International Carbon Market Mechanisms in a Post-2012 Climate Change Agreement

The report analyzes the performance of Kyoto Protocol mechanisms—International Emissions Trading (IET), Joint Implementation (JI), and the Clean Development Mechanism (CDM)—and explores proposals for a post-2012 regime. It discusses the potential for an allocation-based Market Mechanism for Sustainable Development (MMSD), REDD, and the expansion of the CDM to include carbon capture and storage (CCS), nuclear energy, and sectoral crediting. The document highlights critical challenges for future agreements, including the environmental integrity of credits, the issue of additionality, and the need for ambitious developed-country targets to ensure demand for credits from developing nations.

• The Kyoto Protocol's three market-based instruments—International Emissions Trading (IET), Joint Implementation (JI), and the Clean Development Mechanism (CDM)—were designed to help countries meet targets cost-effectively, encourage private sector GHG emission reductions, and stimulate sustainable development and technology transfer in developing countries.
• The Clean Development Mechanism (CDM) is the only Kyoto mechanism engaging developing countries, with China and India hosting 64 per cent of all projects in the pipeline as of May 1, 2009. However, the mechanism faces criticism regarding its environmental integrity and whether it reflects real GHG reductions or merely serves as a forum for wealth transfer.
• Proposed post-2012 mechanisms include an allocation-based Market Mechanism for Sustainable Development (MMSD), which would grant allocations to sectors and allow the sale of reductions beyond those allocations, thereby moving away from the controversial requirement to demonstrate project-based additionality.
• Expanding the CDM to include land-use projects, such as sustainable forest management and agricultural soils, could improve the regional distribution of projects, particularly in Africa. However, the temporary nature of credits (tCERs and lCERs) remains a major barrier to investment in forestry projects.
• Carbon capture and storage (CCS) requires a long-term carbon price for widespread implementation; while the CDM could support the deployment phase after 2020, it is unlikely to provide sufficient incentive for financing demonstration plants before 2020.
• A critical risk for any expanded post-2012 market mechanism is the potential for flooding the carbon market with credits, which could lead to disastrously low carbon prices unless developed countries set ambitious targets to fuel demand.

APA

Murphy, D., Drexhage, J., & Wooders, P. (2009). International Carbon Market Mechanisms in a Post-2012 Climate Change Agreement. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/international_carbon_market_mechanisms.pdf

Chicago

Murphy, Deborah, John Drexhage, and Peter Wooders. International Carbon Market Mechanisms in a Post-2012 Climate Change Agreement. International Institute for Sustainable Development, 2009. https://www.iisd.org/system/files/publications/international_carbon_market_mechanisms.pdf.

Wikipedia

{{cite report |last1=Murphy |first1=Deborah |last2=Drexhage |first2=John |last3=Wooders |first3=Peter |title=International Carbon Market Mechanisms in a Post-2012 Climate Change Agreement |publisher=International Institute for Sustainable Development |date=May 2009 |url=https://www.iisd.org/system/files/publications/international_carbon_market_mechanisms.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{murphy2009international, author = {Murphy, Deborah and Drexhage, John and Wooders, Peter}, title = {{International Carbon Market Mechanisms in a Post-2012 Climate Change Agreement}}, institution = {International Institute for Sustainable Development}, year = {2009}, month = may, url = {https://www.iisd.org/system/files/publications/international_carbon_market_mechanisms.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }