ICAP 2025 Report: Global Emissions Trading Systems Rise To 38, Covering 23% Of Emissions

38 emissions trading systems now operate globally, with 20 more in development or consideration
ETS coverage reaches 23% of global greenhouse gas emissions
Emerging markets are shaping next-generation carbon market design, with major implications for global climate finance

Global temperatures reached new highs in 2024, intensifying pressure on governments to scale market-based climate tools. Against this backdrop, emissions trading systems are expanding both in number and scope, according to the latest ICAP Emissions Trading Worldwide Status Report 2025.

“Temperatures in 2024 continued to soar, and the year overall was confirmed to be the hottest on record”, says Stefano De Clara, Head of the ICAP Secretariat. “It is encouraging to see the growth and spread of emissions trading systems around the world as a response to the climate crisis”.

Stefano De Clara, Head of the ICAP Secretariat

The report identifies a clear trend: carbon markets are no longer confined to advanced economies. Instead, emerging markets are becoming central to the evolution of emissions trading, reshaping how climate policy intersects with economic growth.

Emerging Economies Redefine Carbon Market Design

Countries including Brazil, India, Indonesia, Türkiye, and Vietnam are at the forefront of new ETS development. These systems are not simple replicas of earlier models. They incorporate domestic crediting mechanisms and offset frameworks tailored to national economic structures.

This shift has direct implications for investors and multinational companies. Carbon pricing signals are expanding into fast-growing economies, creating both compliance obligations and new avenues for carbon finance.

Offsetting provisions are expected to play a critical role in these systems, allowing countries to balance industrial growth with emissions reduction targets. For corporates, this introduces additional layers of strategy around sourcing credits, managing exposure, and aligning with voluntary and compliance markets.

Expansion Of Existing Markets Signals Scale

While new systems gain traction, established carbon markets are undergoing significant expansion. China’s national ETS is extending beyond the power sector into steel, cement, and aluminum smelting, adding an estimated 3 gigatonnes of CO₂ equivalent.

This expansion alone represents roughly 5% of global greenhouse gas emissions, underscoring the scale at which policy shifts in major economies can reshape global carbon markets.

In parallel, both the European Union and the United Kingdom are moving to broaden sectoral coverage within their own systems. These developments strengthen the role of ETS frameworks as central pillars of national decarbonization strategies.

Carbon Leakage And Border Measures Gain Traction

As carbon pricing spreads, so do concerns around competitiveness. Carbon leakage, where emissions-intensive industries relocate to jurisdictions with weaker climate policies, remains a persistent political and economic challenge.

To address this, Carbon Border Adjustment Mechanisms are becoming more prominent. The EU and UK are advancing CBAM frameworks designed to level the playing field by applying carbon costs to imports.

For global businesses, this introduces a new layer of regulatory complexity. Supply chains, trade flows, and procurement strategies must now account for embedded carbon costs, not just operational emissions.

Financing The Transition And Public Acceptance

Beyond design and expansion, the success of emissions trading systems increasingly hinges on public acceptance and equitable outcomes.

“The issue of public acceptability and just transition remains central to the success of carbon pricing policies. Reinvesting auction revenues into decarbonization efforts and social measures is key to addressing these concerns“.

Revenue recycling is emerging as a defining feature of next-generation ETS frameworks. Governments are directing proceeds toward clean energy investment, industrial decarbonization, and social support measures aimed at mitigating the impact of higher energy costs.

This approach reflects a broader governance challenge: aligning climate ambition with political feasibility. Without public support, even well-designed carbon markets risk facing resistance or rollback.

What This Means For Executives And Investors

The expansion of emissions trading systems to cover nearly a quarter of global emissions marks a structural shift in climate governance. Carbon pricing is moving from a regional policy tool to a global economic signal.

For executives, this means integrating carbon costs into long-term planning, capital allocation, and risk management. For investors, it highlights growing opportunities in carbon markets, clean technologies, and transition finance.

The next phase of ETS development will be shaped by emerging economies, cross-border policy coordination, and the ability to balance climate goals with economic and social priorities.

As carbon markets scale, their influence will extend far beyond emissions reduction, shaping trade, investment flows, and the competitive landscape of global industry.