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European Commission Study Outlines Options for a New UNFCCC Market Mechanism

14 November 2012: The European Commission has released a study of design options for the new market mechanism (NMM) defined in the outcomes of the Durban Climate Conference, which took place in December 2011, under the UN Framework Convention on Climate Change (UNFCCC).

The study examines options for NMM design elements, including: type of mechanism, deciding between sectoral trading or sectoral crediting; coverage; sector target or crediting thresholds; operational and incentive frameworks; requirements for data collection and monitoring, reporting and verification (MRV); compliance framework and penalties; governance; ways to manage the transition from the Clean Development Mechanism (CDM) to the NMM; and finance of the NMM.

The study includes chapters on: approaches and methodology; selection and assessment of key design elements for the NMM; proposals for designing the NMM; emission reduction potential of the NMM; expert opinions on the NMM; and conclusions and recommendations. The study also discusses case studies of: steel in Brazil; power in Chile; refineries in Indonesia; power in South Africa; and cement in Viet Nam.

The report presents three proposed options for the NMM to maximize environmental integrity and ensure compatibility with the EU Emission Trading System (ETS), including: a government crediting system; a tradable intensity standard; and an installation-based emission trading system. [DG-Climate Action Press Release] [Publication: Design Options for Sectoral Carbon Market Mechanisms]