon integrity assessment of mitigation actions

Development of a methodology and scorecard to assess the carbon integrity of mitigation actions

Carbon market mechanisms in future international cooperation on climate change

Overview of the options for the use of carbon market mechanisms in a 2015 climate change agreement

Analysis of pre-2020 developments in the global carbon market

Continuous analysis of the status and developments of mitigation activities in the global carbon market up to 2020. The German Emission Trading Authority (DEHSt) at the Federal Environment Agency contracted a consortium led by NewClimate Institute, to follow and evaluate the current situation and developments in the international carbon market over the period up to… Read More

Offsetting in carbon taxation systems

Analysis of the potentials and limits of different offset standards in bilateral and global CO2 price systems. Currently, an increasing number of countries and regions develops CO2 pricing mechanisms, including carbon taxes and emission trading systems. Some of these countries are designing or plan to design standards for the use of offsets in their pricing… Read More

Integration of market mechanisms and emission trading schemes

Design and integration of market mechanisms and emission trading schemes under a new climate change agreement. The German emission trading authority (DEHSt/UBA) contracted NewClimate Institute together with adelphi and Öko-Institut to provide a foundation for the formulation and further development of a German position in the climate negotiations, and to facilitate a scientifically-based contribution of… Read More

Development of a sectoral market based approach

Setting incentives for ambitious emissions reductions through carbon pricing in developing countries. The German emission trading authority (DEHSt/UBA) contracted a consortium led by NewClimate Institute with Öko-Institut and a local partner for the development and implementation of a market-based approach to mitigation action on the basis of a sectoral benchmark. This approach aims, on the… Read More

Innovative Financing Options for the Adaptation Fund

Assessing potentials and pathways for financing adaptation through carbon pricing approaches

Further reading

International market mechanisms after Paris Nov 2016 - The purpose of this paper is to identify the main goals and aims of the international carbon market, take into account the general context and environment for carbon markets under the Paris Agreement, identify and discuss the main issues of the relevant paragraphs and analyse issues of the interaction and relationship of the provisions including synergies and conflicts. The paper aims at facilitating the discussion among UNFCCC parties while, given the dynamic nature of the topic, it can obviously only be a snapshot of the current status of the discussions.
Two Unconventional Options to Enhance Multilateral Climate Finance Oct 2016 - NewClimate Institute contributed to a policy brief on ‘Two unconventional options to enhance multilateral climate finance’ under the European Capacity Building Initiative (ecbi).
Impacts of the Clean Development Mechanism Nov 2015 - This focus study presents a quantitative assessment of the mitigation impact of the CDM that occurs as a side effect of the current depressed market conditions. The annual net mitigation impact of the CDM in 2014 is in the order of 480 MtCO2e and thus might have reduced global emissions by approximately 1% in 2014
Where do they go from here? Analysing the status quo of CDM projects Oct 2015 - The situation of project activities, and domestic and international capacities related to the CDM, have noticeably deteriorated following the recent decline of the market conditions. However, a major information gap exists regarding the actual status of individual CDM projects worldwide, as well as their current barriers and required means for the continuation of these projects. In order to close this gap, a large representative sample of projects were evaluated individually in a recent study to extract insights and lessons regarding national situations, technology-specific considerations, and the CDM as a whole.
Connecting the dots – Results-based financing in climate policy Aug 2015 - This study clarifies the definition of results-based financing (RBF) and in particular its role in the context of climate policy. The publication is aimed at readers from the carbon markets and climate finance communities alike. It facilitates a common understanding of what RBF as a financing modality involves and is therefore meant to also be a good starting point for readers looking into this topic for the first time.
Carbon market mechanisms in future international cooperation on climate change Jun 2015 - This discussion paper provides an overview of the development of the international carbon market mechanisms and emerging domestic carbon pricing systems, and lays out three distinct but potentially complementary options for market mechanisms in a future climate change agreement. Options for narrowing the emissions gap before 2020 using market mechanisms are also explored.
Analysing the status quo of CDM projects May 2015 - This research conducted by NewClimate Institute and Ecofys on behalf of the German Federal Ministry for Environment, Nature Conservation, Building and Nuclear Safety (BMUB), seeks to address major gaps in the current understanding regarding the status of individual CDM projects worldwide, as well as the barriers and means for supporting the continuation of these projects.
New Climate Institute in Carbon Mechanisms Review Use and build on what you have: Is a bilateral process suited to testing sectoral approaches that are based on the CDM? Nov 2014 - 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.
Beyond pure offsetting: Assessing options to generate Net-Mitigation-Effects in carbon market mechanisms May 2014 - Carsten Warnecke, Sina Wartmann, Niklas Höhne, Kornelis Blok
This research analysed the question if approaches for carbon market-based mechanisms exist that allow the generation of net emission reductions in host countries while keeping project initiation attractive. We present a criteria-based assessment method and apply it for four generic options in existing mechanisms and derive implications for future mechanism frameworks.
New Climate Institute - Forum China starts trading carbon Feb 2014 - Christian Ellermann, Constanze Böning
This article explains the nature of the new pilot greenhouse gas emission trading schemes (ETS) in China, as well as the significance of their introduction. By moving towards the allocation of emission rights through market mechanisms, the government is signalling that it is addressing climate change seriously and that it wishes to be compared to Europe and the most progressive regions of North America that have also adopted emissions trading. However, the authors also argue that a transition to a more important role for markets in the area of energy and the environment is still in its very early stages.

Public presentations & interviews

Innovative Financing for the Adaptation Fund (AFB29) Mar 2017 - Climate Policy Analyst, Ritika Tewari, presented the findings of the ‘Innovative Financing for the Adaptation Fund: Pathways and Potentials’ report at the 29th Adpatation Fund Board meeting that took place during the 16th and 17th March in Bonn, Germany. Read the full report
Innovative financing options for the Adaptation Fund Nov 2016 - Carsten Warnecke from NewClimate Institute presents at COP22 in Marrakesh on innovative financing options for the Adaptation Fund.  09 November 2016, 11:30 Mediterranean Room, COP22 Livestream
Impact of the Clean Development Mechanism Dec 2015 - 02 December 2015 Thomas Day of NewClimate Institute presents at COP 21 on “The impact of the Clean Development Mechanism – Quantifying the current and pre-2020 mitigation impact of the CDM”. Wednesday, 2 December, 12.00, German Pavilion.    
An overview of the status quo, prospects and outlook of market mechanisms Dec 2015 - 02 December 2015 Carsten Warnecke of NewClimate Institute presents at COP 21 on “The status quo, prospects and outlook of market mechanisms”. Wednesday, 2 December, 12.00, German Pavilion.    
Approaches to lift sectoral mitigation potential with markets in transition Dec 2014 - NewClimate Institute at COP 20 presents insights from research project on "Bilateral Agreements as Basis Towards Piloting Sectoral Market Mechanisms".