Domestic Carbon Markets

A few countries have explored ways to build out domestic carbon markets, with varying success. It has re-entered the conversation as a key focus, with significant country interest in both developed economies and EMDEs. Emerging economies like Indonesia are advancing new regulations to deepen domestic markets, but overall coverage remains uneven, with about 23% of global GHG emissions currently covered.

According to the World Bank, there are 74 carbon taxes and emissions trading systems implemented under national and subnational jurisdictions as of 2025. These instruments now cover 28% of global greenhouse gas emissions, with carbon pricing representing 65% of global GDP.

The World Bank also reported that there are 34 government-administered carbon crediting mechanisms under national and subnational jurisdictions as of 2024. Some governments see expansion of domestic carbon credits as a springboard for participating in international carbon markets, while others focus on domestic use, such as for companies to offset domestic compliance requirements. The EU’s Carbon Border Adjustment Mechanism (CBAM) began its transitional phase in October 2023. During this period (2023–2025), importers of carbon-intensive goods (like steel, cement, aluminum, fertilizers, and electricity) must report embedded emissions but do not yet pay financial adjustments. The definitive regime starts on 1 January 2026, when importers will need to purchase CBAM certificates reflecting the carbon price that would have been paid under the EU Emissions Trading System (ETS).