Carbon Markets Weekly: Inside the EU ETS Overhaul, Corporate Emissions Data and the Global Push to Scale Carbon Capture

Global carbon markets moved through a dense fortnight of regulatory reform, corporate disclosure and quiet infrastructure-building, and taken together the developments sketch a market that is both consolidating its rulebook and testing how far political tolerance for climate ambition will stretch. The centre of gravity sat, as so often, in Brussels, where the European Commission opened a wide-ranging renegotiation of the EU Emissions Trading System (EU ETS), the bloc’s flagship carbon-pricing tool. The proposal, published in mid-July, recalibrates the pace at which the overall emissions cap shrinks, slowing the Linear Reduction Factor to 3.7% a year for 2031–2035 and to 1.7% for 2036–2040, down from the 4.3% rate applied since 2024. It also slows the phase-out of free allowances for industry and halves the trigger threshold for the Market Stability Reserve. The Commission framed the package, which pairs the looser cap with a proposed €100 billion Industrial Decarbonisation Bank, as a way to protect European competitiveness while keeping decarbonisation incentives intact; steelmakers including ArcelorMittal, Outokumpu, SSAB and thyssenkrupp had urged the Commission not to let the carbon price weaken, while environmental groups such as the Greens–European Free Alliance and Bellona Europa argued the reform would let polluting industry emit more for longer at a lower cost. A companion package extended the ETS’s maritime anti-evasion rules to smaller vessels and introduced a new mechanism, modelled on an existing aviation tool, to narrow the cost gap between conventional bunker fuel and lower-carbon alternatives; shipping groups broadly welcomed the direction while port bodies argued it did not go far enough in funding infrastructure. Both proposals must still clear the European Parliament and Council, a process expected to run into 2027.

The reform proposal followed hard on the heels of a separate but related supply story: the EU’s three-year programme of additional allowance auctions to fund REPowerEU, launched after Russia’s invasion of Ukraine, is winding down ahead of its 31 August deadline, cutting common-platform auction volumes by roughly 20% for the rest of the summer. Because average allowance prices in the first half of 2026 ran higher than in 2024–25, the €20 billion revenue target was reached faster than planned, tightening supply just as the wider ETS review lands. Brussels was also busy elsewhere in the carbon architecture: the Commission adopted the first certification methodologies for carbon farming under its Carbon Removals and Carbon Farming Regulation, covering agroforestry, peatland rewetting and ecological afforestation, completing a second building block of what is billed as the world’s first government-run voluntary removals certification framework. It separately finalised the product scope of the EU Deforestation Regulation, dropping leather, retreaded tyres and several other derived goods from coverage while adding items such as soluble coffee, ahead of the regulation’s December 2026 application date – a move the Commission says will cut compliance costs by around 75% relative to the original rules.

Beyond Europe, the architecture of compliance carbon markets continued to fill in. United Nations data showed that 129 of 198 countries, or roughly two-thirds, have now appointed the national authorities needed to participate in the Paris Agreement Crediting Mechanism (PACM), the successor to the Kyoto-era Clean Development Mechanism, while more than 400 legacy projects have secured host-government approval to transition into the new system. Notably, China and India, historically the largest CDM credit suppliers, remain outside the host-approval list, a gap that continues to shape how much supply the mechanism can ultimately offer. Indonesia, meanwhile, confirmed that its first forestry carbon credits will shortly be issued under a reformed national framework, with Verra preparing to certify at least 20 million tonnes of CO2 equivalent across three major peatland projects, including the long-dormant Katingan initiative, now tied into a national registry with blockchain-based traceability. In the Democratic Republic of Congo, the government reaffirmed that its moratorium on new industrial logging concessions in the Congo Basin will remain in place, a decision welcomed by a coalition of environmental and human rights organisations as protecting one of the world’s largest tropical carbon stores. Canada’s federal government, Alberta and the Oil Sands Alliance signed a memorandum of understanding to advance the roughly 6-million-tonne-a-year Pathways carbon capture and storage project, though the agreement remains conditional on further approvals and is bundled with plans for a new west coast oil pipeline, illustrating how carbon capture ambitions in some jurisdictions are increasingly tied to continued fossil fuel expansion rather than displacing it.

Standards bodies, for their part, spent the fortnight tightening rather than loosening their rules. Verra opened consultation on a substantial revision to its methodology for injecting captured CO2 into concrete, proposing to cut the assumed cement-displacement benefit from 30% to 6.5% and to account for natural carbonation that would occur without any project intervention – changes that would materially reduce the credits generated per tonne of concrete unless projects can prove otherwise. The International Carbon Registry, based in Iceland, opened its own consultation on revisions to four core programme documents governing additionality, leakage and quantification, part of a broader pattern of smaller registries aligning more closely with ISO standards and schemes such as CORSIA as a condition of continued market access. In the built environment, a new dedicated registry, BEVerify, went live to bring digital, near-real-time carbon crediting to a sector estimated to account for around 40% of global CO2 emissions, while in agriculture, Syngenta and Groundwork BioAg announced a partnership to route mycorrhiza-based soil carbon credits through Syngenta’s mainstream farm-input distribution network across Latin America and Europe – a structural change that could meaningfully expand the supply of verified agricultural removals if it scales as intended.

Financial market infrastructure also showed signs of deepening. Abaxx Technologies and Climate Impact X completed the first multi-party physical delivery under a CORSIA-linked carbon futures contract, with trading volumes up more than seventyfold year on year, a sign that hedging tools for compliance-grade credits are gaining real commercial traction. In direct air capture, British developer Airhive acquired Dutch rival Carbyon, forming an Anglo-Dutch company in one of the sector’s first significant consolidation deals, as founders cited unpredictable demand signals and a crowded field of start-ups chasing limited corporate offtake. Consolidation of this kind may become more common: Greentown Labs, the world’s largest climate-technology incubator, launched a new programme pairing start-ups working on advanced carbon materials with a major energy partner, reflecting a search for revenue streams beyond credit sales alone. That search is already bearing fruit in unexpected places – Swiss sportswear brand On scaled a shoe midsole made from captured carbon emissions and green hydrogen to more than a million pairs, four years ahead of its own target, while Valmet won a contract to automate what will become Finland’s first CO2 liquefaction plant at a biogas facility, converting captured emissions into feedstock for concrete manufacturing.

On the corporate demand side, the picture was more mixed. Microsoft’s latest sustainability report disclosed a 25% year-on-year rise in total emissions, driven chiefly by data-centre expansion to meet AI demand, even as the company reaffirmed its target of carbon negativity by 2030; the disclosure matters well beyond one company’s balance sheet, since Microsoft remains by far the largest corporate buyer of durable carbon removal and its purchasing has underpinned several first-of-a-kind projects. The GSMA reported that mobile network operators have cut operational emissions by 13% since 2019 despite a quadrupling of data traffic, though it warned that uneven access to renewable electricity, particularly in emerging markets, will determine whether the industry stays on track for net zero by 2050. A less encouraging signal came from the World Bank, which confirmed it will drop its target of directing 45% of financing to climate-related projects, alongside the associated 35% target under its Climate Change Action Plan, following what has been reported as pressure from the United States; the Bank said it would instead judge progress by development outcomes rather than financial inputs, while continuing to report net emissions and climate-resilience indicators through its scorecard.

Elsewhere, project developers pressed ahead with the practical business of scaling carbon capture and offshore storage. The UK government launched a Carbon Management Innovation Challenge aiming to halve the cost of point-source and direct air capture by 2040 and support at least ten commercial-scale greenhouse gas removal projects, while the North Sea Transition Authority issued fresh operational guidance to help licensees at clusters including HyNet, the Northern Endurance Partnership, Acorn and Viking move from licensing into construction. In a more speculative vein, North Sea developer Orcadian Energy unveiled plans for an offshore gas-fired, carbon-capture-equipped power station feeding a co-located AI data centre, exploiting an unusually CO2-rich gas field to reinject captured emissions back into the reservoir. Green hydrogen’s role in decarbonising harder-to-abate fuels also advanced on two fronts: ETFuels selected the Port of Immingham for a UK sustainable aviation fuel refinery converting imported e-methanol into jet fuel, and Japanese refiner ENEOS signed a strategic, non-binding agreement with Germany’s eFuel One to import green hydrogen-based e-gasoline for the Japanese transport market. Across these threads, a consistent pattern emerges: carbon market infrastructure and policy architecture are becoming steadily more sophisticated and interconnected, even as the underlying political and corporate commitment to aggressive near-term emissions cuts shows signs of softening in several major jurisdictions.

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