Market Mechanisms in the Paris Agreement – Differences and Commonalities with Kyoto Mechanisms Discussion Paper

This research paper, published by the Stockholm Environment Institute on behalf of the German Environment Agency, provides a comparative analysis of the market mechanisms established under the Kyoto Protocol and the new provisions introduced in Article 6 of the Paris Agreement. It examines the differences in purpose, governance, and accounting between the two frameworks to identify lessons for the operationalization of the Paris Agreement's cooperative approaches and crediting mechanisms.

• Article 6 of the Paris Agreement introduces two primary market-based approaches: Article 6.2, which allows for 'cooperative approaches' using 'internationally transferred mitigation outcomes' (ITMOs), and Article 6.4, which establishes a new centralized crediting mechanism under the authority of the Conference of the Parties serving as the meeting of the Parties to the Paris Agreement (CMA).
• Unlike the Kyoto Protocol, which differentiated between Annex I and non-Annex I countries for its mechanisms (CDM, JI, and IET), Article 6 of the Paris Agreement does not maintain this distinction, meaning all countries can potentially participate in both Article 6.2 and 6.4.
• The Article 6.4 mechanism is designed as a crediting mechanism with a dual objective of promoting greenhouse gas mitigation and supporting sustainable development, requiring that emission reductions be 'real, measurable, and long-term' and 'additional' to what would otherwise occur.
• A critical difference in accounting between the two frameworks is that the Kyoto Protocol adjusted the emissions budget (assigned amount) of a country, whereas the Paris Agreement requires 'corresponding adjustments' to reported progress to avoid double counting of emission reductions.
• Environmental integrity in international transfers is threatened when a country's Nationally Determined Contribution (NDC) target is set above its business-as-usual (BAU) emissions, as this removes the incentive to ensure that transferred outcomes represent actual emission reductions.
• The Kyoto Protocol's Joint Implementation (JI) Track 1, which allowed host Parties to issue emission reduction units (ERUs) without international oversight, resulted in low environmental integrity, particularly regarding 'hot air' from Russia and Ukraine.
• The Paris Agreement introduces a new emphasis on adaptation through Article 6.1, which mentions 'higher ambition in mitigation and adaptation actions,' a feature not present in the Kyoto Protocol's flexibility mechanisms.
• There is ongoing uncertainty regarding whether ITMOs under Article 6.2 will be issued as formal units in registries or simply as reported amounts in accounting tables, and whether they will be measured exclusively in tonnes of CO2 equivalent (t CO2eq).
• The Article 6.4 mechanism includes a provision to ensure that a portion of the proceeds from its activities is used to cover administrative costs and to assist developing countries that are particularly vulnerable to climate change with adaptation costs.

APA

Schneider, L., Broekhoff, D., Cames, M., Healy, S., Füssler, J., & Theuer, S. L. H. (2016). Market Mechanisms in the Paris Agreement – Differences and Commonalities with Kyoto Mechanisms Discussion Paper. Stockholm Environment Institute. https://www.sei.org/mediamanager/documents/Publications/Climate/DEHSt-2016-Market-mechanisms-Paris-Agreement-Kyoto-Protocol.pdf

Chicago

Schneider, Lambert, Derik Broekhoff, Martin Cames, Sean Healy, Jürg Füssler, and Stephanie La Hoz Theuer. Market Mechanisms in the Paris Agreement – Differences and Commonalities with Kyoto Mechanisms Discussion Paper. Stockholm Environment Institute, 2016. https://www.sei.org/mediamanager/documents/Publications/Climate/DEHSt-2016-Market-mechanisms-Paris-Agreement-Kyoto-Protocol.pdf.

Wikipedia

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BibTeX

@techreport{schneider2016market, author = {Schneider, Lambert and Broekhoff, Derik and Cames, Martin and Healy, Sean and Füssler, Jürg and Theuer, Stephanie La Hoz}, title = {{Market Mechanisms in the Paris Agreement – Differences and Commonalities with Kyoto Mechanisms Discussion Paper}}, institution = {Stockholm Environment Institute}, year = {2016}, month = oct, url = {https://www.sei.org/mediamanager/documents/Publications/Climate/DEHSt-2016-Market-mechanisms-Paris-Agreement-Kyoto-Protocol.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }