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
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

Benchmarking Guide for climate policy instruments

Creating a practical and in-depth guide on how to design and implement benchmarks for policy makers. Return to all expertise and projects World Bank Partnership for Market Readiness programme (PMR) has contracted NewClimate Institute and Ricardo Energy and Environment to develop a Guide for providing an overview and practical guidance for policy-makers and practitioners on the main design elements… Read More


Further reading

Discussion Paper: CDM Supply Potential up to 2020 Aug 2017 - Authored by NewClimate Institute, Lambert Schneider and Stephanie La Hoz Theuer, this publication forms part of a broader project, commissioned by the German Emissions Trading Authority (DEHSt) at the German Environment Agency (Umweltbundesamt, UBA), with the primary objective to analyse the current situation and development of the international carbon markets.
A Guide to Greenhouse Gas Benchmarking for Climate Policy Instruments May 2017 - NewClimate Institute and Ricardo Energy and Environment developed a comprehensive technical note for World Bank’s Partnership for Market Readiness program (PMR) on the topic of ‘GHG benchmarking for climate policy instruments’.
Vulnerability of CDM Projects for Discontinuation of Mitigation Activities May 2017 - Authored by NewClimate Institute and the Öko-Institut, this publication forms part of a broader project, commissioned by the German Emissions Trading Authority (DEHSt) at the German Environment Agency (Umweltbundesamt, UBA), with the primary objective to analyse the current situation and development of the international carbon markets.
Innovative Financing for the Adaptation Fund: Pathways and Potentials Feb 2017 - This new report explores the potential of seven innovative climate finance options to meet the financing needs of the Adaptation Fund. It concludes that if implemented in a collective manner, these can provide a steady and predictable stream of finance for the Fund. However, the Adaptation Fund Board needs to proactively engage with relevant decision makers, following a dynamic resource mobilisation strategy. Potential engagement pathways for each option are discussed as well.
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.
Bilateral agreements as basis towards piloting sectoral carbon market mechanisms Jul 2015 - he international carbon market is characterised by an activity gap between existing and future market-based mechanisms. Project-based carbon market mechanisms - such as the Clean Development Mechanism (CDM) - no longer provide sufficient incentives for the initiation of greenhouse gas mitigation activities in developing countries. At the same time, procedures and modalities for new mechanisms are not yet defined. This transition period creates substantial challenges to maintain the expertise of various stakeholder groups, to test new mechanism approaches in practice and to support the final definition of new mechanisms. Against this background, the underlying research analysed opportunities for piloting market-based approaches at the sectoral level on the basis of bilateral agreements between donor and implementing countries.

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".