Construction, Implementation and Risks of the Carbon Market Mechanisms Under the Paris Agreement

Abstract

AbstractTo assist Parties with their mitigation targets under NDCs, and continuously enhance ambition of mitigation action, the Article 6 of the Paris Agreement offers Parties two market mechanisms: voluntary cooperative approaches and a sustainable development mechanism. Due to the diversity in NDCs and uncertainty of future mitigation actions, designing and implementing the market mechanisms under the Paris Agreement is faced with huge risks and challenges. This paper analyzes and identifies major potential risk factors in the designing of the market mechanisms under the Paris Agreement, and analyzes sources and possible impacts of those risks from the perspective of robust accounting, additionality assessment and enhancement of Parties’ mitigation ambition. To reduce negative impacts caused by risks in the design and implementation of the market mechanisms on global mitigation actions, this paper suggests that we should build a robust accounting system, consider NDC commitments in additionality assessment, and ensure that the market mechanisms can contribute to enhancing Parties’ mitigation ambition by setting market access requirements.KeywordsParis AgreementCarbon market mechanismsCooperative approachesSustainable development mechanismRisks