The World's Carbon Markets in 2026: Key Takeaways from the ICAP Report

The International Carbon Action Partnership (ICAP) reviews the development of emissions trading systems every year. Its 2026 report, funded by Germany’s environment ministry, notes a paradox: climate policy has lost some of its former attention in many countries, yet carbon markets keep growing and maturing.

Key figures

• 41 carbon markets are in operation, 7 are under development and 9 more jurisdictions are considering one.
• The systems in force cover more than 14 billion tonnes of CO₂ equivalent, or 26% of global greenhouse gas emissions.
• Jurisdictions with operating markets are home to more than half of the world’s population and generate 63% of global GDP.
• 14 G20 countries already have carbon markets at the national or subnational level, and two more are building them.
• Market revenues reached $79 billion in 2025, a new record. More than $454 billion has been raised since 2007.

New markets: Asia and Latin America

Most of the growth comes from middle-income and large emerging economies. Three new national markets started in 2026:

• Japan. The GX-ETS becomes mandatory from April 2026. More than 700 companies, accounting for over half of national emissions, took part in the voluntary phase. Auctions for high-emitting power companies are planned from 2033.
• India. The Carbon Credit Trading Scheme sets mandatory emissions intensity targets for energy-intensive industries. Seven industrial sectors moved into it in 2025, and trading is expected from mid-2026.
• Vietnam. The pilot market covers power, iron and steel and cement; allowances are allocated free of charge for now, with auctions and wider coverage possible from 2029.

Turkey adopted its first climate law in July 2025 and is preparing a pilot market for 2026. Brazil is turning the law passed in late 2024 into a working system, and Colombia plans a preliminary phase from 2027 and full launch in 2030. Thailand, the Philippines and Chile took legislative steps, and Bolivia introduced a bill.

Many new systems move away from the classic cap-and-trade design and regulate emissions intensity rather than total volume. About half of the systems in force work this way today, accounting for about 75% of covered emissions, largely because of the world’s largest market, China’s national system.

Mature systems tighten the rules

• China. Compliance for 2023 reached 99.98%. The market, launched in 2021 for the power sector only, was expanded to iron and steel, cement and electrolytic aluminum, adding 3 billion tonnes of emissions. A roadmap toward an absolute emissions cap and auctions was approved. In its new climate commitments for 2035, China for the first time pledged an absolute reduction: 7-10% below peak levels.
• European Union. The EU system remains the largest by trading volume and covers about 35% of the bloc’s emissions. Free allowances for aviation were cut to 50% in 2025 and abolished from 2026. The Carbon Border Adjustment Mechanism (CBAM) entered full application in January 2026, with the first surrender of certificates due in September 2027. The second system for buildings and road transport (EU ETS 2) was postponed by one year, to 2028.
• United Kingdom. Coverage is expanding to domestic maritime transport from mid-2026, waste incineration from 2028 and engineered greenhouse gas removals from 2029. A UK CBAM for aluminum, cement, fertilizers, hydrogen, iron and steel is being prepared for 2027. The system has been extended to the end of 2040, and talks on linking with the EU market are under way.
• The Republic of Korea began its fourth phase for 2026-2030, and the auction share for the power sector will rise to 50% by 2030.
• California extended its system to 2045 and renamed it from “cap-and-trade” to “cap-and-invest”.
• Indonesia expanded its system from grid-connected coal plants to off-grid coal and gas-fired plants, raising the number of covered facilities from about 150 to more than 400.
• Tokyo, home to Japan’s first mandatory system since 2010, reported that emissions from covered facilities were 31% below the base level.

A common pattern is visible: a market first takes root in the power sector, builds up monitoring, reporting and verification, and then moves on to industry and sectors where emissions are harder to cut. Taken together, this marks a shift from a targeted instrument to an economy-wide policy framework.

Prices and revenues

In 2025, prices in most systems held steady or rose moderately. The EU and UK markets fluctuated but grew overall, as did most North American systems. Allowances became slightly cheaper in California, New Zealand and China’s national market, while prices in Korea were stable.

The largest revenues in 2025:

• the EU system: $48.9 billion;
• Germany’s national system: $18.1 billion;
• the UK: $3.2 billion, California: $3.1 billion;
• Washington State: $1.7 billion, the Regional Greenhouse Gas Initiative in the northeastern U.S.: $1.6 billion, Austria: $1.6 billion.

New Zealand is the opposite example: secondary market prices stayed below the auction floor price, all four quarterly auctions failed to clear, and more than 13 million unsold units were permanently removed.

Political pressure and resilience

Populism, energy and trade wars and the rising cost of living are reshaping the political landscape. The most striking example is the U.S. withdrawal from the Paris Agreement and the rollback of federal climate regulation. Yet state-level systems have held up: Oregon and Colorado launched markets in 2025, and New York is preparing its own program. There have also been setbacks: Pennsylvania left the regional initiative, Canada set its federal fuel charge to zero, Saskatchewan suspended its industrial program and Alberta froze its price.

Experience suggests how to make policy durable:

• embed emissions trading in climate legislation and net zero strategies;
• consult businesses and the public at every stage;
• explain from the start where the money goes: direct revenues to climate projects and to support for those most affected by the carbon price.

According to the authors, without the Social Climate Fund created at the same time, the EU ETS 2 for buildings and transport would have been politically unfeasible.

Competitiveness, CBAM and carbon credits

Free allocation remains the main tool for protecting industry from carbon leakage. But caps are falling, and allowances will have to be targeted more precisely: only at energy-intensive sectors that genuinely compete on world markets.

The most innovative alternative is CBAM: a carbon price on imports closes the loophole right at the border. For many of the EU’s trading partners, the mechanism has become an incentive to speed up their own carbon pricing.

The role of offset credits is also growing. The rules of Article 6 of the Paris Agreement have been finalized, creating a framework for internationally transferred mitigation outcomes. Governments must decide whether to build a domestic credit mechanism first or go straight to the international market, while preserving the environmental integrity of their systems.

International cooperation

At COP30 in Belém, governments launched the Open Coalition on Compliance Carbon Markets, and Poland became ICAP’s 35th member. Such platforms help compare the ambition of different systems and build coordination in an increasingly fragmented world.

The report’s conclusion: carbon markets have moved from a niche tool to a cornerstone of climate policy in both high-income countries and emerging economies, and sharing experience among them is becoming one of the key conditions for their further growth.