The governments of China and Brazil and the European Commission announced the launch of the Open Coalition on Compliance Carbon Markets, a new international initiative aimed at strengthening global cooperation on carbon pricing.

Carbon markets are among the key tools used by governments to advance decarbonization efforts, typically by setting a declining cap on emissions and requiring companies to hold allowances covering their greenhouse gas output. Companies that reduce emissions below their allowance levels can sell excess permits, while higher-emitting companies must purchase additional allowances, creating a financial incentive to cut emissions.

According to the EU Commission, there are currently around 80 carbon pricing schemes in place across 50 different countries, indicating a clear benefit to international cooperation, with the new coalition seeking to enable the promotion of best practices and raise global standards, and to help advance carbon pricing as the most cost-effective tool to reduce emissions.

The EU established its carbon pricing mechanism, the Emissions Trading System (ETS), in 2005, which covers GHG intensive sectors, including electricity and heat generation, oil refineries, steel, cement, paper, chemicals, and commercial aviation, among others. While the Commission is currently undergoing a review of the ETS as geopolitical forces raise energy prices and pressure energy-intensive industries, Commission President recently defended the system as an effective tool to drive reduced dependence on imported fossil fuels, accelerate the shift to cleaner energy sources and fund investments in decarbonization-focused technologies.

China launched its own its national carbon emissions trading scheme (ETS) – the world’s largest – in 2021, as part of its strategy to achieve its national climate goals, which include reaching peak carbon dioxide emissions by 2030 and carbon neutrality by 2060.

More recently, Brazil passed legislation in 2024 to establish its own Emissions Trading System.

The new coalition is now open to countries with nationwide compliance carbon markets, such as emissions trading systems or a carbon tax, with New Zealand and Germany announced as the first to join as members.

Key focus areas for the coalition’s work will include robust monitoring, reporting and verification systems, sound carbon accounting methodologies and the potential use of high integrity offsets to promote environmental integrity. A work plan for the coalition is expected to be adopted at the Carbon Market Conference taking place on 15 September 2026 in Wuhan, China.

Kurt Vandenberghe,  Director-General for Climate Action at the European Commission said:

“This is a good day for climate action. Together with Brazil, China, Germany, New Zealand – and with more countries to join soon – we are forming the Open Coalition on Compliance Carbon Markets and starting its work. Together, we will make emissions trading systems more effective, robust and transparent. Ultimately, our collaboration should reduce greenhouse gas emissions whilst growing, modernising and innovating our economies.”