The peaks-over-threshold (POT) method has a long tradition in modelling extremes in environmental variables. However, it has originally been introduced under the assumption of independently and identically distributed (iid) data. Since environmental data often exhibits a time series structure, this assumption is likely to be violated due to short-and long-term dependencies in practical settings, leading to clustering of high-threshold exceedances. In this paper, we first review popular approaches that either focus on modelling short-or long-range dynamics explicitly. In particular, we consider conditional POT variants and the Mittag–Leffler distribution modelling waiting times between exceedances. Further, we propose a new two-step approach capturing both short-and long-range correlations simultaneously. We suggest the autoregressive fractionally integrated moving average peaks-over-threshold (ARFIMA-POT) approach, which in a first step fits an ARFIMA model to the original series and then in a second step utilises a classical POT model for the residuals. Applying these models to an oceanographic time series of significant wave heights measured on the Sefton coast (UK), we find that neither solely modelling short-nor long-range dependencies satisfactorily explains the clustering of extremes. The ARFIMA-POT approach, however, provides a significant improvement in terms of model fit, underlining the need for models that jointly incorporate short-and long-range dependence to address extremal clustering, and their theoretical justification. © 2021 by the authors. Licensee MDPI, Basel, Switzerland.