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 one hand, at generating an incentive for ambitious emission reductions in the target country and, on the other hand, at making part of the emission reductions available to investors, in the form of carbon credits. In reflection of potential continued lack of demand for international carbon credits, the project will develop a market-compatible approach which may be turned into a market instrument in the future or which may be used to access other results based sources of climate finance. A benchmark will be developed to identify a threshold that separates nationally accounted emission reductions and those that may be used for crediting. Initially, the approach will be confined to a single sector in one target country, and the grounds will be prepared for its implementation. At the same time, valuable indications for the application to other sectors and countries will be compiled in the form of a manual.