IDEAS home Printed from https://ideas.repec.org/a/taf/tcpoxx/v15y2015i4p417-437.html
   My bibliography  Save this article

Developing a sectoral new market mechanism: insights from theoretical analysis and country showcases

Author

Listed:
  • Wolfgang Sterk
  • Hans Bolscher
  • Jeroen van der Laan
  • Jelmer Hoogzaad
  • Jos Sijm

Abstract

Parties to the United Nations Framework Convention on Climate Change (UNFCCC) have decided to establish a 'new market-based mechanism' (NMM) to promote mitigation across 'broad segments' of developing countries' economies but have so far defined only some broad outlines of how it is to function. This article identifies key design options of the NMM based on a survey of the literature and reviews them against a range of assessment criteria. Furthermore, potential application of the NMM is analysed for five country-sector combinations. The analysis finds that lack of data and of institutions that could manage the NMM are key bottlenecks. In addition, the analysis reveals the existence of substantial no-regret reduction potential, suggesting that sectors may not be sensitive to the market incentives from an NMM. Governmental capacity building and Nationally Appropriate Mitigation Actions (NAMAs) might be more appropriate in the short term, preparing the ground for the adoption of market-based approaches at a later stage. NMM pilots could be based on supported NAMAs but should ideally generate tradable and compliance-grade emission credits in order to fully simulate the real-life conditions of an NMM. Policy relevance The Doha conference identified 'possible elements' of the NMM to be addressed in the development of the NMM's modalities and procedures. This article identifies available options for these possible elements and reviews these options against a number of criteria, including environmental effectiveness, economic efficiency, political and administrative efficiency, and others. On this basis the article identifies options that are best suited to fulfil the main aims of the NMM as decided at the Durban conference, 'to enhance the cost-effectiveness of, and to promote, mitigation actions'. In addition, the article analysis potential application of the NMM for five country-sector combinations. The analysis assesses the emission reduction potential that could be mobilized through the NMM as well as the institutional market readiness of the sectors. Finally, the article synthesizes the challenges ahead for the NMM that have emerged from the analysis and suggests possible ways forward.

Suggested Citation

  • Wolfgang Sterk & Hans Bolscher & Jeroen van der Laan & Jelmer Hoogzaad & Jos Sijm, 2015. "Developing a sectoral new market mechanism: insights from theoretical analysis and country showcases," Climate Policy, Taylor & Francis Journals, vol. 15(4), pages 417-437, July.
    • Handle: RePEc:taf:tcpoxx:v:15:y:2015:i:4:p:417-437
    DOI: 10.1080/14693062.2014.937384
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/14693062.2014.937384
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/14693062.2014.937384?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Alexandre Kossoy & Pierre Guigon, "undated". "State and Trends of the Carbon Market 2012," World Bank Publications - Reports 13336, The World Bank Group.
    2. repec:wbk:wboper:13335 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Henrique Schneider, 2019. "The Role of Carbon Markets in the Paris Agreement: Mitigation and Development," Contributions to Economics, in: Tiago Sequeira & Liliana Reis (ed.), Climate Change and Global Development, pages 109-132, Springer.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Zhang, Hui & Cao, Libin & Zhang, Bing, 2017. "Emissions trading and technology adoption: An adaptive agent-based analysis of thermal power plants in China," Resources, Conservation & Recycling, Elsevier, vol. 121(C), pages 23-32.
    2. Zhong, Meirui & Zhang, Rui & Ren, Xiaohang, 2023. "The time-varying effects of liquidity and market efficiency of the European Union carbon market: Evidence from the TVP-SVAR-SV approach," Energy Economics, Elsevier, vol. 123(C).
    3. Till Neeff & Daniela G�hler & Francisco Ascui, 2014. "Finding a path for REDD+ between ODA and the CDM," Climate Policy, Taylor & Francis Journals, vol. 14(2), pages 149-166, March.
    4. Hayashi, Daisuke & Huenteler, Joern & Lewis, Joanna I., 2018. "Gone with the wind: A learning curve analysis of China's wind power industry," Energy Policy, Elsevier, vol. 120(C), pages 38-51.
    5. Sheng, Jichuan & Qiu, Hong, 2018. "Governmentality within REDD+: Optimizing incentives and efforts to reduce emissions from deforestation and degradation," Land Use Policy, Elsevier, vol. 76(C), pages 611-622.
    6. Raphael Calel & Antoine Dechezleprêtre, 2016. "Environmental Policy and Directed Technological Change: Evidence from the European Carbon Market," The Review of Economics and Statistics, MIT Press, vol. 98(1), pages 173-191, March.
    7. Rannou, Yves & Barneto, Pascal, 2016. "Futures trading with information asymmetry and OTC predominance: Another look at the volume/volatility relations in the European carbon markets," Energy Economics, Elsevier, vol. 53(C), pages 159-174.
    8. Coleman, Andrew, 2018. "Forest-based carbon sequestration, and the role of forward, futures, and carbon-lending markets: A comparative institutions approach," Journal of Forest Economics, Elsevier, vol. 33(C), pages 95-104.
    9. Ling Huang & Yishu Zhou, 2019. "Carbon Prices and Fuel Switching: A Quasi-experiment in Electricity Markets," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(1), pages 53-98, September.
    10. Daskalakis, George, 2013. "On the efficiency of the European carbon market: New evidence from Phase II," Energy Policy, Elsevier, vol. 54(C), pages 369-375.
    11. Chunguang Sheng & Guangyu Wang & Yude Geng & Lirong Chen, 2020. "The Correlation Analysis of Futures Pricing Mechanism in China’s Carbon Financial Market," Sustainability, MDPI, vol. 12(18), pages 1-20, September.
    12. Raquel Machaqueiro, 2017. "The semiotics of carbon: Atmospheric space, fungibility, and the production of scarcity," Economic Anthropology, Wiley Blackwell, vol. 4(1), pages 82-93, January.
    13. Kate Ervine, 2014. "Diminishing Returns: Carbon Market Crisis and the Future of Market-Dependent Climate Change Finance," New Political Economy, Taylor & Francis Journals, vol. 19(5), pages 723-747, September.
    14. Deeney, Peter & Cummins, Mark & Dowling, Michael & Smeaton, Alan F., 2016. "Influences from the European Parliament on EU emissions prices," Energy Policy, Elsevier, vol. 88(C), pages 561-572.
    15. Rouhani, Omid M. & Niemeier, Debbie & Gao, H. Oliver & Bel, Germà, 2016. "Cost-benefit analysis of various California renewable portfolio standard targets: Is a 33% RPS optimal?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 62(C), pages 1122-1132.
    16. Jichuan Sheng & Weihai Zhou & Alex De Sherbinin, 2018. "Uncertainty in Estimates, Incentives, and Emission Reductions in REDD+ Projects," IJERPH, MDPI, vol. 15(7), pages 1-21, July.
    17. Bonn, Aletta & Reed, Mark S. & Evans, Chris D. & Joosten, Hans & Bain, Clifton & Farmer, Jenny & Emmer, Igino & Couwenberg, John & Moxey, Andrew & Artz, Rebekka & Tanneberger, Franziska & von Unger, M, 2014. "Investing in nature: Developing ecosystem service markets for peatland restoration," Ecosystem Services, Elsevier, vol. 9(C), pages 54-65.
    18. Mazza, Paolo & Petitjean, Mikael, 2015. "How integrated is the European carbon derivatives market?," Finance Research Letters, Elsevier, vol. 15(C), pages 18-30.
    19. de Sépibus, Joëlle, 2012. "Top-down, Bottum-up or In-between: How Can a UNFCCC Framework for Market-Based Approaches Ensure Environmental Integrity and Market Coherence?," Papers 430, World Trade Institute.
    20. Philip, Dennis & Shi, Yukun, 2016. "Optimal hedging in carbon emission markets using Markov regime switching models," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 43(C), pages 1-15.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:tcpoxx:v:15:y:2015:i:4:p:417-437. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/tcpo20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.