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Key Message

Market-based approaches can play a major role in providing the innovative solutions needed to help all countries meet their development goals in a manner that is economically and ecologically sustainable.

Markets, Mitigation and Climate Change

Market-based approaches and an efficient and effective “carbon market” are expected to be key elements of future efforts to promote sustainable development. When imaginatively and carefully designed and implemented, market-based approaches can be an important component of an overall approach to mitigating greenhouse gas emissions, reversing serious ecosystem degradation, promoting sustainable livelihoods and reducing vulnerability to the impacts of climate change. Integrating the provision of ecosystem services (e.g., carbon reduction and sequestration, biodiversity conservation, watershed maintenance and sustainable forestry) into the marketplace could: significantly reduce the costs and increase the feasibility of achieving deep, long-term emissions reductions; provide incentives for the development and deployment of low-carbon energy technologies; promote technology transfer to less developed countries; and achieve co-benefits through improved natural resource management practices.

The emerging mosaic of international and domestic trading schemes related to the carbon market illustrates the potential of market-based approaches. The market mechanisms introduced under the Kyoto Protocol, for example, have put a market value on greenhouse gas emissions reductions and created new investment opportunities. However, for these markets to play a significant role in helping to achieve the deep greenhouse gas emissions reductions required over the next 20 years, decision-makers will need to consider how best to broaden and deepen their reach. The broader the reach of the carbon market—through greater participation of countries and/or coverage of key sources and sectors and/or companies—the more efficient and effective it will be.

IISD is exploring how market-based approaches and effective carbon markets, such as through the Clean Development Mechanism, can be harnessed to support sustainable development and greenhouse gas reductions. Our Climate Change and Energy team is also involved in the development and implementation of Domestic Emissions Trading systems at the national and provincial level. We are also playing a strong role in the design of National Offset Systems. In addition to our research and policy-related activities, IISD is gaining direct experience in the operation of the carbon market through our internal mitigation strategy that is tracking, reducing and offsetting greenhouse gas emissions generated through our daily operations.

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