One primary driver of the adoption of GHG quantification and monitoring methodologies is to enable the flow of finance to support or reward mitigation actions. Issuance of emission reduction credits by a robust standard assures investors of the environmental integrity of the claimed emission reductions. Validation of projects by standards also enhances the conditions for investors and project developers to invest with the prospect that the credits will provide a necessary financial return. These functions of carbon standards may also be relevant in the context of national mitigation actions, where domestic or international investors require assurance that their investments will be effective in achieving mitigation outcomes.
The outcome of UNFCCC discussions on new market mechanisms will be critical in determining the extent to which carbon markets and national MRV processes become linked. Until then, three types of linkage are likely to co-exist:
- Adoption of carbon market methodologies with validation and verification by carbon standards;
- Adoption of carbon market methodologies with validation and verification by national institutions;
- Reference to carbon market methodologies in the development of specific approaches to MRV of national mitigation actions.