Beyond Europe: Carbon Markets in China, the US, and Emerging Economies
The EU isn't the only carbon market that matters anymore. China just expanded its ETS to cover 3 billion tonnes of CO2, California is proving cap-and-trade works, and India is launching its own scheme in 2026. Here's a global tour of carbon pricing.
Carbon Pricing Is Going Global — Fast
In my last article on the EU ETS, I walked through why Europe's carbon market is on fire right now. But here's the thing — the EU is just one piece of an increasingly global puzzle.
Carbon pricing systems now cover roughly 23% of global greenhouse gas emissions, up from basically zero two decades ago. And the pace of expansion is accelerating. China just massively expanded its ETS. India is building one from scratch. And even without federal action, US states are proving that cap-and-trade actually works.
I want to take you on a tour of the world's major carbon markets, compare how they stack up, and explain why this fragmented landscape is slowly starting to connect.
China: The World's Largest Carbon Market Gets Serious
China's national ETS launched in July 2021, and from day one it was the biggest carbon market on the planet by sheer coverage — over 2,200 power companies responsible for roughly 4.5 billion tonnes of CO2 annually.
But for the first few years, it was honestly kind of underwhelming. The market used an intensity-based system (emissions per unit of output) rather than a hard cap, which kept prices low. Trading volumes were thin. The carbon price hovered around $8-10 per tonne — a fraction of what EU allowances cost.
Then 2025 happened.
The March 2025 Expansion
In March 2025, China expanded its ETS to include three massive industrial sectors: cement, steel, and aluminum. This added approximately 3 billion tonnes of CO2 equivalent to the system — nearly doubling its coverage in one move.
Think about that for a second. China's ETS now covers more emissions than the EU, California, and RGGI combined. And these aren't easy-to-decarbonize sectors. Steel and cement are some of the hardest industrial processes to clean up, which means demand for allowances in these sectors will be persistent.
Where China Goes From Here
Here's what I'm watching. China is projected to lead global carbon credit market growth with an estimated $151.51 billion in value creation between 2025 and 2029. The Asia-Pacific region overall is the fastest-growing carbon market globally, with a projected CAGR of 42.6%.
But the price gap between China and the EU remains enormous. Chinese carbon allowances still trade around $10-12 per tonne, while EU allowances are above $83. That gap creates some interesting dynamics — especially once the EU's Carbon Border Adjustment Mechanism (CBAM) starts penalizing imports from countries with lower carbon prices. More on that in the next article.
My take: China's ETS is still in its early innings. The low price signals a system that's not yet biting hard enough to drive real behavioral change. But the direction of travel is clear — more sectors, tighter benchmarks, and eventually a harder cap. When Chinese carbon prices start climbing, the global implications will be massive.
The United States: No Federal Market, But States Are Leading
The US is the world's second-largest emitter, and it has no federal carbon pricing mechanism. That's unlikely to change anytime soon given the political landscape. But writing off the US carbon market would be a mistake, because what's happening at the state level is genuinely impressive.
California Cap-and-Trade
California's cap-and-trade program, launched in 2013 and linked with Quebec since 2014, is the world's fourth-largest carbon market. It covers about 85% of California's greenhouse gas emissions across electricity generation, large industrial facilities, and fuel distributors.
And it's working. The program has been credited with emission reductions equivalent to removing roughly 80% of the state's gasoline-powered cars from the road. California carbon allowances trade significantly higher than China's, though still below EU levels.
What makes California interesting is that it keeps getting more ambitious. The state has set a target of carbon neutrality by 2045, and the cap tightens accordingly. For a single US state, the scale of this program is remarkable — California's economy alone would rank as the fifth-largest in the world.
RGGI: The Quiet Achiever
The Regional Greenhouse Gas Initiative (RGGI) is a cooperative cap-and-trade program among 11 northeastern US states: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont.
RGGI focuses specifically on the power sector, and it's been running since 2009 — making it one of the oldest carbon markets in the US. It's not as flashy as California's program, but it has driven meaningful emission reductions in the region's electricity sector while generating billions in auction revenue for clean energy investments.
Other State Programs
Washington launched its own cap-and-invest program in 2023, and Oregon has its Climate Protection Program. These smaller markets are important because they demonstrate political feasibility — each one makes it harder to argue that carbon pricing can't work in the US.
Could we eventually see these state programs link up? Maybe. A connected US carbon market covering California, the Northeast, Washington, and Oregon would be substantial. But that's a longer-term play.
Emerging Markets: The Next Wave
This is where things get really interesting for the next few years.
India
India is launching its Carbon Credit Trading Scheme (CCTS) in mid-2026, targeting 9 major industrial sectors. For the world's third-largest emitter to implement carbon pricing is a massive deal. The scheme is still being designed, but it signals that carbon pricing is no longer just a developed-world tool.
India's approach will likely be more gradual than the EU's, with lower initial prices and broader coverage over time. But the trajectory matters more than the starting point.
Other Key Developments
Several other countries are building or expanding carbon pricing systems:
- Brazil is developing its regulated carbon market, with legislation advancing through congress
- Indonesia launched a cap-and-trade system for its power sector
- Vietnam is building its domestic carbon credit exchange
- Taiwan is implementing carbon fees and exploring a full trading system
- South Korea has been running its ETS since 2015 and continues to expand coverage
Many of these efforts are directly motivated by the EU's CBAM — countries realize that if they don't price carbon domestically, the EU will effectively price it for them at the border. I'll cover CBAM in detail in the next article.
The Price Gap Problem
Let me show you why comparing carbon markets matters:
| Market | Approximate Price (early 2026) | Coverage |
|---|---|---|
| EU ETS | ~$83-85/tonne | Power, industry, aviation, maritime |
| California | ~$35-40/tonne | Economy-wide |
| RGGI | ~$15-20/tonne | Power sector |
| China | ~$10-12/tonne | Power, cement, steel, aluminum |
| South Korea | ~$8-10/tonne | Power, industry |
These price differences create real distortions in global trade. A steel producer paying $83/tonne for carbon in Europe is at a huge cost disadvantage compared to a Chinese competitor paying $10/tonne. That's exactly the problem CBAM is designed to solve — and exactly why so many countries are scrambling to implement their own carbon pricing.
Article 6: The Framework for Connecting It All
Here's the piece that could eventually tie these fragmented markets together. Article 6 of the Paris Agreement establishes the rules for international carbon credit trading.
Article 6.4, which became operational at COP30 in late 2025, creates a centralized UN-supervised mechanism for generating and trading carbon credits across borders. Think of it as the plumbing that could eventually connect national carbon markets.
This is important for two reasons:
- It enables carbon credit transfers between countries, which could help equalize prices across markets over time
- It creates quality standards for international credits, which addresses the credibility issues that have plagued voluntary carbon markets
We're still in the early days of implementation, but Article 6 becoming operational is a genuine milestone. It gives countries a recognized framework for cooperating on emissions reductions — and for trading the credits that result.
My Take: A Fragmented Market With a Clear Direction
The global carbon pricing landscape in 2026 is messy. Prices range from $10 to $83 per tonne depending on where you are. Coverage varies wildly. Some markets are mature and liquid; others are barely functional.
But zoom out and the direction is unmistakable. More countries are pricing carbon. Existing markets are expanding. International frameworks are coming online. And trade mechanisms like CBAM are forcing convergence whether countries like it or not.
I think the biggest opportunities in this space over the next few years are:
- China's ETS maturing — when prices start rising toward international levels, the market impact will be enormous
- Emerging market carbon pricing — India's scheme launching in 2026 is a particularly important milestone
- Cross-border linkages — as Article 6 gets implemented, watch for bilateral deals linking national markets
The global carbon market hit $114.3 billion in 2025. I think we're still in the early chapters of this story.
Next up in this series: I'll break down CBAM — the EU's carbon border tax that's reshaping global trade starting January 2026.
This is part 2 of our carbon credits series. Not financial advice. Always do your own research.