Ensuring the environmental integrity of market mechanisms under the Paris Agreement

This policy brief by the Stockholm Environment Institute examines the environmental integrity of international market mechanisms under Article 6 of the Paris Agreement. It defines environmental integrity as ensuring that the transfer of emission units does not result in higher global emissions than if Nationally Determined Contributions (NDCs) were achieved through domestic action alone. Drawing on lessons from the Kyoto Protocol's mechanisms—the Clean Development Mechanism (CDM), Joint Implementation (JI), and international emissions trading (IET)—the brief identifies critical factors for success: the ambition of NDCs, incentives for future mitigation, the integrity of units, and robust accounting to prevent double counting.

• Article 6 of the Paris Agreement establishes two primary approaches to international market mechanisms: Article 6.2 allows countries to voluntarily use "internationally transferred mitigation outcomes" to meet their NDCs, while Article 6.4 creates a new crediting mechanism under UNFCCC authority designed to support both mitigation and sustainable development while aiming to "deliver an overall mitigation in global emissions".
• The ambition of NDCs is a critical factor for environmental integrity; countries with ambitious economy-wide targets have an incentive to ensure the integrity of transferred units to avoid having to compensate for failures. Conversely, countries with targets above business-as-usual (BAU) emissions lack this incentive and may sell units that lack environmental integrity without hindering their own target achievement.
• Market mechanisms can create perverse incentives that discourage ambitious mitigation. These include incentives for countries to set narrow or unambitious targets to maximize the sale of units, or for seller countries to avoid adopting mitigation policies that would lower the potential for generating and exporting credits.

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} }