Setting baselines for the new market mechanism: Examples from the power, cement and buildings sectors

The new market mechanism under discussion in the climate negotiations is expected to scale up emission reduction activities in developing countries by covering broad segments of the economy. One of the crucial design elements to consider when establishing market-based mechanisms is the definition of a reference scenario or baseline on the basis of which emission reductions are calculated. This discussion paper provides some insights about how to establish baselines for whole economic sectors in developing countries, drawing on examples with real-world data.