Carbon markets and credits

EU CBAM is the structural compliance-market shift of 2026

The EU Carbon Border Adjustment Mechanism reached its first official-price publication milestone on 7 April 2026 when the European Commission set the CBAM price at €75.36 per tonne of CO2. The CBAM applies to imports of cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen - the most CO2-intensive industrial categories - and requires importers to purchase CBAM certificates equivalent to the embedded carbon. The full phase-in extends through 2026 with declining free-allocation allowances under the EU ETS in parallel. The structural consequence is twofold. First, EU industrial competitiveness is protected against carbon-leakage to lower-regulated jurisdictions. Second, exporters into the EU (particularly China, India, Turkey, Vietnam, plus some US and UK manufacturers in cement and steel) face direct pricing pressure on embedded carbon, incentivising their own domestic decarbonisation. The UK has announced parallel CBAM implementation through 2027; Canada and Australia are evaluating. The CBAM is the most consequential carbon-pricing-policy event globally since the EU ETS itself.

State of the art (2026)

Carbon markets split into two distinct trades in 2026. The compliance side is scaling and tightening: EU ETS allowances trade around €77–80/t, and the EU Carbon Border Adjustment Mechanism published its first official price on 7 April 2026 at €75.36/tCO2, extending the carbon cost to imported steel, cement, aluminium, fertiliser, electricity and hydrogen. Article 6 ITMO trades are live via bilateral deals (Switzerland–Ghana, Singapore–Bhutan). The voluntary side is reforming around quality, with ICVCM Core Carbon Principles as the new benchmark and demand shifting toward durable removal. Frontier has expanded its advance-market commitment to $1.8B, with Heirloom-style mineralisation offtakes near $1,000/t.

Voluntary carbon market is reforming around ICVCM Core Carbon Principles + durability

The voluntary carbon market is recovering from the 2022-2024 credibility crisis through two reinforcing reforms. First, the Integrity Council for the Voluntary Carbon Market (ICVCM) launched Core Carbon Principles (CCP) in 2024 as a quality benchmark. CCP-labelled credits trade at meaningful price multiples of uncertified alternatives - establishing a market-wide quality signal that buyers can use to differentiate high-integrity from low-integrity supply. Second, the market is shifting from avoidance credits (nature-based forestry projects that prevent emissions from happening) toward removal credits (technology-based DAC, biochar, mineralisation, enhanced rock weathering) that physically remove CO2 from the atmosphere. The SBTi (Science Based Targets initiative) Forest Land and Agriculture guidance and corporate Scope 3 net-zero commitments are structurally driving demand toward removals. Pricing reflects the quality and durability hierarchy: low-quality nature avoidance €7-24/t, premium nature €60/t, CORSIA-eligible ~€19/t, technology-based removals €200-800/t. The 2026-2030 path: VCM grows from ~€3B to €15B by 2035 but with structurally rising prices reflecting quality rather than supply expansion alone.

Durable CDR is the highest-priced segment and the fastest-scaling commercial category

Durable carbon dioxide removal (CDR) - technology-based methods that remove CO2 from the atmosphere with permanence measured in centuries or millennia - is the highest-priced voluntary-market segment and the fastest-scaling commercial CDR category. The Frontier advance-market commitment (Stripe, Alphabet, Shopify, Meta, McKinsey Sustainability, plus members Autodesk, H&M Group, JPMorgan Chase, Workday) has committed over $1B to durable CDR offtake purchases. Direct air capture with mineralisation (Heirloom, Climeworks, Carbon Engineering / 1PointFive, CarbonCapture) leads on permanence; the most recent Frontier round paid Heirloom $26.6M for 26,900 tonnes ($988/t implied). Heirloom has reduced cost per ton by 50%+ since 2021 and targets a further 70% decline by 2030; Climeworks Gen 3 targets $250-350/ton by 2030. Other durable categories - enhanced rock weathering (Lithos Carbon, UNDO Carbon, Travertine), biochar (Husk Power, Carbonext, Pyrocal), ocean alkalinity enhancement (Planetary, Vesta) - are commercialising at smaller scale. The 2027 milestone is cumulative durable CDR delivery exceeding 1 Mt/year - the threshold above which the category becomes a meaningful share of the broader CDR demand from net-zero commitments.