The UN climate conference in Durban in 2011 decided to establish a new market mechanism (NMM) under the UNFCCC that is supposed to cover broad segments of the economy of developing countries. Detailed modalities and procedures are yet to be elaborated. The project developed design options for the NMM and assessed the impact that the NMM might have in specific sectors in specific developing countries.
Three Design Proposals for the New Market Mechanism
The development of design proposals was based on three priority criteria: Environmental effectiveness and integrity, preparedness for evolution towards an EU ETS compatible cap-and-trade system, and economic efficiency.
The three proposals are:
The case studies consisted of theoretically applying the second proposal in five sectors in five developing countries. Key findings were:
Capacity building and developing institutions that can manage the NMM are therefore important requirements. In the short term, strengthening existing policies could be an effective approach to NMM development. If certain policies have demonstrated to have the intended effect, the NMM can support the policies' up scaling.