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

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 MtCO2e—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 10/tCO2. 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.