Carbon markets have emerged as a key policy instrument to combat global emissions by treating greenhouse gases (GHGs) as tradable commodities, encouraging activities that reduce, avoid, or capture emissions. Rooted in the Kyoto Protocol and reinforced by the Paris Agreement, carbon markets operate through compliance (cap-and-trade) and voluntary mechanisms, engaging diverse stakeholders — project developers, verifiers, standard bodies, and credit buyers. These markets foster climate action by enabling companies and individuals to offset their emissions while promoting renewable energy, afforestation, and energy efficiency projects. Technological advancements like blockchain-based carbon credits and tokenization have enhanced market transparency and liquidity. However, challenges persist, including conflicts of interest in project validation, limited participation of small-scale players, and regulatory ambiguities. Strengthening governance, ensuring inclusivity for marginalized groups, and promoting micro-carbon projects are essential for their success. With India’s commitment to achieving net-zero emissions by 2070, carbon markets hold immense potential to accelerate climate goals, driving both environmental sustainability and economic growth. The present article provides a broad understanding of carbon markets, covering their origin and evolution, current status, processes, stakeholders, as well as the lacunae and challenges they face, along with future prospects.
Against the background of the global "dual carbon" goal and the EU Carbon Border Adjustment Mechanism (CBAM), targeting problems such as missing trust in emission reduction and insufficient technological collaboration in cross-border low-carbon supply chains, this paper incorporates blockchain technology, vertical spillover of emission reduction and consumer low-carbon preference into a unified analytical framework. It constructs a two-echelon cross-border supply chain model consisting of a single supplier and a single manufacturer, builds Stackelberg game models under centralized decision-making and decentralized decision-making respectively, comparatively analyzes the optimal emission reduction levels, pricing strategies and profit distributions under two scenarios with and without vertical spillover, and verifies the conclusions through numerical simulation. The research shows that the EU CBAM carbon tax, vertical spillover of emission reduction and consumer low-carbon preference form a positive synergistic incentive, which significantly lifts the supply chain's emission reduction level and overall profit, and the synergistic effect is more prominent under centralized decision-making. A rising emission reduction cost coefficient will restrain enterprises' investment in emission reduction, and vertical spillover will aggravate this restraining effect. Whether vertical spillover is considered or not, centralized decision-making outperforms decentralized decision-making in both emission reduction efficiency and total supply chain profit; the higher the carbon tax rate and vertical spillover rate, the wider the gap between the two. This paper further puts forward management insights from the aspects of enterprise technology sharing, decision-making mode selection and government policy guidance, so as to provide theoretical reference and decision support for cross-border supply chains to respond to CBAM regulations and realize low-carbon transformation.