Carbon markets are systems that allow trading in carbon credits, each such credit representing the verified reduction, removal or prevention of the release of one metric ton of carbon dioxide (CO2) or equivalent greenhouse gases into the atmosphere. These markets serve as an economic tool to motivate companies and countries to reduce emissions by charging for pollution.

Carbon market fragmentation

According to purpose and rules, we distinguish two main types of markets:

• Mandatory (regulatory) markets: They are set up by governments and are mandatory for specific sectors (e.g. energy or heavy industry). An example is the EU Emissions Trading System (EU ETS), where entities must hold allowances covering every tonne of emissions emitted.
• Voluntary Markets (VCM): They operate on a voluntary basis, where companies or individuals purchase credits to meet their own sustainability or net zero emissions goals (net-zero).

How does the carbon credit life cycle work?

The creation and sale of credit on the voluntary market takes place in several key steps:

1. Project proposal: The developer will propose an activity that reduces emissions (e.g., protecting forests, planting mangroves, or capturing methane).
2. Validation: An independent third party will assess the project design and methodology to confirm that the project will actually deliver the claimed savings.
3. Implementation and monitoring: The project will be launched and its actual impact on emissions will be measured regularly.
4. Verification: Independent auditors will verify the measured monitoring data.
5. Credits Issue: After successful verification, the certification standard (e.g. Vera or Gold Standard) will issue credits to its registry.
6. Retirement: When a buyer redeems a credit to offset their emissions, the credit is permanently retired from the registry to prevent it from being resold (double counting).

Key quality factors in 2026

As the market matures, more and more attention is paid to integrity credits. Quality credit must meet the following criteria:

• Additionality: The project would not have been possible without financial support from the sale of carbon credits.
• Permanence: Ensuring that the removed carbon remains stored for the long term (decades to centuries) and does not return to the atmosphere, for example during fires.
• Leakage prevention: Protecting a forest in one area will not cause it to be cut down in a neighboring location.
• Co-benefits: Projects that, in addition to the climate, also help biodiversity or local communities are considered more premium.

Price and trend overview

In 2026, we see a significant difference in prices by project type:

Interesting fact: Projects focused on blue carbon (coastal ecosystems such as mangroves or seagrasses) can capture up to five times more carbon per hectare than terrestrial tropical forests. JRi&CO2AI