Carbon Markets 2026 H1: Review and Outlook

The first half of 2026 marked an important shift in carbon market dynamics. Carbon credit issuances slowed to their lowest levels in years, while retirements remained resilient, bringing supply and demand into closer balance. At the same time, the market continued its transition towards higher-quality credits, compliance demand materially affected retirement trends, and Article 6 implementation advanced despite ongoing operational constraints.

Our latest Carbon Markets 2026 H1: Review and Outlook examines these developments and explores what they mean for market confidence, pricing, and the outlook for the remainder of the year. Leading headlines include:

Retirement and issuance volumes converge

Carbon credit retirements reached 98 million in the first half of 2026, while issuances fell to just under 100 million, bringing supply and retirements into balance. We forecast around 200 million credits to be issued in 2026 – the lowest annual issuance since 2019 – as publication developers transition to conservative accounting methodologies and adopt a more selective approach to issuing new credits. One-fifth of all credits issued during the first half of the year carried the ICVCM Core Carbon Principles (CCP) label, the highest share on record, reinforcing the market’s continued shift towards higher-quality supply.

Household device activities lead new supply

For the first time, household device activities – namely cookstoves and domestic biogas – became the largest source of newly issued carbon credits. Meanwhile, issuances from nature-based activities declined by one-third, largely because several major avoided-emissions programmes did not bring new volumes to market during the first half of the year. Nearly 90% of all issued credits originated from emissions reductions or removals generated within the past four years, consistent with more selective issuance practices and the market’s transition towards newer methodologies.

Compliance demand increasingly shapes retirements

Nature-based solutions remained the largest source of retired credits, supported by demand under the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). Authorised credits from Guyana’s jurisdictional REDD+ programme accounted for nearly one-third of retired nature-based credits, illustrating the increasing role of compliance demand in global carbon markets. At the same time, older vintages continued to account for more than half of retirements, demonstrating that legacy credits continue to play a significant role in the offtake market.

Article 6 implementation gathers pace

Article 6 implementation continued to accelerate, with 112 bilateral agreements in place, approximately 63 million Mitigation Outcomes issued, and 28 million Internationally Transferred Mitigation Outcomes (ITMOs) transferred between participating countries by the end of June 2026. While limited methodological coverage remains the principal constraint on scaling the Paris Agreement Crediting Mechanism, the publication pipeline continues to expand. Growing interest from major economies (namely the European Union) could strengthen future demand for ITMOs and support the next phase of Article 6 market development.

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The data presented in this report is powered by the Climate Focus Carbon Markets Dashboard. If you would like to receive monthly updates from the Carbon Markets Dashboard, please email us at dashboard@climatefocus.com.