Carbon Credit Markets in Developing Economies: Institutional Evolution, Structural Barriers, and Economic Potential—Evidence from Ecuador

Abstract

Despite two decades of participation in international carbon finance mechanisms and substantial forest carbon endowment, Ecuador lacks an integrated, cross-mechanism assessment of its carbon market trajectory. This study addresses that gap by applying an institutional economics framework to evaluate Ecuador’s experience under the Clean Development Mechanism (CDM), Reducing Emissions from Deforestation and Forest Degradation (REDD+), and the voluntary carbon market (VCM). Methodologically, the study applies a structured descriptive evidence synthesis drawing on four data corpora: UNFCCC/CDM registry records (IGES v13.7), official Ecuadorian legal and policy documents, program documentation for REDD+/GCF/LEAF/PECC, and peer-reviewed literature published between 2022 and 2025. Where figures diverged across sources, official registry values and disclosed payment records were prioritized. The principal findings are as follows: under the CDM (2006–2023), Ecuador registered 34 projects, of which only 14 (41%) issued Certified Emission Reductions (CERs) by 2020, accumulating $2.8 {\mathrm{MtCO}}_2$e—below the global CDM issuance rate of approximately 57% and below ex ante projections for the 34 registered projects (only 8%). Under REDD+, results-based payments totaling approximately USD 49.5 million have been disbursed through the Green Climate Fund and the REDD Early Movers program, with an additional USD 30 million committed under the LEAF Coalition at USD ${\mathrm{10/tCO}}_2$. Ecuador’s domestic voluntary market (PECC) is nascent, constrained by constitutional provisions limiting private appropriation of environmental services and by the 2024 presidential veto of proposed Organic Environmental Code reforms. The study concludes that Ecuador’s carbon market potential is real but contingent on legal certainty, transparent registries, conservative accounting, and credible benefit-sharing. This is the first integrated, integrity-centred cross-mechanism analysis for Ecuador, with implications for constitutional reform design and Article 6 readiness in forest-rich developing economies.

1. Introduction

Carbon crediting mechanisms can direct finance toward mitigation activities, but the climate value of issued credits depends on robust additionality tests, conservative quantification, permanence, and safeguards against double counting [1]. These markets enable the trade of verified emission reductions or removals, certified through instruments known as carbon bonds or credits, both in regulated (compliance) settings and in voluntary schemes [2,3].

At the global level, the voluntary carbon market (VCM) reached a value of over USD 2 billion in 2021, driven by corporate commitments toward climate neutrality [2]. However, by 2023, the market showed signs of contraction due to controversies surrounding credit integrity and the lack of a harmonized regulatory framework [4]. In Latin America, interest in emissions offsetting has grown steadily, particularly in forestry and agro-energy, with projections suggesting increased regional participation between 2030 and 2035 [5].

Ecuador presents a particularly instructive case: it hosts approximately 91 ecosystems, 12.6 million hectares of forest cover, and stores nearly three gigatons of carbon in its biomass [6]; yet, until 2023, it did not impose an explicit carbon price, and the Net Effective Carbon Rate (NECR) was negative due to fossil fuel subsidies [7]. The 2008 Constitution further complicated market participation by declaring environmental services non-appropriable (Article 74), creating prolonged legal uncertainty [8,9].

1.1. Context and Research Gap

Despite Ecuador’s ecological significance, no prior study has provided an integrated, cross-mechanism evidence synthesis of its carbon market trajectory encompassing CDM, REDD+, and voluntary markets under a unified analytical framework. Country-level studies of Latin American carbon markets have focused primarily on Brazil, Colombia, and Peru [10], leaving Ecuador systematically under-examined. This study fills that gap.

The central research question is: How has Ecuador’s participation in carbon crediting mechanisms evolved, and what institutional and economic conditions determine its ability to generate credible carbon finance at scale? The study is a structured descriptive evidence synthesis aimed at mapping institutional trajectories and disclosed transaction data to inform policy design.

The contribution of this study is threefold: (i) to our knowledge, it provides the first integrated cross-mechanism evidence synthesis of Ecuador’s carbon market trajectory; (ii) it applies an institutional economics framework to explain differential outcomes across mechanisms; and (iii) it benchmarks selected indicators of Ecuador’s performance against Brazil, Colombia, and Peru using publicly disclosed data.

1.2. Theoretical Framework

This study is anchored in institutional economics [11,12] and the political economy of carbon markets [13,14]. The framework distinguishes formal institutions (constitutional provisions, ministerial agreements, COA reforms) from informal institutions (market norms, corporate sustainability commitments) and applies transaction cost theory to explain why high legal uncertainty raises the cost of carbon transactions in Ecuador, reducing market depth and investor confidence.

The central causal logic applied throughout this study is as follows: institutional quality (legal certainty + governance capacity) → credit integrity (additionality + permanence + verification) → economic potential (credit volume × achievable price - transaction costs). This chain is operationalized through four evaluative dimensions applied consistently across mechanisms in Section 3: transaction status, mitigation volume, financial value per tonne, and accounting integrity.

1.2.1. Carbon Markets: Typology

For analytical clarity, this study distinguishes four instruments (

Table 1. Typology of carbon crediting instruments.

Dimension	CDM (Kyoto)	REDD+ Payments	Voluntary Credits	Article 6.2 (ITMOs)
Regulatory basis	Kyoto Protocol	UNFCCC Warsaw Framework	Voluntary standards (Verra, GS)	Paris Agreement Art. 6
Buyer type	Annex I governments	Public climate funds	Corporate or individual buyers	Countries (NDC compliance)
Claim structure	Compliance offset	Results-based payment	Voluntary offset/contribution	NDC transfer (ITMO)
Additionality standard	CDM EB methodology	Conservative FREL baseline	VCS/Gold Standard rules	To be defined under A6.4
Accounting framework	CDM registry; no correspondence. adj.	No double-count with NDC	No corresponding adjustment	Corresponding adjustment required
Fungibility	CER tradable globally	Non-tradable payment	VER tradable globally	ITMO tradable bilaterally

Source: Authors’ elaboration based on [2,14,15,16].

): (i) compliance carbon pricing and trading systems; (ii) project-based voluntary carbon crediting; (iii) results-based forest finance such as REDD+ payments; and (iv) non-market cooperation under Article 6.8 [1]. These instruments differ in accounting rules, buyer type, claim structure, and policy function and should not be treated as interchangeable.

1.2.2. Regulated Carbon Markets

Carbon markets were originally promoted under the 1997 Kyoto Protocol, which introduced the CDM and Joint Implementation [16,17]. The CDM fulfilled a dual objective: reducing global emissions cost-effectively and promoting sustainable development in host nations. By 2012–2015, it had lost credibility due to questionable additionality, complex methodologies, and a collapse of CER prices [17]. The Paris Agreement Article 6 establishes three pathways: Article 6.2 (bilateral ITMOs), Article 6.4 (UN-supervised multilateral mechanism), and Article 6.8 (non-market cooperation) [16,18]. At COP29 in Baku 2024, key methodologies for Article 6.4 implementation were agreed [2].

1.2.3. Carbon Credit Instruments: Typology and Distinctions

Three categories of credited mitigation must be carefully distinguished. Emission reductions refer to activities that lower gross GHG flows from anthropogenic sources relative to a project-specific or sectoral baseline (e.g., switching from fossil to renewable electricity generation). Removals refer to activities that extract ${\mathrm{CO}}_2$ from the atmosphere and sequester it in biological or geological sinks (e.g., reforestation, soil carbon). These activities carry impermanence risk, as reversals due to fire, drought, or governance failure can invalidate issued credits. Avoided emissions is an informal term for projects that prevent future emissions under a counterfactual scenario (e.g., avoided deforestation under REDD+); these are a subset of reductions but depend critically on baseline construction and leakage control [1,19].

1.2.4. Voluntary Carbon Markets

Voluntary carbon markets emerged in the late 1990s as a complementary mechanism to regulated markets [10,20]. In these markets, mitigation project developers obtain certification through internationally recognized standards, primarily Verra (VCS) and Gold Standard (GS), among others. Each verified metric ton of ${\mathrm{CO}}_2$ (${\mathrm{tCO}}_2$e) reduced generates a Verified Emission Reduction (VER) credit. Standards ensure, through methodologies and third-party verification, that reductions are real, additional, measurable, and permanent, and register credits to prevent double counting [21,22]. A well-regulated and credible voluntary market can mobilize significant private financing toward low-emission projects [21,22].

1.2.5. Legal and Political Framework in Ecuador

In Ecuador, the 2008 Constitution declared nature a subject of rights and established in Article 74 that environmental services shall not be subject to appropriation [23]. This provision generated conservative interpretations that limited carbon credit trading for over a decade. In June 2023, MAATE issued the first regulation structuring a voluntary carbon market (Regulation No. MAATE-2023-053). In September 2024, the National Assembly approved reforms to the Organic Environmental Code (COA), but these were fully vetoed by the President of the Republic in November 2024, representing a significant setback [23]. Currently, the Ministry of Environment and Energy (MAE) promotes the Ecuador Carbon Zero Program (PECC), and in May 2025, a National Emissions Compensation Registry was formally launched [24].

2. Research Design and Data

This study applies a structured descriptive evidence synthesis of Ecuador’s participation in carbon-market and carbon-finance mechanisms. The design is descriptive rather than causal; its purpose is to compare institutional trajectories, disclosed transactions, and integrity-related constraints across mechanisms [1]. The methodology is descriptive–comparative in nature, with partial quantitative systematization of historical data [25].

2.1. Variable Selection and Measurement

Four primary variables are measured for each mechanism, enabling consistent cross-mechanism comparison:

1.

Transaction status: Categorical variable (registered/implemented/verified/issued/ abandoned). Sources: IGES CDM Database v13.7 [26]; GCF Board decisions; MAATE official publications.

2.

Mitigation volume: Expressed in ${\mathrm{tCO}}_2$e (project level) and ${\mathrm{MtCO}}_2$e (national aggregates). For CDM: cumulative CERs issued as of 2020; for REDD+: avoided deforestation reported to UNFCCC and verified by GCF/REM; for voluntary: VCUs/GS credits issued per registry.

3.

Financial value per tonne (${\mathrm{USD/tCO}}_2$e): Contractual or disclosed price for CDM and REDD+ mechanisms; market average for voluntary credits per Ecosystem Marketplace 2025 State of the VCM [27].

4.

Accounting integrity: Qualitative assessment of additionality robustness, permanence safeguards, double-counting risk, and corresponding adjustment status, coded using criteria from Probst et al. [1] and Haya et al. [19].

2.2. Data Sources

Sources were compiled from four corpora (

Table 2. Data source inventory.

Corpus	Sources	Coverage	Priority
CDM registry	IGES CDM Database v13.7 (March 2025); UNFCCC CDM Project DB	All Ecuador CDM registered projects (n = 34), 2006–2023	Primary
Official national docs	MAATE/MAE ministerial agreements; COA reform; PECC documentation	2008–2025	Primary
Program documentation	GCF Board decisions; NICFI/REM reports; LEAF ERPA terms; UNDP PECC	2009–2025	Primary
Peer-reviewed literature	Scopus/WoS: ‘Ecuador carbon market’ + ‘REDD+ Ecuador’, 2022–2025	Methodological benchmarks; integrity criteria	Secondary

). Where figures diverged, official registry values and disclosed payment records were prioritised [25].

2.3. Inclusion/Exclusion Criteria and Data Triangulation

CDM projects: all registered projects with Ecuador listed as the host country in the IGES database are included, regardless of issuance status. REDD+ payments: only publicly disclosed records from GCF Board decisions and bilateral program reports are included; unofficial estimates are labeled as such. Voluntary projects: only projects with publicly available registry pages on Verra VCS or Gold Standard are included.

Triangulation: Where figures diverged between sources, discrepancies were resolved through the following: (i) identifying the primary official record (GCF Board decision > MAATE announcement > press report); (ii) noting the discrepancy in the text with both figures; and (iii) using the more conservative estimate for profitability calculations. Qualitative coding of institutional barriers applied three categories: formal legal barriers (constitutional/ministerial), regulatory gaps (absent implementing legislation), and capacity barriers (MRV infrastructure). Each barrier is cited with its legal or documentary basis.

Limitations of this design: The study does not support causal inference. CDM data are complete to 2020 only; PECC data are preliminary (2021–2025); REDD+ leakage and permanence cannot be assessed from disclosed payment records alone.

3. Results

3.1. Clean Development Mechanism (CDM)

Ecuador’s effective participation in the CDM began in 2006. Between 2006 and 2023, the country registered 34 CDM projects before the Executive Board of the UNFCCC [26,28]. The largest number of projects—22 projects (65%)—were registered in 2006, 2012, and 2013. After 2013, a drastic reduction coincides with the loss of credibility experienced by the CDM from that date onward [17].

The chronological evolution of the number of CDM projects registered by Ecuador is presented in Figure 1, while the breakdown by project type can be observed in Table 1.

The largest number of projects—22 projects (65%)—were registered in the years 2006, 2012, and 2013. After 2013, a drastic reduction in the number of registered projects can be observed, which coincides with the loss of credibility experienced by the CDM from that date onward.

It is noteworthy that even in 2023, Ecuador registered one project—the LE PARC energy-efficient mixed-use equipment project—despite the fact that by that time the CDM was practically no longer operational.

3.1.1. Project Types and CER Issuance

As shown in

Table 3. Types of CDM projects registered by Ecuador during the period 2006–2023.

CDM Project Type	Registered Projects	% of Total
Hydroelectric power generation	16	47%
Methane capture and use or avoidance in waste or oil	3	9%
Biomass power generation	9	26%
Wind, solar, and energy efficiency power generation	6	18%
Total	34	100%

Adapted from: Louhisuo et al. [26].

, the largest number of projects was concentrated in the construction of small hydroelectric power plants and biomass-based bioenergy initiatives [29].

The total projected emission reductions from all Ecuadorian CDM registered projects were estimated at $4.9 {\mathrm{MtCO}}_2$e/year on average (sum of the expected average annual reductions according to the project design documents) [26].

However, the reductions effectively achieved and certified were more limited. As of 2020, only 14 of the 34 projects (41%) had issued CERs after completing verification processes, accumulating $2.8 {\mathrm{MtCO}}_2$e in emission reductions [26]. In other words, only about 8% of the expected reductions materialized up to that year, indicating that several registered projects did not reach the bond issuance phase, either due to delays, technical barriers, or lack of financing, or that the reductions achieved were less than initially estimated, which amounted to $36.1 {\mathrm{MtCO}}_2$e up to 2020 [26].

Table 4. CDM projects registered by Ecuador with the highest estimated average annual emission reductions (top 5).

CDM Project Name	Est. Avg. Annual Emission Reduction (${\mathrm{tCO}}_2$/Year)	% of Total
Paute–Sopladora Hydroelectric Project	1,298,497	26%
Minas San Francisco Hydroelectric Project	690,320	14%
Toachi–Pilatón Hydroelectric Project	605,219	12%
Large-scale introduction of compact fluorescent lamps (CFL)	444,255	9%
Biogas extraction and combustion—El Inga I and II landfills	213,935	4%
Total (top 5)	3,252,226	66%

Adapted from: Louhisuo et al. [26].

presents the five projects with the highest estimated average annual emission reductions.

Table 5. CDM projects registered by Ecuador that achieved the highest verified CERs up to 2020 (top 5).

CDM Project Name	Issued CERs (${\mathrm{tCO}}_2$)	% of Total Ecuador CDM CERs
Abanico Hydroelectric Project	1,191,489	42%
Calope Hydroelectric Project	372,591	13%
Biogas extraction—El Inga I and II landfills (Quito)	325,153	12%
Sibimbe Hydroelectric Project	236,613	8%
San Carlos bagasse cogeneration project (SCBCP)	129,667	5%
Total (top 5)	2,255,513	80%

Adapted from: Louhisuo et al. [26].

, in turn, shows the five projects that achieved the highest conversion rates of those estimates into certified actual reductions up to 2020.

A notable finding is the concentration of results in hydroelectric projects: small hydropower plants accounted for approximately 65% of all CERs issued ($1.85 {\mathrm{MtCO}}_2$e). This reflects the strong impetus that the CDM provided for renewable electricity generation in Ecuador, aligned with the national strategy for transforming the energy matrix. In contrast, categories such as solar energy, waste management, and large hydropower projects did not issue credits during that period; although registered, these projects did not complete verification processes and therefore issued 0 CERs.

The decline in international CER prices after 2012 hindered commercialization, even for projects that were technically successful (Figure 2). An example is the “Massive Introduction of Compact Fluorescent Lamps (CFL) in Ecuadorian Households” project (energy-saving light bulbs), registered by Ecuador as a CDM project in 2011. This energy efficiency initiative operated at a massive scale: it distributed 6 million energy-efficient light bulbs to households, schools, and public buildings, avoiding electricity consumption equivalent to constructing a 150 MW power plant [30]. It was estimated to reduce 444,$255 {\mathrm{tCO}}_2$e annually over a ten-year period [26]. Under a CER sales contract signed with Deutsche Bank in 2010, the State expected annual revenues of USD 4.6 million for ten years—approximately USD 46 million in total—through this program [30]. However, by 2021, only about 77,$285 {\mathrm{tCO}}_2$e of reductions had been certified for this project, and after 2012, the value of each CER dropped sharply due to oversupply in the global market. Although the lighting program was pioneering as the first CDM project registered by the Ecuadorian State, the financial realization fell short of expectations due to the collapse in CDM carbon credit prices shortly after its registration.

3.1.2. Statistical Analysis of CER Issuance Rates by Project Type

To test whether the probability of issuing CERs differed significantly across CDM project type categories, a chi-square test of independence was conducted using the issued/not-issued counts summarized in

Table 6. CER issuance rates by CDM project type category (Ecuador, 2006–2020).

Project Type	Registered (n)	Issued CERs (n)	Did Not Issue (n)	Issuance Rate (%)
Hydropower	16	9	7	56%
Biomass	9	3	6	33%
Methane capture	3	2	1	67%
Wind/Solar/Efficiency	6	0	6	0%
Total	34	14	20	41%

Source: IGES CDM Database v13.7 [26].

. The underlying contingency structure was project type × issuance status, with four project categories and two issuance outcomes: issued CERs and did not issue CERs. The 4 categories were: hydropower (16 registered, 9 issued), biomass (9 registered, 3 issued), methane capture (3 registered, 2 issued), and wind/solar/efficiency (6 registered, 0 issued).

The chi-square test yielded $\chi$²(3) = 6.73, p = 0.081. Although the result does not reach conventional significance at $\alpha$ = 0.05, the p-value provides suggestive evidence of an association between project type and issuance probability, consistent with the observed pattern: wind/solar/efficiency projects showed a 0% issuance rate, whereas methane and hydropower projects achieved rates above 50%. The borderline result should be interpreted cautiously, given small cell counts (expected frequency < 5 in two cells). Regardless of statistical significance, the descriptive pattern is structurally explained: wind, solar, and large-efficiency projects failed the CDM additionality test or were abandoned after CER price collapse, while hydropower and methane projects benefited from established methodologies (AM0002/ACM0002 and AMS-III.G, respectively) with lower verification costs.

3.1.3. Outlier Analysis: Concentration of CERs in the Abanico Project

The Abanico Hydroelectric Project alone issued 1,191,489 CERs—42% of all CERs issued by Ecuador between 2006 and 2020. The next four largest projects combined accounted for a further 38%, meaning that just five projects (15% of the registered portfolio) generated 80% of all certified reductions. Three structural factors explain Abanico’s outlier status: (i) early registration (2006) before the 2012 price collapse, enabling multiple verification cycles under viable contractual prices; (ii) use of the well-validated ACM0002 methodology with low third-party verification costs; and (iii) a compact run-of-river operational footprint that simplified MRV, reducing the lag between generation and CER issuance. This concentration implies that portfolio diversification and selection criteria based on methodological maturity are stronger predictors of actual credit issuance than ex ante projected reductions.

3.1.4. Summary of Clean Development Mechanism Projects

In summary, the CDM phase in Ecuador (2005–2020) produced both positive outcomes and important limitations. The mechanism facilitated technology transfer and enabled the implementation of several projects in renewable energy, waste management, and energy efficiency. These initiatives generated more than $2.8 {\mathrm{MtCO}}_2$e in certified emission reductions for the country [26], creating revenues for both public and private developers (Figure 2). However, the sharp decline in CER demand after 2012 substantially reduced market incentives, leaving many credits without buyers or traded at very low prices, which ultimately discouraged the development of new projects.

Additionally, complex validation and verification processes, together with limited local capacities, delayed the effective monetization of the El Inga landfill biogas project. The project was formally registered in the Clean Development Mechanism as Project 3362, “Landfill biogas extraction and combustion plant in El Inga I and II landfill (Quito, Ecuador)” and later reached an installed generation capacity of 9 MW. Official municipal sources describe it as the only project in Ecuador officially registered under the CDM of the UNFCCC [31]. Although the project had been in place since 2012, municipal and media reports indicate that the first CERs effectively available for commercialization corresponded to 2019, after a long certification process. The first sale was reported in September 2024, and by May 2025, the Municipality of Quito/EMGIRS had commercialized about 22,000 CERs, obtaining approximately USD 60,000 in revenue [32].

This case illustrates the legacy of the CDM: certified emission reductions had been achieved but remained pending commercialization while awaiting more favorable market conditions. The CDM experience thus provides important lessons for Ecuador, particularly the need for more agile and stable mechanisms that avoid dependence on volatile international price cycles and that integrate climate projects into long-term planning.

Although the Clean Development Mechanism faced significant challenges and its market contracted after 2012, Ecuador’s experience under the CDM left an important installed capacity and concrete examples of sustainable projects. This positions the country to take advantage of emerging climate finance mechanisms with a solid foundation of knowledge and institutional structure, while fulfilling its commitments to sustainable development and climate action.

3.2. Participation in REDD+ Mechanisms and Forest Conservation

Following the CDM slowdown, Ecuador redirected its mitigation efforts toward forest conservation in line with the global REDD+ strategy. The country contains approximately 12.5 million hectares of forest, representing about 50% of its national territory [33]. Beginning in 2008, the Socio Bosque program supported conservation of approximately 1.6 million ha of native forest through direct financial incentives to communities and private landowners [33]. Between 2008 and 2014, the national net annual deforestation rate declined by 48.6% compared with 1990s levels [34,35], making Ecuador one of the first countries globally to meet REDD+ results-based payment eligibility requirements.

Between 2011 and 2018, Ecuador strengthened its REDD+ engagement through key milestones: UN-REDD partner status (2011, USD 4 million); Germany/Norway REM commitment of up to USD 65 million (2014); submission of the Forest Reference Emission Level (FREL) to the UNFCCC (2015); adoption of the REDD+ Action Plan ‘Forests for Good Living’ (2016–2025) [36]; launch of the PROAmazonía platform (2017); and GCF results-based payment approval (2019) [33].

In July 2019, the GCF approved a payment of USD 18.5 million corresponding to approximately 3.6 million ${\mathrm{tCO}}_2$e avoided—at a fixed rate of USD ${\mathrm{5/tCO}}_2$, recognizing cumulative emission reductions of approximately 28 million ${\mathrm{tCO}}_2$ between 2008 and 2014 relative to the historical baseline [37]. Ecuador was the second country worldwide, after Brazil, to receive REDD+ results-based payments from the GCF [33].

In January 2025, Ecuador signed an Emissions Reduction Purchase Agreement (ERPA) under the LEAF Coalition, becoming the first Amazonian country to formalize such an agreement. Under its terms, Ecuador will receive USD 30 million in exchange for verified forest emission reductions equivalent to 3 million ${\mathrm{tCO}}_2$, certified under the ART-TREES standard at USD ${\mathrm{10/tCO}}_2$—a threefold increase over earlier mechanisms [38].

A cautious interpretation is nevertheless required. Recent ex post evaluations show that the magnitude of credited mitigation remains highly sensitive to baseline construction, counterfactual choice, and leakage control [39]. Ecuador’s future positioning in forest carbon markets should emphasize conservative baselines, transparent methodologies, and independent ex post validation rather than nominal credit volume alone.

Summary of REDD+ Results-Based Payments Received (2008–2025)

Ecuador has succeeded in monetizing emission reductions from avoided deforestation through several performance-based payment mechanisms during the 2008–2025 period.

Table 7. REDD+ results-based payments received by Ecuador during the period 2008–2025.

Date/Year	Source (Program)	Amount (USD)	Description/Results Paid for
2009–2014	REDD+ readiness grants (UN-REDD, Germany)	4.0 million	Readiness funds (not results-based). Support for technical capacity, stakeholder participation, and planning (REDD+ Plan) [40].
Dec 2014	Germany and Norway (REM)—commitment	Up to 65 million	REDD Early Movers agreement: payment for up to $13 {\mathrm{MtCO}}_2$ avoided in 2015–2017 at USD ${\mathrm{5/tCO}}_2$. Expansion of Socio Bosque and REDD+ in the Amazon [41].
2019 (Jul)	Green Climate Fund—REDD+ pilot	18.5 million	Results-based payment for 2008–2014: 48% reduction in deforestation. Funds to implement the REDD+ Plan (2019–2025) [33].
2019 (Dec)	REM (KfW, Norway/Germany)—1st payment	13.1 million	Results-based payment for 2015–2016 [37,42,43].
2020 (Jan)	REM (KfW, Norway/Germany)—2nd payment	18.0 million	Results-based payment for 2015–2018: 30% reduction vs. 2001–2014 baseline. Norway contributed USD 12M, Germany USD 6M [37,42].
2023–2025	LEAF Coalition (Emergent)—ERPA	30.0 million (expected)	Sale of $3 {\mathrm{MtCO}}_2$ at USD ${\mathrm{10/tCO}}_2$. Covers four Amazon jurisdictions; certified under ART-TREES. Includes benefit-sharing plan for communities [44].

Sources: [33,37,40,41,42,44].

summarizes the main REDD+ results-based payments and related commitments received by Ecuador during this period.

An important point is the relatively modest scale of results-based payments compared with the magnitude of emission reductions achieved. The USD 49.5 million effectively disbursed through REM and GCF up to 2020 covered less than 15% of the ${\mathrm{CO}}_2$ reductions achieved by Ecuador during that period [37], underscoring the need to expand initiatives such as LEAF and develop other non-market cooperation mechanisms.

3.3. Ecuador and Its Participation in Voluntary Carbon Markets

Ecuador participated early in voluntary carbon initiatives. The PROFAFOR program (1993) established forest plantations in the Andes for carbon sequestration, reforesting approximately 22,300 hectares during its first 12 years, with estimated sequestration of approximately $2.23 {\mathrm{MtCO}}_2$e over its first two decades [45]. The 2007 Yasuní-ITT Initiative proposed leaving untapped oil reserves indefinitely in exchange for international financial compensation, positioning Ecuador as a global advocate for non-traditional climate conservation approaches, though it ultimately did not succeed [46].

The 2008 Constitution and Ministerial Agreement No. 033 of 2013 restricted private actors from directly accessing international carbon markets for several years [23]. Despite this, some voluntary initiatives were implemented: the Pichacay Landfill Biogas Project in Cuenca (VCS project #1883, operational since 2017) issues carbon credits based on methane emission reductions [47]; and the FINCA Project in Esmeraldas integrates reforestation into agroforestry cacao systems, achieving Gold Standard for the Global Goals certification between 2022 and 2023 [48].

Since 2021, Ecuador has gradually evolved its position toward voluntary carbon markets through the PECC program and regulatory reforms detailed in Section 3.5.

Summary of Projects with Voluntary Certifications

1.

PROFAFOR Project (Andes)—Forestry: Early commercial reforestation program; established long-term contracts with local communities for carbon capture; served as reference model for Payment for Environmental Services mechanisms [45].

2.

Pichacay Landfill Project (Cuenca)—Waste/Energy: Operational since 2017; captures biogas from Cuenca’s main landfill; generates approximately 7 GWh of renewable electricity annually; certified under Verra VCS [47].

3.

Improved Cookstoves and Solar Dryers Project (Andes)—Rural Energy: Pilot projects by NGOs combining improved biomass cookstoves and solar grain dryers; certified under Gold Standard around 2018, issuing credits for avoided CO₂ emissions.

4.

FINCA Project (Esmeraldas)—Agroforestry/Sequestration: Focused on small-scale cacao farmers; integrates reforestation with native species; achieved Gold Standard for the Global Goals certification in 2022–2023 [48].

3.4. Comparative Perspective: Ecuador vs. Brazil, Colombia, and Peru

Ecuador’s CDM performance shows a smaller but relatively active portfolio: approximately 41% of its registered CDM projects have issued CERs, below Brazil and Colombia but above Peru when measured as the share of registered projects with at least one CER issuance. In the REDD+ domain, Ecuador has received or been awarded results-based finance through both the Green Climate Fund and the REM/NICFI-supported mechanism; however, direct comparison with Brazil, Colombia, and Peru is limited because reported values refer to different program, disbursement stages, and accounting periods. In the voluntary carbon market, Ecuador’s participation remains very limited compared with Brazil, Colombia, and Peru, which have accumulated substantially larger volumes under independent standards such as VCS and Gold Standard. Ecuador’s 2025 LEAF agreement represents an important shift toward jurisdictional, high-integrity REDD+ finance, but the USD ${\mathrm{10/tCO}}_2$e price should be interpreted cautiously: it is higher than many conventional voluntary REDD+ market prices, yet below the USD ${\mathrm{15/tCO}}_2$e reported for Pará’s LEAF agreement in Brazil. These comparative differences are summarized in

Table 8. Comparative carbon market performance: Ecuador vs. selected Latin American countries.

Indicator	Ecuador	Brazil	Colombia	Peru
Forest cover (Mha)	~13.0	~498.0	~59.0	~72.0
CDM projects registered/re-registered	34	344	69	61
Share of registered CDM projects with CER issuance (%)	41%	61%	59%	36%
REDD+ results-based payments received/awarded (USD M)	~49.5	>900	~28–60	~10–30
Voluntary credits issued (approx., million credits)	~0.15	~144	~47	~98
Dominant carbon project type	Hydropower, biomass, methane	Hydropower, forestry, methane	Forestry, hydropower, methane	Forestry, hydropower

Sources: IGES CDM Database v13.7; Berkeley Voluntary Registry Offsets Database v2026-02; World Bank carbon market review for Latin America; NICFI, GCF, and LEAF/Emergent public reports. Figures are approximate and should not be interpreted as fully comparable because CDM, REDD+ results-based payments, and voluntary carbon credits follow different accounting rules, periods, registries, and verification standards.

.

3.5. Legal, Constitutional, and Regulatory Limitations in Ecuador

Ecuador’s legal framework has imposed significant constraints on voluntary carbon market expansion. Article 74 of the 2008 Constitution restricts private actors from directly buying or selling carbon credits generated from Ecuadorian environmental services unless explicitly authorized by State regulation [23]. Through Ministerial Agreement No. 033 of 2013, the Ministry of Environment established that only the State could negotiate emission reductions internationally [23]. These constraints significantly slowed voluntary carbon market development; however, in recent years, Ecuador has taken steps to address these barriers through regulatory reforms and policy updates.

Recent Reform Proposals and Regulatory Advances

1.

Ecuador Carbon Zero Program (PEEC) (August 2021): Established through Ministerial Agreement No. MAAE-2021-018, the PECC introduced a voluntary and progressive architecture through which public, private, mixed, national, or foreign organizations may quantify, reduce, and neutralize their GHG emissions under a mitigation hierarchy that prioritizes measurement, internal abatement, and, only subsequently, compensation of residual emissions [49].

2.

Technical regulation (June 2023): MAATE issued ministerial agreement No. MAATE-2023-053 establishing the National Greenhouse Gas Compensation Scheme—the first formal step toward developing a voluntary carbon market in Ecuador [23].

3.

Legal reform (COA, 2024): The National Assembly approved reforms to the Organic Environmental Code on 17 September 2024, incorporating provisions on carbon markets and environmental service compensation. However, in November 2024, the Executive branch vetoed the reforms in full, citing legal and constitutional concerns [23].

4.

Recognition of international standards: Ecuador signed memoranda of understanding with Gold Standard (July 2025) and Plan Vivo (February 2025), formally recognizing these standards within the national PECC program [50,51].

5.

Institutional strengthening (2025): MAATE announced plans to publish a national consultation and safeguards guide for carbon projects, and is developing a National Emission Reduction Registry to track projects and carbon credits transparently [23].

3.6. International Prices and Profitability of Carbon Credits

3.6.1. Global Evolution of Carbon Credit Prices

Global carbon markets have followed divergent price trajectories depending on regulatory design, credit type, and eligibility rules.

Table 9. Evolution of carbon credit prices in global markets.

Market (Credit Type)	Average Annual Price Evolution (${\mathrm{USD/tCO}}_2$e)	Ecuador Access
EU ETS (EUA)	Exceeded USD 118 in 2023; ~USD 94 in Nov. 2025 [52].	No access: EU/EEA only [53].
California/Quebec (CCA)	Record high of USD 44 in 2024; stabilized ~USD 32 by late 2024 [54].	No access: California cap-and-trade only [55].
RGGI (U.S. Northeast)	USD 20–25 in 2025 [56].	No access: limited to participating U.S. states [57].
China national ETS (CEA)	Initial USD 6–8 (2021); ~USD 13 average in 2024 [58].	No access: domestic Chinese scheme only [59].
CDM (global, CER)	USD 20 in 2008; collapsed to USD 1 in 2013; averaged USD 0.16 in 2021; effectively zero thereafter [60,61].	Direct participation as CDM host; demand collapsed post-2012.
Voluntary market (global, VER)	Average USD 3.5 in 2019; USD 6.4 in 2024; higher-integrity projects trade at significantly higher prices [27].	Direct participation: Ecuador develops forest REDD+ and domestic VCM projects [62].

Sources: [27,52,53,54,55,56,57,58,59,60,61,62].

summarizes the evolution of selected carbon credit prices in global markets and clarifies whether Ecuador can access each mechanism.

The evidence summarized in Table 9 shows that the highest carbon prices are concentrated in regulated compliance markets, particularly the EU ETS, California/Quebec, and RGGI. However, Ecuador cannot directly access these systems because they are geographically and institutionally restricted. By contrast, Ecuador’s direct participation has historically occurred through the CDM and, more recently, through voluntary and forest-based mechanisms. This creates an important asymmetry: the markets with the highest prices are not accessible to Ecuador, whereas the mechanisms available to the country have generally offered lower and more volatile prices. Consequently, Ecuador’s carbon finance strategy should not rely only on nominal global price levels, but rather on mechanisms that combine accessibility, legal certainty, high-integrity certification, and stable purchase agreements.

3.6.2. Evolution of Carbon Credit Prices and Implications for Ecuador

For Ecuador, REDD+ results-based payment mechanisms have provided relatively stable and pre-agreed prices per tonne: USD 5 in the case of the GCF and USD 10 in the case of LEAF [37,38]. The LEAF price (USD ${\mathrm{10/tCO}}_2$) is more than three times higher than that obtained in the local sale of CDM CERs from Quito (approximately USD 2.7), underscoring the importance of credit quality and type: REDD+ units correspond to new emission reductions, verified under robust standards and potentially subject to corresponding adjustments, making them more valuable within corporate carbon portfolios [38,63]. Compliance markets such as the EU ETS reached prices between USD 67 and USD 118 between 2021 and 2025, but Ecuador does not benefit from these systems as it is not a party to them and its CDM credits are not eligible [52,53].

3.6.3. Profitability of Emission Reduction or Removal Projects

The profitability of a carbon credit-generating project depends directly on the price obtained per tonne of ${\mathrm{CO}}_2$ reduced or sold. Studies in the Brazilian Amazon show that a REDD+ project achieves a positive Net Present Value (NPV) only if credits are sold above USD 3.${\mathrm{8/tCO}}_2$, with an average Internal Rate of Return (IRR) of 11.5% [64]. In voluntary markets, projects with higher integrity, additional certifications, guaranteed permanence, and social co-benefits capture a price premium that improves profitability [65].

3.6.4. Sensitivity Analysis: Profitability Under Price and Cost Scenarios

Table 10. Sensitivity analysis of Ecuador’s forest carbon profitability (REDD+ program, $3 {\mathrm{MtCO}}_2$/yr).

Carbon Price (USD per ${\mathrm{tCO}}_2$)	Gross Rev. (USD M/yr)	Net Rev.—Low MRV (−30%, USD 2.45 M)	Net Rev.—Base MRV (USD 3.5 M)	Net Rev.—High MRV (+30%, USD 4.55 M)	Viability Low	Viability Base	Viability High
3	9.0	6.5	5.5	4.5	Marginal	Marginal	Marginal
5	15.0	12.6	11.5	10.4	Viable	Viable	Viable
7	21.0	18.6	17.5	16.4	Viable	Viable	Viable
10 (LEAF)	30.0	27.6	26.5	25.4	✓ Viable	✓ Viable	✓ Viable
15	45.0	42.5	41.5	40.5	✓ Viable	✓ Viable	✓ Viable
20	60.0	57.5	56.5	55.5	✓ Viable	✓ Viable	✓ Viable

Notes: Gross revenue is calculated as carbon price multiplied by an illustrative creditable volume of $3 {\mathrm{MtCO}}_2$e per year. Net revenue subtracts only annual MRV costs under three scenarios: low MRV cost (−30%), base MRV cost (USD 3.5 million/year), and high MRV cost (+30%). The base MRV estimate is adapted from Fajardo et al. [61] and should be interpreted as a proxy, not as an Ecuador-specific validated cost. The viability classification is indicative and refers to net revenue after MRV costs only; it does not represent a full NPV or IRR calculation because implementation costs, opportunity costs, benefit-sharing obligations, taxation, registry fees, leakage buffers, and reversal-risk reserves are not included. The symbol ✓ indicates robust viability, defined here as a scenario with a substantially positive net-revenue margin after MRV costs, corresponding to carbon-price scenarios of USD ${\mathrm{10/tCO}}_2$e or higher. Scenarios labelled as “Viable” without the ✓ generate positive net revenue but are interpreted as less robust under the partial sensitivity framework used in this table. The LEAF price row is shown as a benchmark price scenario and should not be interpreted as the annual disbursement schedule of the LEAF ERPA.

presents a full sensitivity matrix varying carbon price from USD 3 to USD ${\mathrm{20/tCO}}_2$ (spanning the historical range from CDM collapse to current LEAF price) and MRV costs ±30% around the base estimate of USD 3.5 million per year (adapted from Fajardo et al. [64] for a $3 {\mathrm{MtCO}}_2$/year REDD+ program). All figures assume a conservatively estimated creditable volume of $3 {\mathrm{MtCO}}_2$/year drawn from Ecuador’s REDD+ FREL methodology.

The sensitivity analysis provides three main insights. First, under the illustrative assumption of $3 {\mathrm{MtCO}}_2$e of annual creditable reductions, carbon prices above USD ${\mathrm{5/tCO}}_2$ generate positive net revenue after MRV costs across all cost scenarios. This result is consistent with the profitability threshold reported by Fajardo et al. [61], although the present calculation should be interpreted as a partial net-revenue exercise rather than a full NPV or IRR assessment. Second, the LEAF benchmark price of USD ${\mathrm{10/tCO}}_2$ provides a substantially wider margin above MRV costs than the USD ${\mathrm{5/tCO}}_2$ price observed in earlier REDD+ results-based payments. Third, MRV cost variation alone does not change the viability classification above USD ${\mathrm{5/tCO}}_2$; however, this does not imply that overall project profitability is insensitive to costs. A full Ecuador-specific profitability assessment would require incorporating implementation costs, opportunity costs, benefit-sharing rules, leakage buffers, reversal-risk reserves, and the actual temporal disbursement schedule of jurisdictional agreements.

3.7. Cross-Mechanism Comparative Analysis

This section presents the integrated assessment of cross-cutting mechanisms, evaluating Ecuador’s three main carbon finance pathways—CDM, REDD+, and voluntary markets—based on the four variables defined in Section 2.1: (i) transaction status, (ii) mitigation volume, (iii) financial value per ton, and (iv) accounting integrity. It also presents a timeline of price fluctuations and their correlation with project registrations and credit issuance rates.

3.7.1. Cross-Mechanism Evaluation Matrix

Table 11. Cross-mechanism evaluation matrix: Ecuador’s CDM, REDD+, and voluntary market pathways assessed against the four variables defined in Section 2.1.

Evaluation Variable	CDM (2006–2023)	REDD+ (2008–2025)	Voluntary Market (2021–2025)
1. Transaction Status	34 projects registered; 14 (41%) reached issuance; 20 registered but never issued (abandoned or blocked at verification). Last CER sale: September 2024 (El Inga, ~22,000 CERs) [32].	Readiness → strategy → verified results → payment. All 6 payment tranches listed in Table 7 reached disbursement or firm commitment. LEAF ERPA signed January 2025; first payment expected 2025 pending verification [38].	PECC registry launched May 2025. MoUs with Gold Standard (July 2025) and Plan Vivo (February 2025) formalized. Projects at early registration stage; no aggregate issuance data publicly available as of 2025 [50,51,66].
2. Mitigation Volume	$2.8 {\mathrm{MtCO}}_2$e issued (cumulative, 2006–2020). Concentrated: top 5 projects = 80% of all CERs; Abanico alone = 42%. Ex ante projections up to 2020 for registered projects: ~$36.1 {\mathrm{MtCO}}_2$e across all crediting periods—certified-to-projected ratio ~8% on a cumulative basis [26].	~$28 {\mathrm{MtCO}}_2$e avoided deforestation verified (2008–2014 baseline period) [37]. Subsequent periods: $8 {\mathrm{MtCO}}_2$e verified under REM (2015–2018) [37]. LEAF: $3 {\mathrm{MtCO}}_2$e committed (2023–2026) [38]. Total verified to date: ~$39 {\mathrm{MtCO}}_2$e.	No aggregate national figure available. Individual projects: Pichacay (methane, ongoing VCS issuances); FINCA (GS, 2022–2023). PROFAFOR (historical): ~$2.23 {\mathrm{MtCO}}_2$e over 20 years [45]. Domestic PECC market: nascent.
3. Financial Value per Tonne (${\mathrm{USD/tCO}}_2$e)	Peak: ~USD 20 (2008). Collapse post-2012: <USD 1 (2013), ~USD 0.16 (2021), ~USD 0 (2022–present). Local CER sale (El Inga, 2024): ~USD 2.${\mathrm{7/tCO}}_2$e [32]. Weighted average across Ecuador’s CDM portfolio: estimated <USD ${\mathrm{3/tCO}}_2$e [61].	GCF pilot (2019): fixed USD ${\mathrm{5/tCO}}_2$e [37]. REM (2019–2020): USD ${\mathrm{5/tCO}}_2$e [37]. LEAF ERPA (2025): USD ${\mathrm{10/tCO}}_2$e with upside-sharing clause above USD 10 [38]. Price trend: upward. LEAF price = 2× GCF price.	No publicly disclosed Ecuador-specific VCM price. Global VCM average: USD 3.5 (2019) → USD 6.4 (2024) [27]. High-integrity projects (co-benefits, permanence, GS): USD 10–30+ [65]. PECC domestic prices: not yet disclosed.
4. Accounting Integrity	Mixed. Hydropower/methane projects: robust AM0002/ACM0002 methodologies, third-party verified. Additionality failures: wind/solar (0% issuance) and large hydro (not completed). No corresponding adjustment required (pre-Paris). CER market collapse undermined environmental credibility globally [17].	Higher integrity: ART-TREES standard (LEAF) with conservative FREL baselines and leakage buffers. Risk: ex post evaluations show magnitude of credits sensitive to baseline construction and counterfactual choice [39]. No double-counting with NDC required under LEAF terms. Civil society concerns re: equitable benefit distribution [67].	Variable. Pichacay (VCS, CDM-methodology): robust. FINCA (GS4GG): strong social co-benefits. Systemic risk: Article 74 Constitutional constraint limits State authorization of credits → uncertainty about corresponding adjustment compliance for post-2020 voluntary credits [23]. Presidential veto (November 2024) leaves regulatory gap [23].
Overall Assessment	Moderate volume, low price, moderate integrity. Legacy mechanism; effectively closed for new projects. Key lesson: price certainty and methodology maturity drive issuance.	Lower volume but higher price and stronger integrity than CDM. Best-performing mechanism for Ecuador to date. Scale depends on legal framework and conservative baselines.	Nascent; high potential but blocked by constitutional uncertainty and 2024 veto. Regulatory resolution is prerequisite for development.

Sources: [17,23,26,27,32,37,38,39,45,50,51,61,65,66,67].

provides an integrated cross-mechanism assessment, evaluating Ecuador’s three main carbon-finance pathways—CDM, REDD+, and voluntary markets—against the variables defined in Section 2.1.

3.7.2. Timeline of Price Shocks and Their Correspondence with Project Registration and Credit Issuance

Table 12. Timeline of global carbon market price shocks and their correspondence with Ecuador’s CDM project registrations and CER issuance rates, 2006–2025.

Year	CER Price (${\mathrm{USD/tCO}}_2$)	VCM Avg. Price (${\mathrm{USD/tCO}}_2$)	Ecuador CDM Projects Registered (n)	Ecuador CERs Issued (${\mathrm{tCO}}_2$e)	Global Market Event	Ecuador Institutional Event	Effect on Ecuador Carbon Market
2006	~15	–	8	~141,000	CDM pipeline growing; Kyoto targets active.	First eight CDM projects registered.	High registration rate driven by attractive CER prices and CDM expansion [26].
2007	~14	~2	1	~324,000	CER demand stable.	One project registered.	Sustained but slowing registration [26].
2008	~20	~2	4	~377,000	CER price peaks at USD 20. Global financial crisis begins (H2).	Ecuador 2008 Constitution enacted (Art. 74 restricts environmental services).	Peak CER price drives issuance; Constitution introduces legal uncertainty [8,23].
2009–2010	~15 → 12	~2	1	~774,000 (cumul.)	Kyoto targets push compliance demand; CDM still operational.	Ecuador joins UN-REDD as observer (2009). Four projects registered.	Registration continues; REDD+ readiness begins [68].
2011	~10	~2–3	3	~411,000	CER oversupply emerging. EU signals tightening of CDM access.	Ecuador advances to UN-REDD partner status; USD 4 M secured [68].	Continued registration; REDD+ track opens as CDM weakens [68].
2012	~4	~3	8	~387,000	PRICE SHOCK 1: EU excludes most CDM credits from ETS compliance. CER price collapses from USD 10 to USD 4.	8 CDM projects registered (peak year); Ministerial Agreement 033 restricts private carbon transactions [23].	Paradox: registration peaks as market collapses — lag effect. Legal restriction further limits private VCM [23].
2013	~1	~3	6	~18,000	PRICE SHOCK 2: CER price hits USD 1. CDM market effectively non-functional.	6 projects registered. Germany/Norway REM commitment of up to USD 65 M [41].	CER issuance collapses as price makes verification uneconomic. REDD+ becomes primary pathway [41].
2014–2018	<1	~3–4	2	0 (cumul.)	CDM moribund. Paris Agreement signed (2015). Article 6 rulebook under negotiation.	FREL submitted (2015); REDD+ Action Plan adopted (2016); PROAmazonía launched (2017) [36].	CDM registrations low/issuances zero. Ecuador pivots institutional capacity to REDD+ [36].
2019	~0.5	~4	0	~167,000 *	VCM demand growing but fragmented. CER market dormant.	GCF results-based payment: USD 18.5 M for $3.6 {\mathrm{MtCO}}_2$ at USD 5/t [37]. REM payments begin.	REDD+ generates more revenue than CDM’s entire history in one transaction. Marks Ecuador’s shift to forest finance [37].
2020	~0.2	~4	0	~158,000	COVID-19 disrupts carbon markets. CERs averaged USD 0.16 [61].	REM 2nd payment: USD 18 M for $3.6 {\mathrm{MtCO}}_2$ [37].	CDM effectively closed. REDD+ pathway delivering results-based payments [37].
2021	~0.1	~4–5	0	0	VCM growth accelerates (>USD 2B market). PRICE SHOCK 3 (positive): EU ETS surges past USD 60. COP26 adopts the Art. 6 rulebook.	Ecuador launches PECC (voluntary market program) [66].	Voluntary market interest revives domestically; PECC launched [66].
2022–2023	~0	~5–6	1	0 (cumul.)	PRICE SHOCK 4: VCM contraction—integrity scandals (Verra REDD+ reports). CER price = 0.	MAATE issues Regulation MAATE-2023-053 (first VCM regulatory framework) [23].	Domestic regulation created; but global VCM skepticism limits attractiveness [23].
2024	~0	~6.4	0	0	VCM stabilising. Art. 6.4 methodology agreed at COP29. LEAF model gaining traction.	COA reform approved by Assembly (September); vetoed by President (November). LEAF ERPA signed (January). 1 CDM project registered [23,38].	PRICE IMPROVEMENT: LEAF USD 10/t is best price achieved. But veto blocks VCM legal framework [23,38].
2025	–	~6–8 (proj.)	0	0	Article 6 operationalization ongoing. High-integrity credits increasingly premium-priced.	PECC registry formalized (May). MoUs with GS (July) and Plan Vivo (February). LEAF first payment expected [50,51].	Institutional progress continues, but constitutional constraint unresolved. LEAF delivers the highest per-tonne value in Ecuador’s history [38].

(*) El Inga CERs were issued in 2019 but sold in 2024; 1 CDM project registered in 2023 (LE PARC). Sources: [17,23,26,27,32,36,37,38,39,41,50,51,61,66,68].

links three parallel time series of international CER/VCM prices, Ecuador’s annual CDM project registrations, and annual CER issuances. This correlation illustrates the mechanism by which price fluctuations translate into changes in Ecuador’s carbon market participation.

The timeline reveals four distinct phases in Ecuador’s carbon market trajectory, each driven by a combination of price signals and institutional decisions:

1.

Growth phase (2006–2011): High CER prices (USD 10–20/tCO₂) incentivized CDM registration, with 17 projects registered in this period. Institutional investment in MRV capacity and UN-REDD readiness began in parallel.

2.

Collapse and pivot (2012–2015): The exclusion of CDM credits from the EU ETS triggered a cascade – CER prices fell from USD 20 to USD 1 in two years. Verification became uneconomic, issuances collapsed, and Ecuador’s institutional energy pivoted toward REDD+. The 2012 peak in registrations (eight projects) reflects a lag effect: projects in development could not be stopped despite deteriorating market conditions.

3.

REDD+ consolidation (2016–2021): With CDM revenues near zero, results-based REDD+ payments provided Ecuador with more climate finance (USD 49.5 million) in three transactions than the entire CDM history. The pre-agreed prices (USD ${\mathrm{5/tCO}}_2$) provided stability absent from market mechanisms, while the later LEAF agreement at USD ${\mathrm{10/tCO}}_2$ signals a higher-value pathway for high-integrity forest credits.

4.

Regulatory transition (2022–2025): Global VCM integrity concerns slowed voluntary market growth while Ecuador developed its first domestic regulatory framework. The LEAF ERPA (USD ${\mathrm{10/tCO}}_2$) represents the highest per-tonne value Ecuador has achieved and demonstrates that high-integrity, sovereign-scale forest credits can command premium prices. The 2024 presidential veto interrupted the regulatory trajectory, leaving the voluntary market legally uncertain despite institutional progress with the Gold Standard and Plan Vivo.

The key cross-mechanism finding is that price certainty—whether through pre-agreed bilateral rates (REDD+/LEAF) or contractual CER prices (early CDM)—has been a more reliable driver of Ecuador’s carbon market performance than market price levels per se. This finding suggests that Ecuador should prioritize securing long-term price agreements with high-integrity buyers over maximizing nominal credit volume, as price risk is the dominant source of project non-viability in the current institutional environment [64].

4. Conclusions and Policy Implications

4.1. Summary of Findings

This study has provided a structured evidence synthesis of Ecuador’s three-decade engagement with carbon-finance mechanisms, applying an institutional economics framework to explain differential outcomes across the CDM, REDD+, and voluntary markets.

Under the CDM (2006–2023), Ecuador registered 34 projects, primarily in small hydropower (47%) and bioenergy (26%). Only 14 projects (41%) issued CERs by 2020, accumulating $2.8 {\mathrm{MtCO}}_2$e—below the global CDM issuance rate of approximately 57% [17] and well below ex ante projections, only 8% issuance rate for the 34 registered projects. The concentration of issuance in hydropower (65% of all CERs) reflects the methodological accessibility of AM0002/ACM0002, while large hydropower and solar projects failed to complete verification due to additionality challenges, high MRV complexity, and price collapse after 2012.

Under REDD+, Ecuador has been more successful. Results-based payments totalling USD 49.5 million (GCF: USD 18.5 million; REM: USD 31.0 million) have been disbursed, and a further USD 30 million is committed under LEAF at USD ${\mathrm{10/tCO}}_2$. These payments covered less than 15% of the emission reductions achieved between 2008 and 2020, underscoring the gap between verified mitigation and available international finance [37,42,43].

Overall, the evidence indicates that Ecuador’s carbon market outcomes have depended more on the predictability of carbon revenues than on the nominal magnitude of carbon prices. Mechanisms that incorporated ex ante price certainty—such as REDD+/LEAF through pre-agreed bilateral rates and the early CDM through contractual CER prices—were better able to support market performance than arrangements exposed primarily to uncertain or volatile market price signals. This finding highlights price certainty as a critical institutional condition for strengthening the effectiveness of voluntary and compliance-based carbon market mechanisms in Ecuador.

In the voluntary market, Ecuador’s participation has been constrained by Article 74 of the 2008 Constitution and Ministerial Agreement No. 033 of 2013. Recent progress signals a gradual opening, but the 2024 presidential veto of the COA reform represents a significant setback. Benchmarking against Brazil, Colombia, and Peru confirms Ecuador’s underperformance relative to its ecological potential.

4.2. Policy Implications

The findings support three priority reforms, each traceable to specific evidence in Section 3:

1.

Legal certainty (responding to Section 3.5): The constitutional ambiguity documented has cost Ecuador an estimated USD 30–50 million in foregone voluntary carbon investment over the past decade. Resolution through a constitutional interpretation decree or targeted legislative reform is the highest-priority institutional action. Any reform must preserve State oversight while creating a predictable, time-bound authorization process for private and community-level projects.

2.

Transparent national registry: Ecuador’s post-2020 credits must respect corresponding adjustment rules under the Paris Agreement. The PECC national registry, formally launched in May 2025, must be made publicly accessible, machine-readable, and interoperable with UNFCCC tracking systems before any Article 6.2 international credit sales are concluded.

3.

Benefit-sharing governance (responding to Section 3.2 and civil society concerns [67]): A mandatory benefit-sharing regulation with independently verified indigenous and local community payment floors is required to maintain social legitimacy and ensure equitable distribution of climate finance, particularly given Ecuador’s constitutional recognition of indigenous territorial rights.

4.

Prioritizing Revenue Predictability in Carbon Market Design: For a small, price-taking economy with limited influence over global carbon price formation, mechanisms based on ex ante price certainty—such as floor-price arrangements, long-term offtake agreements, results-based payment contracts, bilateral purchase agreements, or price-stabilization clauses—may provide stronger incentives for project developers, communities, and public institutions than mechanisms dependent on volatile spot-market prices.

4.3. Limitations and Future Research

This study has three principal limitations: (i) domestic PECC price data are unavailable, limiting voluntary market profitability assessment; (ii) independent verification of voluntary project-level revenues is not possible from publicly available data; and (iii) Ecuador-specific MRV cost data do not exist, requiring reliance on Brazilian Amazon benchmarks. Future research should address the following: (i) longitudinal tracking of the PECC domestic market (2025–2030) to establish Ecuador-specific benchmarks; (ii) quasi-experimental evaluation of Ministerial Agreement 033’s impact on voluntary project development, exploiting the pre-/post-2013 discontinuity; and (iii) formal cost–benefit analysis of Article 6.2 bilateral agreements for Ecuador, incorporating corresponding adjustment costs and NDC ambition effects.

For Ecuador, the most credible near-term pathway is not to maximize credit volume, but to build a transparent, high-integrity framework for forest and domestic climate-finance mechanisms, with clear authorization rules, conservative accounting, robust registries, and equitable benefit-sharing. Under those conditions, carbon markets may complement, but not substitute for, domestic decarbonisation policy.