International carbon markets under Article 6 of the Paris Agreement – opportunities and challenges

International carbon markets applying a baseline-and credit approach have been implemented in- and outside the international climate policy regime since the early 2000s. Since 1995, there have been two full cycles, partially running in parallel, following a common pattern – slow emergence of rules and institutions with piloting of concrete activities, an exuberant ‘gold rush’, maturation and decline due to concerns about quality of credits and faltering demand. The first cycle was driven by the Clean Development Mechanism (CDM) and spanned the period 2000 to 2015, and the second cycle by private voluntary carbon market programmes from 2005 to 2023. The carbon markets under Article 6 of the Paris Agreement are still in the piloting phase, but are accelerating rapidly. Article 6.2 allows countries to collaborate under limited international oversight while the Article 6.4 mechanism is the successor of the CDM. Its rules have taken up many relevant lessons from both cycles regarding additionality determination and baseline setting and thus have become much more stringent than previous rules. This could stabilize international carbon markets in the long term as already indicated by the willingness of the EU to engage in Article 6.