Despite headlines about climate policy back-tracking, 2025 saw steady progress on carbon pricing and carbon markets, culminating at COP30 in the Leaders’ Declaration on the Open Coalition on Compliance Carbon Markets.
This creates clear opportunities for further progress in 2026, with carbon pricing coverage set to increase and international carbon markets expected to keep gaining momentum. Countries’ cooperation on carbon markets remains strong, with the EU maintaining a leading role in driving ambition and supporting implementation.
Solid progress on carbon pricing
Between 2024 and 2025, global coverage of carbon pricing increased from 24% to 28% of global greenhouse gas emissions, as countries introduced new pricing policies or expanded existing ones.
China, for example, confirmed that it will extend its Emissions Trading System (ETS) from the power sector to cover the steel, cement and aluminium sectors, increasing the volume of covered emissions by around 60%. The government also announced plans to move the ETS from intensity-based caps to absolute caps, representing a step-change in the system’s design and effectiveness.
Meanwhile, Türkiye passed a law to establish an Emissions Trading System, Vietnam worked on its carbon pricing system with plans to start implementation in 2029, and both India and Brazil made progress in developing their new domestic pricing mechanisms.
Beyond sheer coverage, many existing schemes have been strengthened. In Japan, the Japanese GX league, initially a voluntary carbon market, is gradually being transformed into a compliance system.
Strengthening cooperation
To complement this domestic progress, the EU, working closely with COP30-host Brazil, led diplomatic efforts that resulted in a high-level declaration by Heads of State supporting the development of an Open Coalition on Compliance Carbon Markets.
The Open Coalition secured the support of 17 countries, alongside the EU and several Member States.
This will allow the formal launch of the Coalition in 2026, with the aim of strengthening cooperation between countries that operate compliance carbon markets and supporting the development and improvement of these systems.
Growing momentum in the international carbon market
On carbon credits, the compliance market under Article 6 of the Paris Agreement has continued to develop steadily, as seller countries put in place domestic strategies and regulations to govern their participation. Buyer countries are also increasingly active, with 16 new bilateral agreements signed in 2025, alongside 8 Memoranda of Understanding.
The Voluntary Carbon Market is slowly emerging from the tumultuous waters of recent years. Reports from multiple credit rating agencies show it is still hampered by a sizeable supply of low-quality carbon credits (See for example the annual review reports from Sylvera, Calyx Global and BeZero Carbon). However, both buyers and project developers are increasingly prioritising quality, which is a promising trend.
Market volume decreased in 2025, while market value increased, signalling that buyers are moving from quantity to quality. This is a positive sign, although significant work remains to build a high-trust, high-quality market.
The EU as a driver of cooperation on carbon markets and carbon pricing
Over the past year, the EU has engaged with more than 40 countries to promote the benefits of carbon pricing and markets as effective tools to address climate change, and to demonstrate the practical benefits of pricing carbon.
Within the EU, carbon pricing has continued to drive down emissions while generating significant public revenues to invest in climate action and support a just transition. EU ETS-covered emissions decreased by 50% between 1990 and 2025, while the scheme generated over €250 billion in public revenues.
2025 was also the year that the EU reached agreement on its climate target for 2040, demonstrating its commitment to climate action and providing long-term policy stability. The new target will shape the EU’s post-2030 climate policy framework, with carbon pricing remaining a cornerstone.
In addition to the review of the EU ETS and the creation of a new market for EU-based carbon removals, the agreement allows for the purchase of international carbon credits under Article 6 of the Paris Agreement to contribute to the EU’s headline target of reducing net emissions by 90% in 2040 compared to 1990.
More to come in 2026
In 2026, the EU will continue to support countries as they implement and expand domestic carbon pricing mechanisms, building on its bilateral relationships. The Open Coalition on Compliance Carbon Markets will help sustain political momentum and strengthen cooperation among countries with compliance markets.
The start of the Carbon Border Adjustment Mechanism (CBAM) this year marks an important step in preventing carbon leakage - where companies move production abroad to avoid climate rules, while emissions continue unchanged. CBAM ensures imported goods face a similar carbon cost to those produced inside the EU, protecting both the climate and fair competition. The introduction of CBAM encourages partners to develop their own carbon pricing systems, and the EU will work with them to design CBAM-compatible approaches.
The introduction of mandatory carbon pricing in Japan, Mexico and India - together with progress on ETS development in Brazil, Türkiye and Indonesia, and ongoing reforms in countries such as Chile, Colombia and Bolivia - will be a key focus of the agenda.
The EU will also continue to support countries seeking to sell carbon credits, as they develop strategies and regulatory frameworks to ensure just and fair participation under Article 6. At the same time, it will develop its own framework to engage in international carbon markets, including the possible purchase of international credits from 2036 to contribute to the Union’s 2040 climate target.