Achieving global cooperation on emissions to curb global warming has been difficult. But Yale economists are using recent research to work with government officials and climate leaders as evidence mounts for the power of a seemingly unlikely environmental tool to spur cooperation – markets.
Their work comes at a critical moment, as some of the world’s largest and fastest-growing economies – including China, Brazil, India, and Indonesia – are building new carbon markets, that could cut billions of tons of CO2 at low cost. The EU has shown this is possible, as its emissions market has halved emissions from covered sectors since 2005.
But the promise of these new national systems will only be realized if they are designed well. Yale economists are working to make sure that happens, engaging with these global efforts, including at COP, the UN’s annual climate summit, to help researchers, governments, and experts learn from each other.
“The climate only cares about all emissions. If you’re going to do something about climate change, you need markets and regulations that are functioning over most of the world.”
- Nick Ryan, Associate Professor of Economics
The efforts build on deep experience. For over a decade, Ryan and Rohini Pande, the Henry J. Heinz II Professor of Economics, have worked with environmental regulators in India, introducing the world’s first emissions market for particulate matter in the industrial city of Surat. By setting a cap on pollution, the system incentivized factories to find the fastest and cheapest way to limit their own emissions. It quickly cut the harmful pollution by 25%, was a finalist for the 2025 Earthshot Prize, and is now being scaled up to improve air quality for millions more people.
The emerging economies building carbon markets currently account for a significant share of global emissions, but they also have opportunities to advance climate goals through reforestation and other so-called “nature-based” solutions. Pande and Ryan, of the Yale Economic Growth Center (EGC), have been working to ensure the new systems work well – for the countries, and the global climate.
In September, Pande and Ryan convened economists, policymakers, and carbon market experts at Yale and during Climate Week NYC around a central question: Given the mixed record of earlier voluntary offset markets, what will it take for the new “compliance” markets – where governments reliably set and enforce emission limits – to succeed?
Addressing an international audience at Yale, Professor Nick Ryan shows the 87 different pricing systems currently covering 29% of global emissions.
At an EGC-convened campus event, supported in part by the Yale Center for Natural Carbon Capture, climate researchers from around the Yale community and officials from Brazil and Indonesia heard new findings on China’s developing carbon market, which represents 15% of global CO2 emissions. Researchers estimate it could avert about 2 million premature pollution-related deaths, but how the government sets the rules will determine how the economic impacts are felt in different segments of the population.
“The type of work EGC is doing on carbon markets is sorely needed – offering practical options for real-world implementation of emissions commitments,” said Susan Biniaz, a lecturer in the Yale School of the Environment who served as the US government’s lead climate lawyer for over 25 years and played a key role in negotiating the Paris Agreement, the 2015 global climate pact to limit global warming.
At Yale at Climate Week NYC, from left to right: Markus Pohlmann of the World Bank; Teresa Cristina de Melo Costa, Program Director for Carbon Markets in Brazil’s Ministry of Finance; Julia Strong, Executive Director of the Symbiosis Coalition; Yale’s Nick Ryan and Rohini Pande.
Later, at private and public events during Yale Climate Week NYC, Pande and Ryan brought together government officials, market makers, and researchers to dig into the nuts-and-bolts problems that will determine if the emerging carbon markets are successful.
“The Yale events were a valuable opportunity to exchange views with leading researchers at a decisive moment for Brazil, as we build the Brazilian Emissions Trading System (SBCE),” said Teresa Cristina de Melo Costa, Program Director for Carbon Markets in Brazil’s Ministry of Finance. “Rigorous, evidence-based research helps us anticipate design challenges, test policy options, and ensure that the market delivers real emissions reductions while supporting sustainable economic growth.”
The recent efforts build on work started last year, when Pande was among the economists recruited by COP30 President Ambassador André Corrêa do Lago to offer advice on how to build robust carbon markets, including for emerging economies. Drawing on advances in satellite monitoring, data science, and risk management, the team produced a draft proposal for a credible, unified global carbon market.
After the proposal was submitted at COP30, a new Open Coalition on Compliance Carbon Markets was established in November 2025, based on many of the principles outlined in the report. With 17 countries including Brazil, China, and Germany – accounting for 42% of global emissions and US$49 trillion in GDP – the coalition aims to connect national and regional efforts and lay the groundwork for a global market. Pande also joined the Executive Committee of the new Economics of Climate Organization (ECO), a multi-institution initiative launched through COP30 to develop scalable climate solutions grounded in economics principles.
A central question is driving these efforts: How can carbon markets in emerging economies be built with enough integrity to be credible, sustainable, and eventually interoperable at the global level? Pande and Ryan think cross-country coordination will be key.
“As countries design these markets, there’s a growing sense that this is an opportunity to get coordination and standardization right from the start,” said Pande. “Because what you don't want to do is standardize on the wrong thing.”
Getting these new markets right from the start could help more countries meet their own climate commitments, while advancing broader efforts to reduce emissions globally.
