The current carbon market landscape comprises multiple market segments, embodying two decades of parallel efforts by various public and private actors. This resulted in fragmentation and complexity and undermined trust in the integrity of carbon markets. This fragmentation was triggered by a loss in faith in Kyoto mechanisms after the failure to establish a robust international climate policy regime in 2009. However, this diversity also contributed to the carbon markets’ versatility and resilience to changes in political and economic circumstances, enabling them to evolve to cater to various purposes.

A new research article by Perspectives traces the parallel development of compliance and voluntary carbon markets, identifies areas of fragmentation and convergence in the governance of carbon markets, and discusses the paradigm shift brought about by the Paris Agreement. We discuss emerging features of international carbon market governance in the public and private domain, including political and technical issues. Fragmented governance is characterized by different degrees of transparency, centralization, and scales. We assess the crunch issues in the Article 6 negotiations through the lens of these governance features and their effectiveness, focusing on governance principles and their operationalization to ensure environmental integrity and avoid double counting.

We conclude that, to maintain their relevance and integrity in the era of the PA, carbon markets need to continue to align with the global mitigation goals.