Ensuring the environmental integrity of market mechanisms under the Paris Agreement

The document argues that for international market mechanisms under the Paris Agreement to be effective, they must ensure that the transfer of emission units does not result in higher global emissions than if targets were met through domestic action. It identifies four critical factors for environmental integrity: the ambition of Nationally Determined Contributions (NDCs), incentives for future mitigation, the integrity of the units themselves, and robust accounting to prevent double counting. The brief warns that unambitious NDCs or poorly designed crediting mechanisms can create perverse incentives that discourage comprehensive climate policy or lead to the overestimation of emission reductions. It recommends that only countries with targets below business-as-usual emissions participate in Article 6.2 mechanisms and that NDCs be converted into absolute multi-year emission trajectories to ensure robust accounting.

• Article 6 of the Paris Agreement provides for international carbon market mechanisms, allowing countries to use international units to meet their NDCs and establishing a new crediting mechanism under UNFCCC authority.
• The ambition of NDCs is critical to environmental integrity; countries with targets above business-as-usual (BAU) emissions lack the incentive to ensure the integrity of the units they sell, a problem observed with Kyoto Protocol transfers of assigned amount units (AAUs) and emission reduction units (ERUs).
• Market mechanisms can create perverse incentives that discourage mitigation, such as encouraging countries to set unambitious targets to maximize unit sales or discouraging the adoption of national mitigation policies that would lower the potential for generating credits.
• Ensuring the environmental integrity of units in crediting mechanisms is challenged by information asymmetry between developers and regulators, as well as the difficulty of demonstrating that policies are 'additional' since they often serve multiple purposes like energy security or air pollution reduction.
• Robust accounting is essential to prevent double counting, which occurs through double issuance (multiple units for one reduction), double claiming (reductions counted by both the host and the purchasing country), or double use (one unit used twice for an NDC).

APA

Schneider, L., Kollmuss, A., & Theuer, S. L. H. (2016). Ensuring the environmental integrity of market mechanisms under the Paris Agreement. Stockholm Environment Institute. https://www.sei.org/mediamanager/documents/Publications/Climate/SEI-PB-2016-Market-mechanisms-Paris-Agreement.pdf

Chicago

Schneider, Lambert, Anja Kollmuss, and Stephanie La Hoz Theuer. Ensuring the environmental integrity of market mechanisms under the Paris Agreement. Stockholm Environment Institute, 2016. https://www.sei.org/mediamanager/documents/Publications/Climate/SEI-PB-2016-Market-mechanisms-Paris-Agreement.pdf.

Wikipedia

{{cite report |last1=Schneider |first1=Lambert |last2=Kollmuss |first2=Anja |last3=Theuer |first3=Stephanie La Hoz |title=Ensuring the environmental integrity of market mechanisms under the Paris Agreement |publisher=Stockholm Environment Institute |date=2016 |url=https://www.sei.org/mediamanager/documents/Publications/Climate/SEI-PB-2016-Market-mechanisms-Paris-Agreement.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{schneider2016ensuring, author = {Schneider, Lambert and Kollmuss, Anja and Theuer, Stephanie La Hoz}, title = {{Ensuring the environmental integrity of market mechanisms under the Paris Agreement}}, institution = {Stockholm Environment Institute}, year = {2016}, url = {https://www.sei.org/mediamanager/documents/Publications/Climate/SEI-PB-2016-Market-mechanisms-Paris-Agreement.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }