Market Mechanisms: Incentives and Integration in the Post-2020 World

Well-designed market mechanisms can play an important role in achieving rapid decarbonization over the next decades. However, increasing mitigation ambition with market mechanisms works only if sufficient trust regarding their integrity, long-term existence, and user-friendliness can be built. This study assesses ways in which existing and new mechanisms can be reformed and designed in a way to achieve and increase mitigation ambition and at the same time uphold environmental integrity. It asks how the various mechanisms can be integrated with each other and how existing units from the Kyoto Mechanisms should be treated in a post-2020 regime. On the basis of assessments made in the run-up to the COP negotiations in Paris, the authors provide recommendations for the Swiss government regarding key issues in the negotiations on the market mechanisms.