Carbon Markets

The enabling architecture for carbon markets is advancing considerably faster than transactions and finance flows. By April 2026, 108 bilateral cooperation agreements and Memoranda of Understanding had been signed, 22 more than a year earlier, while 12 host countries had authorized around 43.5 million credits for potential international transfer. However, only four projects had completed ITMO issuances and transfers, with no additional issuances recorded since 2024 . A much larger pipeline of around 270 million tCO₂e remains under development (World Bank, 2026) Progress in establishing agreements, integrity systems, and market infrastructure is not yet translating quickly into operational transactions, as countries work through corresponding adjustments and decisions over which mitigation outcomes can be transferred without compromising their NDCs.

Carbon markets are expanding in participation and potential supply but remain far from generating transactions and climate finance at a meaningful scale. More than 100 countries indicate in their latest NDCs that they intend to use international carbon markets through Article 6, and over 50 have arrangements for authorizing international transfers in place or under development (World Bank, 2026). Yet this growing readiness has translated into relatively few transactions. Article 6.2 activity remains nascent, and Article 6.4 is still being operationalized. Demand is also insufficient to absorb growing supply. Voluntary market retirements fell 7% to 157 MtCO₂e in 2025 (Carbon Direct, 2026), while anticipated compliance demand has yet to materialize at scale. The central gap is therefore between rapidly expanding market foundations and the still-limited volume of finance actually flowing through carbon markets.

Interest in carbon markets is geographically broad, but effective participation and realised finance remain concentrated in a small number of countries. More than 100 countries intend to use Article 6, over 50 have authorization arrangements in place or under development, and 1,137 prospective PACM projects span 97 host countries. Yet prospective participation has not translated into comparable access to carbon finance: Article 6.2 transfers have so far involved only four projects across Thailand, Ghana, and the Maldives, while Japan, Singapore, Switzerland, and the Republic of Korea account for 90 of 108 bilateral agreements. (World Bank, 2026) Capacity and infrastructure gaps continue to constrain participation, particularly among lower-income and climate-vulnerable countries, leaving a significant gap between the potential and realized reach of carbon markets.

Stronger integrity frameworks are improving credit differentiation and market confidence, but the climate finance and development impact of carbon markets remains limited by their small transaction volumes and uneven reach. Higher-integrity standards are strengthening confidence that credits represent credible mitigation outcomes and are increasingly distinguishing higher-quality supply. However, with Article 6 transactions still nascent and voluntary demand subdued, these improvements have yet to translate into significant additional finance for mitigation and resilience. Evidence that carbon markets are delivering broader development benefits equitably across countries and communities also remains uneven.