The Paris Agreement (PA) heralds a new era of international carbon market mechanisms. Its bottom-up nature and the fact that all countries under the PA have national commitments (nationally determined contributions, NDCs) to reduce greenhouse gas emissions, pose new challenges to the design of international carbon markets and related transactions. Under Article 6 of the PA, Parties can either pursue cooperative approaches (Article 6.2) or rely on a multilateral mechanism (Article 6.4) for the generation of internationally transferred mitigation outcomes (ITMOs). These instruments are to play a key role in enhancing national and global mitigation ambition, thus emphasising the transformational potential of future carbon markets.

International negotiations on the finalisation of a rulebook for international carbon market co-operation in the context of the PA have failed at the 24th Conference of the Parties (COP24) in Katowice as well as at COP25 in Madrid in 2019. Negotiations have, however, progressed considerably on many important aspects. They are now scheduled for finalisation at COP26 in Glasgow in November 2021.