On April 14, 2026, ICAP published its annual report Emissions Trading Worldwide: ICAP Status Report 2026. The document provides a comprehensive overview of the global development of emissions trading systems (ETS) and represents the most authoritative and complete reference publication on the state of carbon markets worldwide. The report covers data as of February 2026 and was prepared with the support of the German Federal Ministry for the Environment.
The 2026 edition documents 41 active emissions trading systems covering 26% of global greenhouse gas emissions. The jurisdictions in which these systems operate account for 63% of global GDP and cover more than half of the world’s population. Three new national systems are launching in 2026—in Japan, India, and Vietnam—and another 16 jurisdictions are at various stages of preparing or considering the introduction of an ETS.
Emissions Trading as a Key Climate Policy Tool
The report’s main message is that emissions trading systems have evolved from a specialized tool into mainstream policy and have firmly established themselves as a key pillar of climate strategies worldwide. ETSs are already operational at the national or subnational level in 14 of the G20 countries, and two more are actively developing their systems. This coverage is five times greater than at the time of the launch of the European ETS in 2005.
The expansion of the ETS coincides with a pivotal moment in international climate governance—in 2025, all parties to the Paris Agreement were required to submit their new nationally determined contributions (NDC 3.0) with climate targets for 2035. Brazil, Turkey, Mexico, and a number of Asian economies explicitly cite their ETS or carbon pricing mechanisms as central tools for implementing their NDCs, demonstrating the integration of emissions trading into the core of national climate strategies.
Revenues and Price Dynamics
The report notes record revenues from emissions trading. In 2025, these reach nearly $80 billion, surpassing the previous record of $75 billion in 2023. Cumulatively since 2007, global ETS revenues exceed $454 billion. The largest share belongs to the EU ETS (48.9 billion dollars for 2025), followed by the German national ETS (18.1 billion dollars) and the United Kingdom (3.2 billion dollars).
Emissions allowance prices are expected to return to relative stability in 2025. The EU ETS and the UK ETS are showing fluctuations with steady growth, and a similar trend is observed in most North American systems. California, New Zealand, and China’s national ETS are recording a moderate decline in prices, while Korea’s K-ETS remains relatively stable.
Geographic and Sectoral Expansion
New ETSs are driven primarily by large and medium-sized emerging economies, mainly in Asia and Latin America. India is introducing an intensity-based system (baseline-and-credit) for energy-intensive sectors. Vietnam has launched a pilot ETS for the power, ferrous metallurgy, and cement industries. Japan is transitioning from a voluntary scheme to a mandatory national ETS involving over 700 companies, covering more than half of national emissions. In Latin America, Brazil, Chile, and Colombia have adopted ETS legislation and are preparing for its implementation, while Bolivia has begun work on a legal framework.
Equally important is the sectoral expansion of existing systems. China’s national ETS, launched in 2021 for the power sector only, has been officially expanded to include steel, cement, and aluminum, adding 3 billion tons of emissions. The United Kingdom is expanding its scope to include maritime shipping starting in 2026 and waste incineration starting in 2028. The EU is preparing to launch an entirely new system—EU ETS 2—for buildings and road transport starting in 2028.
Trends in RES Design and Sustainability Amid Global Uncertainty
The report emphasizes that, in the context of geopolitical turbulence, populism, energy and trade wars, and pressure on affordability, climate policy—and RES in particular—faces new challenges. The U.S. withdrawal from the Paris Agreement under the current administration is the most striking example of the rapid shift in the political foundations of climate policy. At the same time, the resilience of subnational systems in the U.S. (California, RGGI, etc.) demonstrates that once enshrined in law, ETS can be more resilient than political cycles.
Lessons learned from previous periods shape current trends in ETS design. The report identifies three key mechanisms for enhancing political resilience
- integration of emissions trading into overarching climate legislation and net-zero emissions targets;
- conducting broad consultations with stakeholders from the outset;
- early integration of communication strategies into the system’s design.
A notable trend is the growing adoption of intensity-based systems (based on emission quantities), particularly in emerging economies. About half of the systems currently in operation worldwide are intensity-based, covering about 75% of emissions covered by ETS globally—a figure dominated by the scale of China’s national ETS. At the same time, established systems, including China’s, are increasingly moving toward a transition from intensity-based caps to absolute caps as they mature.
Political acceptability becomes critical when expanding the scope of ETS beyond industry to sectors where the carbon price directly affects citizens’ livelihoods. A key trend is the development of mechanisms for the transparent use of revenues, whereby revenues are increasingly directed toward climate initiatives and support for disproportionately affected sectors and consumer groups. Some jurisdictions are rebranding their systems from Cap-and-Trade to Cap-and-Invest to emphasize the link between revenues and public benefit. The report explicitly states that the EU ETS 2 for buildings and transport simply would not have been politically feasible without the accompanying Social Climate Fund.
Competitiveness, CBAM, and Credit Mechanisms
Free allocation of allowances remains the primary tool for protecting industry from carbon leakage, but as net-zero emission targets draw nearer, current practices are being called into question. The trend is toward better targeting and free allocation only for emission-intensive and internationally exposed (EITE) sectors.
The most innovative alternative approach is the EU’s Carbon Border Adjustment Mechanism (CBAM), which entered its final phase in January 2026 with a first deadline for submitting CBAM certificates by September 2027. The United Kingdom plans to introduce a similar mechanism starting in early 2027. CBAM acts as a catalyst for broader carbon pricing ambitions among the EU’s trading partners and is driving a rethinking of the future of free allocation in established systems.
The use of offsets and the creation of credit mechanisms are becoming widespread in the design of new ETSs, with emerging systems integrating crediting from the outset. Governments are choosing between establishing domestic offset systems before turning to international markets, whether credits should serve domestic compliance or international sales, and how to balance domestic benefits against international market value.
International Cooperation
The report notes a growing momentum in international cooperation in the field of emissions trading. The Open Coalition for Compliance Carbon Markets initiative was endorsed at COP30 in Belém. The EU and the United Kingdom have begun formal negotiations to link their ETSs, which would allow for mutual recognition of allowances and create conditions for mutual exemptions under CBAM.
The finalization of the rules under Article 6 of the Paris Agreement provides a framework for internationally transferred mitigation outcomes and an emerging global carbon crediting mechanism. Poland joined as the 35th member of ICAP, while California, Quebec, and Washington continue discussions on a potential system link. Behind these technical discussions lies a growing community of practice based on shared experience.
Key Developments by Region
Europe and Central Asia
EU ETS 1 remains the largest system by trading volume. Shipping is covered starting in 2025, and free allowances for aviation are fully phased out starting in 2026. The launch of EU ETS 2 (buildings and transport) has been postponed by one year to 2028. Germany has adopted legislation for the transition to EU ETS 2. Turkey has adopted a foundational climate law and is preparing a pilot national ETS. Ukraine plans a pilot phase starting in 2028. The United Kingdom has extended its ETS for a second phase (2031–2040) and plans to include engineering-based greenhouse gas removal starting in 2029.
North America
California has legislatively renamed the program to Cap-and-Invest and authorized it through 2045. The states of Oregon and Colorado are introducing new systems. New York is preparing a comprehensive program. Canada has eliminated the federal carbon fuel charge but retains the Output-Based Pricing System for industry. RGGI has completed its third review with more ambitious caps starting in 2027. Saskatchewan has frozen its system in response to tariff uncertainty.
Asia and the Pacific
China has announced a roadmap for transitioning from an intensity-based to an absolute emissions cap, expanded its national ETS to include three new sectors, and for the first time committed to absolute emissions reductions in its NDC. South Korea has reformed the K-ETS with an increased share of auctioned allowances to 50% for the energy sector by 2030 and a new quantitative mechanism for market stability. Australia reports its first full year of compliance under the reformed Safeguard Mechanism with a 2% reduction in covered emissions. Taiwan plans an accelerated transition from a carbon tax to an ETS with a possible pilot by the end of 2026. Thailand has approved a draft climate change bill with four carbon pricing instruments.
Latin America and the Caribbean
Brazil established a CCT at the end of 2024 and is actively developing secondary legislation. Bolivia has introduced a bill for a national CCT—a significant policy shift after years of rejecting market-based mechanisms. Chile has published a national roadmap for carbon pricing. Colombia expects a pilot phase starting in 2027 and full implementation by 2030. Mexico has included the operational phase of the ETS in its 2025–2030 Sectoral Environmental Program.
Forecasts and Outlook
The ICAP 2026 report outlines the following key forecasts for the development of emissions trading in the short and medium term:
- Continued expansion: ETS will continue to spread among emerging economies. Turkey is preparing a pilot phase; Brazil, Chile, and Colombia are moving from legislation to implementation; Thailand and the Philippines are advancing their legal frameworks. With full implementation of the systems currently under development and discussion, the share of global emissions covered would increase from 26% to 30–35%.
- Transition to absolute caps: Established intensity-based systems, led by China, are planning a transition to absolute caps, which represents a fundamental shift in the world’s largest emitter’s approach to carbon markets. This transition is expected to strengthen the market price signal and bring China’s ETS closer to the model of developed economies.
- Expansion of sectoral coverage: The trend toward including new sectors—maritime transport, buildings, road transport, and waste—will intensify. The EU ETS 2 for buildings and road transport starting in 2028 is the most ambitious example. The United Kingdom is adding shipping starting in 2026 and waste incineration starting in 2028. China is expanding its scope beyond the electricity sector.
- CBAM as a catalyst: The EU’s CBAM in its final phase starting in 2026 and the UK’s upcoming CBAM starting in 2027 will have a growing impact on trading partners. Taiwan is already preparing its own CBAM. CBAM is expected to accelerate the adoption of carbon pricing among exporters to the EU and the UK.
- System linking: Negotiations to link the EU ETS and the UK ETS are the most significant development in this area. California, Quebec, and Washington are continuing discussions. If successful, linking will create more liquid and efficient markets, but will also raise questions about cap coordination and rule harmonization.
- Revenue growth and fiscal significance: As the scope expands and caps tighten, ETS revenues will continue to grow. The report anticipates that governments will increasingly rely on these revenues to finance the green transition and mitigate the social impacts of the carbon price.
- Political risks: The report does not overlook the threats—populism, affordability, and trade wars could undermine political support—the political sustainability of ETS is not guaranteed and requires targeted efforts in design, communication, and the equitable distribution of benefits.
