The next generation of these global carbon markets has its foundation in Article 6 of the 2015 Paris Agreement. At COP 26 in Glasgow in 2021, countries finally agreed on a package of rules to govern and implement two international carbon market mechanisms based on Article 6. Article 6.2 allows countries to trade emission reductions and removals with one another through bilateral or multilateral agreements. Article 6.4 will create a global carbon market where businesses can directly purchase credits.

These new markets replace the Kyoto Protocol’s controversial Clean Development Mechanism (CDM), which is now being phased out. The idea underpinning the CDM was that rich countries could finance climate projects in developing countries to compensate for some of their continued pollution at home. These unstable foundations resulted in a CDM riddled with problems. It has not reduced emissions globally and some projects funded under it have been linked to human rights violations and environmental destruction.
As opposed to the Kyoto Protocol that required emissions reductions only from rich countries, the Paris Agreement markets must function in a world where all countries contribute towards the overall goal of limiting global warming to 1.5℃.

While the overall frameworks for these markets were hammered out at Glasgow, many important technical details and rules remain to be finalised. As an official observer at UNFCCC negotiations, Carbon Market Watch campaigns for full transparency in these markets and strong social and environmental safeguards to ensure that any climate project not only protects the environment but also upholds human rights and benefits local communities.