Sectoral Crediting

Sectoral approaches are proposed as a means to broaden the global scope of greenhouse gas (GHG) mitigation to developing countries. Market mechanisms are put forward in that context to create incentives for mitigation in developing countries beyond the existing Clean Development Mechanism (CDM), and to encourage mitigation at least possible cost. The introduction of new, sector-based, market mechanisms is only one of many proposals discussed by UNFCCC Parties in the context of a post-2012 international climate policy framework, as a possible means to support mitigation actions in developing countries. The role of such sectoral mechanisms will eventually be determined by the emission goals that accompany them, and on how the Parties decide to harness the carbon market and other mechanisms to support mitigation in developing countries. These aspects are also currently under negotiation. Three general ways to link sectoral goals with the carbon market are normally considered:

  • Intensity goals – based on a GHG performance per unit of output.
  • Fixed emission goals – an absolute total quantity of GHG emissions – as the basis for crediting, with an ex post issuance of credits, or trading, with an ex ante allocation of allowances.
  • Technology-based sectoral objectives.