Market making for the planet: the Paris Agreement Article 6 decisions and transnational carbon markets*

Abstract

The inclusion of market approaches to inter-Party cooperation in Article 6 of the Paris Agreement was controversial among Parties. The Article 6 rules, which were among the last elements of the Paris rulebook to be agreed at the 2021 Glasgow conference, were keenly contested among Parties. This article analyses the significance of Article 6 and the related decisions from the Glasgow and Sharm el-Sheikh conferences for the governance of transnational carbon markets. It argues that these rules have the potential to anchor carbon markets in a normative framework of enhanced mitigation ambition and environmental integrity. However, realising this potential will depend on the recursive interactions of multiple actors and sites of norm production within and beyond UNFCCC processes. The theory of transnational legal orders (TLOs) is applied to the analysis of this situation. TLO theory also suggests key factors that will determine the salience of Article 6 to carbon markets.