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New Market Mechanisms: Prerequisites for Implementation

Wolfgang Sterk, Florian Mersmann


The Durban climate conference decided to establish a new market-based mechanism (NMM) that is to cover broad segments of countries’ economies. This article aims to explore the essential prerequisites for the implementation of an NMM. In addition to a theoretical discussion it considers the cases of China and Mexico. The article finds that the challenges in establishing market mechanisms that cover a broad segment of the economy are formidable and most developing countries have serious capacity constraints. Lead times can be expected to be at least 3–5 years. To move the process forward, it may be useful to consider promoting pilot activities similar to the Activities Implemented Jointly pilot phase that preceded the introduction of the flexible Kyoto mechanisms and the demonstration activities for Reducing Emissions from Avoided Deforestation and Forest Degradation.


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