Top-Down, Bottom-Up or In-Between: How Can a UNFCC Framework for Market-Based Approaches Ensure Environmental Integrity and Market Coherence?

Abstract

The Durban Climate Conference agreed on the creation of a new market-based mechanism under the United Nations Framework Convention on Climate Change (UNFCCC) and to consider the establishment of an overall framework for various mitigation approaches, including opportunities for using markets (“Framework”). This development is taking place against the background of increasing numbers of parties developing market mechanisms outside the UNFCCC. The creation of such a Framework is therefore of high political significance, as it should ensure on the one hand that new market-based mechanisms contribute to global climate change mitigation and to achievement of targets and on the other hand that different market-based approaches can be integrated in a global carbon market. As there is yet little clarity as to the roles and design of such a framework. This paper contributes to the debate by discussing and evaluating inter alia several design options, ranging from decentralised to centralised. The paper concludes that a strong central oversight at the level of the UNFCCC is probably the only option that could comfortably assure the vast majority of UNFCCC Parties that the environmental integrity of new market-based mechanisms is in fact ensured.