India has emerged as one of the world’s largest new carbon markets with the launch of its Carbon Credit Trading Scheme in 2026, as global carbon pricing systems now cover 29 per cent of greenhouse gas (GHG) emissions and annual revenues from emissions trading systems and carbon taxes crossed $107 billion in 2025, according to a new World Bank report.
The report, State and Trends of Carbon Pricing 2026, says India’s new emissions trading system currently covers seven sectors and around 490 industries, with estimated coverage of approximately 477 million tCO2e, making it one of the world’s largest newly implemented carbon pricing systems.
Globally, average carbon prices have nearly doubled over the past decade, rising from $10/tCO2e in 2016 to nearly $21/tCO2e in 2026, while carbon credit issuances rose 8 per cent between 2024 and 2025.
Published by the World Bank Group, the report highlights the rapid expansion of carbon pricing systems despite economic uncertainty, volatile energy markets and commodity supply disruptions.
“As countries navigate a period of heightened uncertainty from fiscal pressures and energy market volatility to growing development needs, policymakers are increasingly focused on how to deliver growth that is both sustainable and resilient,” wrote Paschal Donohoe in the report’s foreword.
Alongside India, new emissions trading systems were introduced in Japan and Viet Nam, while Mauritania and Serbia launched carbon taxes. The report says if all carbon pricing policies currently under development are implemented by 2030, nearly one third of global GHG emissions could come under carbon pricing systems.
The analysis identifies India’s Carbon Credit Trading Scheme as a GHG emission intensity-based trading system aimed at hard to abate sectors. It is built on India’s existing Perform Achieve and Trade energy efficiency programme.
Under the mechanism, industries are assigned annual GHG emission intensity targets. Companies that outperform their targets receive Carbon Credit Certificates, which can be sold to industries unable to meet compliance obligations.
The assessment says India’s system is expected to expand further to include the iron and steel sector, which has not yet received emission intensity targets.
The World Bank notes that only China’s national ETS, the European Union ETS and the Republic of Korea ETS currently cover larger absolute volumes of GHG emissions than India’s newly implemented system.
India’s future expansion into iron and steel is also identified as one of the major contributors that could push global carbon pricing coverage toward nearly one third of global emissions by 2030.
Meanwhile, another report, Carbon as a Business Variable: Trade, Risk, and the Evolution of India’s Carbon Market, by Rubix Data Sciences, notes that India issued more than 375 million carbon credits between 2010 and 2025, making it one of the world’s largest voluntary carbon markets, although only around one third of Indian carbon projects successfully reach registration because of execution and verification bottlenecks.
The document also highlights that Scope 3 and value chain emissions can significantly exceed direct operational emissions across sectors, making indirect carbon exposure increasingly important for businesses. As global trade rules tighten, the report says carbon efficiency is beginning to influence pricing power, competitiveness and market access, particularly for export-oriented industries.
The report flags mounting pressures on carbon pricing systems from disruptions in global commodity markets.
It says the reduction in global oil supply in March 2026, estimated at around 10 million barrels per day, represented the largest oil shock on record, while disruptions through the Strait of Hormuz affected international trade in natural gas, fertiliser and aluminium.
These disruptions have already prompted policy adjustments in some countries. Ireland, for instance, delayed a scheduled increase in its national carbon tax because of rising fuel costs.
The report also highlights inequities in carbon pricing revenues. Most revenues are concentrated in developed economies because developing countries generally have lower carbon prices and limited allowance auctions.
Another concern is fragmentation across systems. The report says the growing diversity of emissions trading systems, carbon taxes and border carbon adjustment measures is increasing administrative and compliance costs, especially for smaller economies and businesses exposed to multiple pricing regimes.
In voluntary carbon markets, retirements of carbon credits fell from 257 million tCO2e in 2024 to 230 million tCO2e in 2025, although demand for high integrity credits continued to strengthen.
Governments are increasingly directing carbon pricing revenues toward climate and energy transition investments. Japan’s GX ETS, for example, will channel revenues into a national energy transition fund.
The analysis also points to stronger international coordination efforts. The Open Coalition on Compliance Carbon Markets, launched at COP30 with 18 member countries, aims to establish common standards and improve transparency and liquidity across carbon markets.
Border carbon adjustment mechanisms are emerging as another major policy tool. The European Union’s Carbon Border Adjustment Mechanism entered its definitive phase in 2026, applying a carbon price to emissions embedded in imported goods. Although it currently covers only around 0.3 per cent of global GHG emissions, the mechanism is already influencing policy reforms globally.
The report says countries including Albania, Malaysia, Thailand, Australia and Canada are examining new carbon pricing measures or border adjustments partly in response to the EU mechanism.
In carbon credit markets, buyers are increasingly paying premiums for higher integrity credits. Credits eligible under the aviation sector’s Carbon Offsetting and Reduction Scheme for International Aviation traded between $15/tCO2e and $22/tCO2e since September 2025, compared with $1 to $14/tCO2e for most other credit categories.
The report also says nature-based projects are attracting growing investor interest. Between 2021 and 2024, 70 per cent of all capital committed or directly raised for carbon credits was directed toward conservation and reforestation projects.
The assessment finds that emissions trading systems have expanded much faster than carbon taxes over the past decade. ETS coverage of global emissions has tripled since 2016, rising from 8 per cent to around 26 per cent, while carbon tax coverage has remained broadly stable at around 4 to 5 per cent.
Sectoral coverage is also widening rapidly. Since 2020, the number of carbon pricing instruments covering industry has increased 44 per cent, while waste sector coverage has expanded by 129 per cent.
The report further notes that the first credits under the Paris Agreement Crediting Mechanism were provisionally issued to a clean cookstoves project in Myanmar, marking a major milestone in the operationalisation of international carbon markets under the Paris Agreement.