Mitigation of Greenhouse Gas Emissions through Market Mechanisms

Abstract

Article 6 of the Paris Agreement, adopted in 2015, describes that Parties may cooperate voluntarily in the implementation of their nationally determined contributions (NDC) against global warming. Parties may use internationally transferred mitigation outcomes. Also, one Party may use emission reduction credits obtained from a certain mitigation activity in another Party. Article 6, together with paragraph 137 of the decision at COP21, are the provisions that allow Parties to use carbon pricing and market-based approaches to fulfill its NDC. Parties can meet their mitigation targets in the most cost-effective way by taking advantage of differences in the marginal costs of emission reduction across different regions or sectors. The Paris Agreement explains that the ultimate objective of cooperation among participating Parties is to promote environmental integrity and sustainable development. The mitigation of greenhouse gas emissions using market mechanisms is not a new trend. The Kyoto Protocol adopted in 1997 introduced three types of market mechanisms; emission trading, joint implementation, and the Clean Development Mechanism (CDM). After that, the Bali Action Plan adopted in 2007 stated enhanced action on mitigation based on various approaches which consider use of the market to increase cost-effectiveness. For the market mechanisms developed under the Paris Agreement, Parties were requested to submit their views by next March and there will be a series of round table discussions on the details later on. It is necessary to take note that since the adoption of the Kyoto Protocol, it took only four years to outline the details of the Kyoto mechanism at Marrakesh in 2001, which forecasts that the upcoming discussions will proceed urgently.