Compliance carbon pricing is broadly working, and revenues are rising. However, the voluntary market that companies relied on is in trouble.
Microsoft staff began calling carbon-removal developers in early April with awkward news. The world’s largest corporate buyer of credits used to extract carbon dioxide from the atmosphere was putting purchases on hold. Bloomberg confirmed the story on April 11. Brian Marrs, Microsoft’s senior director of energy and carbon removal, had said the previous year that nearly all of the firm’s contracted credits were due between 2030 and 2050. The April calls suggested that the shopping spree, at least for now, was over. Two days later Melanie Nakagawa, the chief sustainability officer, walked back the message: the programme had “not ended”. The damage was done. Microsoft accounted for 78.5 per cent of all disclosed durable carbon-removal contracts as of mid-April, on data from CDR.fyi. When the buyer underwriting most of an industry pauses, the industry notices.
Paschal Donohoe, the World Bank’s managing director, chose this week to publish his organisation’s annual State and Trends of Carbon Pricing report. Revenues from carbon pricing had tripled in a decade, mobilising more than 107 billion US dollars for governments in 2025. The number of schemes worldwide reached 87, with India and Vietnam the year’s most significant additions. Around 29 per cent of global greenhouse-gas emissions were now covered by a direct price; that share would tip past a third if all the instruments under development reach the statute book. Donohoe was careful to talk about pricing as a tool for countries to “determine their own energy mix” rather than as a guaranteed lever for cutting emissions.
The European Commission published verified 2025 emissions data on April 10 showing that emissions in sectors covered by the EU Emissions Trading System (ETS) had fallen by 1.3 per cent year on year. Since the scheme launched in 2005, emissions in covered sectors are down by close to half. Prices traded around 75 euros per tonne through April. Jonathan Colmer and co-authors found in a 2024 study that French manufacturers regulated by the ETS cut emissions by 14 per cent in its first phase and 16 per cent in its second. The compliance scheme that nobody finds especially exciting has been chewing through the easy bits of the problem for years.
Manohar Lal Khattar, India’s power minister, used the Prakriti 2026 conference in New Delhi in March to launch the country’s Carbon Market Portal and confirm that the Carbon Credit Trading Scheme would begin trading by the middle of this year. The first 490 industrial entities, across seven heavy sectors, already have binding intensity targets running from this financial year. China expanded its ETS to cover cement, steel and aluminium in 2024, taking the system to 15 per cent of global emissions. Vietnam is on a similar track. The list of large emerging economies still resisting any kind of carbon price is now noticeably short.
Junk credit
Joseph Romm, a senior research fellow at the University of Pennsylvania, published a systematic review of carbon offsets in the Annual Review of Environment and Resources in October 2025. The conclusion was bleak. Offset programmes routinely overestimated their climate impact by a factor of five to ten or more, the paper found, and many credits were tied to projects that would have happened anyway. Romm called them “a dangerous distraction from the real solution”. After twenty-five years of trying to fix the things, the verdict from him and his co-authors was that they were unfixable.
Corporate Accountability, a research group, examined 43 of the largest offset projects of 2024 in a report published in June 2025. Some 47.7 million of those credits (around 23 per cent of all credits retired in the voluntary market that year) were unlikely to deliver the reductions promised. Verra, the registry that until recently dominated issuance, was still working through the after-effects of its 2023 overcrediting scandal; its share of retirements fell below 60 per cent in 2025 for the first time since at least 2015, on Fastmarkets data. Donohoe’s report acknowledged that credit prices had softened across 2025, with only credits for airline compliance under CORSIA, or top-rated forestry projects, holding their premium.
Ben Rubin, the executive director of the Carbon Business Council, told ESG Dive on April 15 that the market “can’t rely on any one single actor”. Microsoft had contracted more than 36 million tonnes of durable carbon removals since 2020. Jonathan Rhone, the chief executive of CO280, posted on LinkedIn that Microsoft, “didn’t just buy carbon removal credits. They built the market.”
Climeworks, the Swiss direct-air capture pioneer, laid off 106 staff in May 2025. Jan Wurzbacher, the co-chief executive, blamed unfavourable market conditions and shifting climate policy. The firm had captured 1,100 tonnes of carbon dioxide against 380,000 tonnes contracted at the time of the cuts.
The IMF said in 2023 that the average global carbon price would need to reach about 85 US dollars per tonne by 2030 to keep the Paris targets within reach. The World Bank’s average for 2025 was 21 US dollars.
India’s first compliance carbon credit certificates are due to be issued by the end of the year. The price discovered there will tell investors more than another set of headline revenue figures.
Photo: Dreamstime.