Direct carbon pricing instruments now cover 29 percent of global greenhouse gas emissions.
Direct carbon pricing instruments now cover 29 percent of global greenhouse gas emissions, driven by a tripling of emissions trading systems (ETSs) over the past decade and the rollout of major new frameworks in Asian economies, according to the World Bank’s annual report on carbon markets.
The report, State and Trends of Carbon Pricing 2026, reveals that a total of 87 direct carbon pricing instruments, comprising 47 carbon taxes and 40 emissions trading systems, are currently in operation worldwide. This expansion marks a significant shift from 2016, when only 39 instruments were active, covering roughly 12 percent of global emissions. If policies currently under development are fully realized, the World Bank estimates that nearly one-third of global greenhouse gas emissions will fall under a carbon pricing framework by 2030.
Major expansion across Asian economies.
The net increase in global coverage over the past year amounted to approximately 625 million metric tons of carbon dioxide equivalent (tCO2e), a 1.2 percent rise in the global total. This growth was primarily propelled by the implementation of national emissions trading frameworks in India, Japan, and Viet Nam.
India launched its national Carbon Credit Trading Scheme (CCTS), an emission intensity-based system initially focused on energy-intensive sectors, with an estimated coverage of 477 million tC02e for 2026 and 2027. Japan’s GX-ETS transitioned into its mandatory phase on April 1, 2026, requiring participation from more than 700 companies and covering roughly 50 percent of the nation’s greenhouse gas emissions, or 524 million tCO2e. Meanwhile, Viet Nam enacted an ETS covering emissions in 2025 and 2026, which is operating in a pilot phase until the end of 2028. At the national level, Mauritania and Serbia also introduced carbon taxes within the last 12 months.
The global report notes that the expansion of emissions trading systems has significantly outpaced carbon taxes over the last ten years. While the number of active carbon taxes remains higher than ETSs (47 versus 40), the share of global emissions covered by ETSs surged from under 8 percent in 2016 to 26 percent in 2026. Conversely, the global coverage of direct carbon taxes has remained stagnant at around 4 to 5 percent.
Price and revenue disparities.
Global revenues from direct carbon taxes and ETSs increased by 2 percent in real terms, reaching over $107 billion in 2025. Emissions trading systems have become the dominant source of income, accounting for more than 70 percent of total carbon revenues ($80 billion), compared to carbon taxes, which brought in $27 billion.
The global weighted-average carbon price reached nearly USD $21/tCO2e, up 7 percent from April 2025 and double the 2016 average of USD $10/tCO2e. However, prices remain highly fragmented by region and country income level. The highest average prices are found in Europe and Central Asia, which hold 30 of the world’s 87 active instruments and boast a regional average price of $68. By comparison, average prices stand at USD $43/tCO2e in North America, USD $19/tCO2e in Sub-Saharan Africa, USD $11/tCO2e in the East Asia Pacific, and USD $4/tCO2e in Latin America and the Caribbean.
This disparity extends to revenue collection. Although middle- and low-income countries account for roughly 70 percent of the greenhouse gas emissions currently covered by global carbon pricing, they generate only about 1 percent of global revenues. Report analysts attribute this mismatch to lower baseline prices in developing economies and a reliance on free allocation rules rather than competitive allowance auctions. For example, newly implemented systems in China, India, and Viet Nam do not currently auction permits, though Viet Nam plans to introduce auctions by 2029.
The border adjustment influence.
On the international trade front, the European Union’s Carbon Border Adjustment Mechanism (CBAM) entered its definitive financial phase in January 2026. Importers of selected carbon-intensive goods like aluminum, cement, fertilizer, iron, steel, electricity, and hydrogen must now purchase CBAM certificates to match the carbon price paid by domestic EU producers.
While the embedded emissions of EU imports covered by CBAM represent less than 0.5 percent of global emissions (roughly 171 million tCO2e), the mechanism is acting as a major catalyst for international policy reform. Exporter nations are increasingly adopting carbon pricing to retain revenues domestically rather than letting them collect at the EU border. The United Kingdom plans to launch its own CBAM in 2027, covering an estimated $26 billion in trade, while jurisdictions including Albania, California, Malaysia, Serbia, and Thailand are explicitly factoring border adjustment dynamics into their climate policy frameworks.
Shifts in carbon credit markets.
The report highlights a more complex environment for carbon credit markets. Total carbon credit issuances grew by 8 percent from 2024 to 2025, reaching 432 million credits. However, actual credit retirements fell by 11 percent to 230 million tCO2e. This decline was largely driven by a normalization of compliance retirements in California’s market, which stabilized following a massive compliance-cycle spike in 2024. Voluntary corporate use continues to dominate retirements, making up 82 percent of the 2025 total.
Despite the temporary drop in retirements, long-term forward signals remain robust. The value of forward-looking offtake agreements tripled in 2025 to an estimated $12 billion, representing 158 million tCO2e in future delivery commitments. Corporate buyers, led by major technology firms like Microsoft, are shifting capital upstream to secure supply, particularly for engineered carbon dioxide removals (such as biochar and direct air capture) and nature-based removal projects.
The international framework also marked a milestone with the operationalization of the Paris Agreement Crediting Mechanism (PACM) under Article 6.4. A clean cookstoves project in Myanmar received the first provisional credit issuance under the UN-administered system. Concurrently, bilateral agreements under Article 6.2 expanded, with 22 new agreements signed since April 2025, bringing the global total to 108. Japan, Singapore, and Switzerland remain the leading sovereign buyers under this bilateral framework.
Energy shocks present short-term challenges.
The World Bank notes that its findings largely reflect trends before major recent disruptions in global energy markets. A record oil supply shock in March 2026, which removed an estimated 10 million barrels per day from global markets, alongside shipping bottlenecks in the Strait of Hormuz, has caused a spike in fuel costs that is testing political commitment to carbon pricing.
In response to immediate inflationary pressures, some governments have already adjusted their timelines. Ireland announced a delay in its national carbon tax increase, moving the scheduled rollout from May to October 2026. In the EU, while the long-term phase-out of free allocations remains codified, a comprehensive review of the EU ETS has been scheduled for July 2026 to assess the market impacts of recent commodity volatility.
The expansion from 39 to 87 carbon pricing instruments in just a decade reflects a fundamental shift in how governments are approaching decarbonization. What is particularly notable is that growth is now being driven by major industrial economies in Asia, including India, Japan, and Viet Nam, rather than only early adopters in Europe. This signals that carbon pricing is evolving from a regional climate tool into a foundational component of the global economic system. For industry professionals, this means carbon exposure, emissions accounting, and transition planning are becoming increasingly tied to long-term competitiveness, investment readiness, and trade positioning.
Invert Insights.
💡 The global carbon landscape has evolved from a speculative commodity market to a highly rigorous, data-driven one where land-use and forestry initiatives capture a dominant share of global investment capital. Uniform pricing is rapidly dissolving in favor of deep quality differentiation, with buyers utilizing third-party ratings to pay massive premiums, often exceeding $30/tCO2e, for top-tier removals over unrated alternatives. To secure this premium inventory, corporate buyers are shifting heavily upstream, triggering a $12 billion surge in structured offtake agreements and commercial credit facilities that inject vital funding early in the project lifecycle. Concurrently, the operationalization of the Paris Agreement Crediting Mechanism formalizes concrete international compliance pathways for land-based removals. However, developers must remain agile enough to navigate sudden regional supply shocks, such as recent export restrictions in Southeast Asia, alongside strict new UN methodology guardrails regarding project non-permanence.
💡 The EU’s CBAM demonstrates that carbon pricing is no longer confined within national borders, it is beginning to influence global trade flows and industrial policy. Even though CBAM currently covers less than 0.5% of global emissions, its market influence is already catalyzing policy reform internationally as exporting nations move to retain carbon revenues domestically rather than effectively paying them at the EU border. This marks an important evolution in climate governance: carbon policy is increasingly becoming a trade and competitiveness issue, not solely an environmental one. Companies operating across international supply chains will likely face growing pressure to quantify, verify, and strategically manage embedded emissions.
💡 Since the report was issued, the Canadian federal government and Alberta have finalized a landmark agreement that pivots climate and energy policy toward a pragmatic model of cooperative federalism. The deal injects long-term stability into the regional carbon market by setting an effective carbon price of $130 per tonne by 2040 and establishing a mandatory credit floor price under Alberta’s TIER system starting in 2030 to insulate investors against market collapse. Backed by a cost-shared issuance of 75 million tonnes of carbon contracts to de-risk private clean-tech capital, the strategy simultaneously fast-tracks a major low-emission bitumen pipeline to Asian markets and binds the province to a 75% reduction in oil and gas methane output by 2035. By coupling market-driven emissions benchmarks with expanded global trade access, this compromise replaces federal regulatory friction with the long-term economic certainty required to advance Canada’s 2050 net-zero transition.
