Evaluation and analysis of domestic and international carbon market mechanisms, with the objective to inform design of new mechanisms which can support countries to achieve their climate commitments, to increase future ambition, and to support sustainable development.

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 play an important role in many international and domestic discussions around climate change mitigation efforts and come with both opportunities, but also risks. Internationally, the 2015 Paris Agreement set out provisions for market mechanisms to assist countries in achieving their nationally determined contributions, increase ambition and support sustainable development. Parties continue to work on the exact design of these mechanisms. International aviation and shipping are also considering carbon market mechanisms as a climate change measure. The “Carbon Offsetting and Reduction Scheme for International Aviation” (CORSIA) started in 2021; and International Maritime Organization (IMO) also lists market-based measures as a candidate measure for its strategy to reduce GHG from global shipping. Increasing numbers of national and sub-national jurisdictions are also working on various forms of carbon pricing. In addition, the future role of voluntary carbon markets is increasingly in the spotlight, with a growing number of companies setting emission reduction or net-zero targets; many companies are purchasing carbon offset credits to ‘neutralise’ their emissions, while others – aware of the limitations of offsetting– are seeking alternative approaches.

NewClimate Institute is active in the analysis, evaluation and design of international and domestic carbon market mechanisms. We have developed a depth of analysis on the Kyoto mechanisms to inform the design and development of future mechanisms, particularly those that increase mitigation ambition of countries and deliver an overall mitigation impact. NewClimate’s climate responsibility approach sets an alternative blueprint for companies to address their own corporate climate responsibility, marking an alternative approach for the future of voluntary carbon markets that focuses on transparency and constructive impact.

Our experts combine years of experience working in various capacities with the Kyoto Protocol mechanisms, the EU ETS and voluntary offsetting markets. We provide inputs to discussions under CORSIA and IMO, and advise international policy makers on emerging market concepts and piloting activities.

Key contacts

Carsten Warnecke
Carsten Warnecke
Thomas Day

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Associated projects

Increasing transparency and integrity of corporate climate pledges

A key aspect of the work, lead by the NewClimate team, is to set up a corporate climate pledge monitor which will shed light on a range of voluntary climate strategies, showcasing ambitious action as well as highlighting where existing commitments fall short.

Appraising policy choices for Article 6 of the Paris Agreement

Rules for the implementation of Article 6 of the Paris Agreement are still under negotiation at the international level. This project sheds light on the potential impacts of this policy making process through a combination of qualitative and quantitative analysis.

Understanding Climate Neutrality and Net Zero Targets

A growing number of countries and companies are setting climate neutrality or “net-zero” targets. Although the apparent growth in climate ambition of these actors is a promising development…

Informing EU policy options for tackling aviation’s climate impact

Assessing ICAO’s global market-based measure (CORSIA) and its interaction with the EU ETS.

CORSIA: Analysis and evaluation of regulating international aviation emissions through offsetting

NewClimate Institute conducted research to support the German Emission Trading Authority on CORSIA design issues.

Future role for voluntary carbon markets after 2020

This research project considers the future role for voluntary carbon markets after 2020.

Analysis of pre-2020 developments in the global carbon market

The project developed and applied a method to assess the vulnerability of existing project-based mitigation activities (e.g. CDM) to discontinuing their abatement activity.

Virtual Article 6 Pilots

NewClimate Institute is working to elaborate virtual Article 6 pilots to contribute to the discussion regarding rulemaking for Article 6 of the Paris Agreement.

Sustainable development framework for market mechanisms

This ongoing research project aims to overcome the previously identified barriers to combine SD and GHG mitigation impacts through the identification of practical solutions and concrete proposals for the implementation of SD indicators in GHG mitigation projects.

Technical advisory services “Global Carbon Market”

NewClimate Institute was contracted by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), as part of a larger consortium, to advise GIZ’s agency on its “Global Carbon Market” project.

Benchmarking Guide for climate policy instruments

NewClimate Institute developed a practical and in-depth guide on how to design and implement benchmarks for policy makers.

Innovative Financing Options for the Adaptation Fund

Assessing potentials and pathways for financing adaptation through carbon pricing approaches

Development of a sectoral market-based approach

The project establishes a strong case for incorporating sustainable design and energy efficiency considerations into new residential development, especially in the social housing segment.

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

Offsetting in carbon taxation systems

Analysis of the potentials and limits of different offset standards in bilateral and global CO2 price systems. Return to all expertise and projects An increasing number of countries and regions developed CO2 pricing mechanisms, including carbon taxes and emission trading systems. Some of these countries are designing or plan to design standards for the use… Read More

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

Carbon integrity assessment of mitigation actions

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

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

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

Bilateral agreements as basis towards piloting sectoral market mechanisms

Opportunities provided by bilateral agreements for piloting market-based approaches at sectoral levels. Return to all expertise and projects The German emission trading authority (DEHSt/UBA) funded this research project which was conducted by a consortium of NewClimate Institute and Ecofys to assess opportunities provided by bilateral agreements for piloting market-based approaches at sectoral levels. The main… Read More

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

Further reading

Analysis of options for determining OMGE, SOP and Transition within Article 6 May 2021 - Quantitative analysis of Article 6 policy decision options
Results-Based Finance in the Paris Era Dec 2020 - A discussion of using aspects of carbon market mechanisms for results based finance in the Paris era, including challenges, some solutions, and a potential niche role going forward.
Indicators for the promotion of sustainable development in carbon market mechanisms Dec 2020 - This report assesses options for the effective implementation of sustainable development impact assessment, in the context of climate change mitigation mechanisms such as those of Article 6 of the Paris Agreement.
Indicators for sustainable development under Article 6 of the Paris Agreement Dec 2020 - This report analyses how the role of sustainable development can be strengthened in the process of further designing the mechanisms under Article 6 of the Paris Agreement.
Analysis of current developments in global carbon markets Dec 2020 - The major aim of this research project was to provide insights on the state of current carbon market activities and options for supporting the continuation of new and existing mitigation activities in the pre-2020 period. This report contains a summary of the findings and combined conclusions from all analysis components addressed within the project.
Considerations for Article 6 engagement Nov 2020 - What should countries considering hosting emission reduction activities take into account with regard to engaging in carbon markets under the Paris Agreement.
Setting Incentives for Emission Reductions in Developing Countries: The Case of Social Housing in Colombia Nov 2020 - Exploration and discussion of considerations for a Net Zero Energy Building Article 6 Pilot under the Paris Agreement in Colombia.
CDM supply potential for emission reductions up to the end of 2020 Nov 2020 - Updated estimates of CDM supply potential to inform ongoing negotiations at the UNFCCC on rules for Article 6 of the Paris Agreement.
Future role for voluntary carbon markets in the Paris era Nov 2020 - We critically assess options for the voluntary carbon market and offer a set of recommendations, heading into the Paris era.
Analysis and assessment of the design of an offsetting system for international aviation Nov 2020 - This research project analyses matters that are critical for implementing CORSIA and ensuring that it effectively delivers on its objective of achieving carbon neutral growth.

Public presentations & interviews

The role of offsetting in ambition raising and net-zero Oct 2020 - Carsten Warnecke presented on "The role of offsetting in ambition raising and net-zero" at the 20th IEA-IETA-EPRI GHG Trading Workshop in October 2020.
Offsetting emissions under CORSIA – Analysing the potential supply of credits Jun 2019 - Carsten Warnecke presented on "Offsetting emissions under CORSIA - Analysing the potential supply of credits" at Innovate4Climate in June 2019.
Are countries ready for Article 6? – COP 23 Nov 2017 - Ritika Tewari (alumni) from NewClimate Institute presented findings from the Germany’s international cooperation on carbon markets report that is looking at Ukraine, Vietnam and Ethiopia readiness to implement Paris Agreement’s Article 6.
Innovative Financing for the Adaptation Fund (AFB29) Mar 2017 - Climate Policy Analyst, Ritika Tewari (alumni), 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".