Carbon Markets & Offsetting
Carbon market
The systems in which emission allowances and carbon credits are traded — spanning government-run compliance markets and the voluntary carbon market.
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Markets that put a price on greenhouse-gas emissions through tradable units. Two broad families exist: compliance markets, where regulators cap emissions and entities trade allowances (emissions trading systems such as the EU ETS and China's national ETS) or use credits against obligations (e.g. CORSIA for aviation); and the voluntary carbon market, where companies and individuals buy carbon credits to compensate for emissions outside any legal obligation.
References
~30% of global emissions priced; 87 policies; US$107bn 2025 revenues; credit issuance trends.
Instrument taxonomy (ETS, carbon tax, crediting mechanisms); coverage and price data.
Overview
What it means
Carbon markets turn an externality into a price signal and a financing channel: the World Bank's State and Trends 2026 report records nearly 30% of global GHG emissions now covered by a direct carbon price across 87 implemented policies, with carbon pricing raising over US$107 billion in public revenue in 2025.
Market integrity — whether a traded unit represents a real, additional, permanent tonne — is the field's defining credibility problem, addressed by governance bodies such as the ICVCM and demand-side rules from VCMI. Fragmentation across jurisdictions, registries and quality tiers remains structural.
How it is used
Governments design ETSs and accept credits for compliance; companies buy allowances or credits for compliance or voluntary claims; project developers generate credits; exchanges, brokers and registries provide infrastructure; Article 6 of the Paris Agreement frames international trading between countries.
Why it matters
Carbon markets are the main price-based engine for funding mitigation at scale; whether they drive real decarbonisation or merely shuffle paper tonnes depends on cap stringency, credit integrity and transparent accounting.
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