Implementing market mechanisms in the Paris era: the importance of bureaucratic capacity building for international climate policy

At the 26th Climate Change Conference of the Parties, scheduled for November 2021, negotiators will finally decide on the future of international carbon markets under the Paris Agreement. While several issues still need to be solved, this ‘policy impact forum’ article seeks to raise awareness of an important challenge that must be dealt with at the implementation stage: the lack of national administrative capacity. We argue that no matter how international carbon markets will ultimately look like under the Paris Agreement, low-capacity countries will find it difficult to build up the institutional structures needed to successfully participate in carbon markets. International support for bureaucratic capacity building can help to overcome this barrier. The implementation of market mechanisms under the Paris Agreement must thus be accompanied by increased investments into international cooperation and bureaucratic support programmes. We substantiate our argument with an empirical analysis of the market mechanisms used under the Kyoto Protocol.