Carbon Credits Market Size Projected to Generate a Revenue of $143,530.6 Million by 2032

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The Global Carbon Credits Market is predicted to be valued at $143,530.6 million by 2032, surging from $2,000.0 million in 2022, at a CAGR of 55.5 %.

Impact Analysis of COVID-19 on the Carbon Credits Market

The economic slowdown and worldwide lockdowns had a significant impact on energy use, travel, and industrial activities. Therefore, carbon emissions temporarily decreased in many sectors. There was an oversupply of carbon credits in some markets due to the reduced emissions, which led to a drop in their prices. Not all industries and geographical areas experienced the same level of emission reductions. Some industries, such as healthcare, e-commerce, and home entertainment, saw an uptick in activity, which led to an increase in emissions. Furthermore, the pandemic-related emission reductions are only temporary and do not represent the long-term structural changes required to combat climate change.

The recovery efforts taken by governments of various countries to address economic and social consequences of COVID-19 and initiatives taken to reduce greenhouse gas emissions is having a positive impact on the carbon credits industry in the post-pandemic period. For instance, several governments have implemented potential policies that drives investments and consumption decisions towards low-carbon alternatives.

Global Carbon Credits Market Analysis

As the world advances towards net zero goals, businesses are investing a lot of time and money in decarbonization. Carbon credits helps in reducing the greenhouse gas emissions and one carbon credit is equal to one ton of carbon emitted into the environment. The U.S. has been in forefront of reducing the harmful carbon emissions and has developed the U.S. Clean Air Act of 1990, which is known to be the world’s first cap-and-trade program for regulating the airborne emissions. Also, the number of companies that are buying carbon credits as a part of corporate social responsibility (CSR) are increasing rapidly. Carbon credits help in creating monetary incentives for the companies to reduce their carbon emissions. The companies get fixed number of carbon credits that can decline over time and companies can trade these carbon credits. Thus, the number of countries that want to participate in carbon markets are increasing rapidly which helps in meeting the climate change goals. For instance, Jordan is the first developing country that has built an end-to-end digital infrastructure for tracking the global greenhouse gas emission reductions. These factors are anticipated to boost the carbon credits market growth in the upcoming years.

Limited environmental integrity and issues with displacement of emissions are anticipated to hamper the carbon credits market share in the future. As the integrity of carbon credits depend on the accurate measurement of carbon emissions, reporting, and verification, the methodologies and standards used for calculating carbon credits varies that can cause inconsistencies and loopholes in the process. These factors are anticipated to restrain the carbon credits market share during the forecast period.

It is anticipated that there will be a significant increase in demand for carbon credits. The voluntary offset market presents a chance to reduce greenhouse gas emissions while also meeting the needs of developing nations. Participating in climate protection helps developing nations reduce their carbon emissions and offers a chance for generating income from the sale of their carbon credits. Tradable carbon credits help the customers to meet the sustainability goals. Also, monetization of carbon credits creates additional revenue stream for the companies. The trade of carbon credits help the countries and businesses to lower or remove the carbon from the atmosphere by switching to clean energy sources, planting trees, and others. The rising need for decarbonizing economies is anticipated to generate excellent opportunities in the carbon credits industry.

Global Carbon Credits Market, Segmentation

The carbon credits market is segmented on the basis of type, system, end-use industry, and region.

Type:

The type segment is classified into regulatory and voluntary. Among these, the voluntary sub-segment is anticipated to show the fastest growth during the forecast period. Voluntary carbon credits market is growing in popularity since companies purchase carbon credits for voluntary use rather than complying with legally binding emissions targets. As companies are becoming more conscious about their carbon emissions, they are voluntarily taking part in carbon reduction programs and initiatives such as carbon credits. Under voluntary carbon credits initiatives such as carbon capture & storage, reforestation, and development of renewable energy & green technology are considered. Voluntary carbon credits help in carbon footprint reduction as the individuals & organizations can take the responsibility of their carbon emissions. The companies are purchasing carbon credits as a part of corporate social responsibility (CSR) to demonstrate their commitment towards environmental sustainability that helps in enhancing the brand image to attract environmentally conscious individuals. These factors are anticipated to boost the growth of the voluntary sub-segment during the forecast period.

System:

The system segment is further classified into cap-and-trade and baseline-and-credit. Among these, the baseline-and-credit sub-segment is projected to witness the highest CAGR during the forecast period. The baseline-and-credit system sets a baseline on total emissions and reducing the emissions below this level helps in generating credits that can be sold to others. The key advantages of baseline-and-credit system is that the generated credits can be sold to others and there is no pressure to buy credits if the baseline is exceeded. The baseline-and-credit system incentivizes the switch to low-carbon alternatives. Baseline-and-credit represents indirect carbon emissions. Also, this model helps in efficiently switching to greener energy sources and reduces the energy dependence.

End-use Industry:

The end-use industry segment is further classified into aviation, energy, industrial, petrochemical, and others. Among these, the industrial sub-segment is predicted to have the fastest growth during the forecast period. The carbon market provides economic incentives for industrial entities to reduce their emissions. These entities can adopt various strategies to mitigate their greenhouse gas emissions, such as implementing energy efficiency measures, adopting cleaner technologies, optimizing industrial processes, and exploring renewable energy alternatives. By reducing emissions, industrial entities can generate carbon credits that can be traded or used to meet compliance obligations. Industrial entities may also participate in emission reduction projects that generate carbon offsets. These projects can focus on implementing technologies or practices that reduce emissions, such as capturing and utilizing methane from waste sites, implementing renewable energy systems, or improving industrial energy efficiency. By participating in such projects, industrial entities can generate carbon offsets that can be sold or used to offset their own emissions.

Region:

The carbon credits market in Asia-Pacific is anticipated to show the fastest growth during the forecast period. Countries in the region are increasingly using carbon credits to meet their decarbonization objectives and keep up with legislative changes like cross-border carbon tariffs.. At least 26% of the total annual emissions in Asia-Pacific are currently covered by four well-established regulatory carbon schemes. According to the independent advisory Climate Change Commission of New Zealand's recommendations, the market  registered a significant increase in auction price settings in 2022. NZU prices, however, fell by over 15% as a result of the government's implementation of a weaker-than-anticipated auction price setting for the emission trading system (ETS) and uncertainty regarding the future course of policy. Also, in May 2023, India which is one of the leading carbon-emitting country is on track with its net zero carbon emission by 2070 and the country is set to launch high-integrity carbon credits to attract more investments.

Key Players in the Global Carbon Credits Market

Some of the leading carbon credits market players are

• South Pole
• 3Degrees
• EKI Energy Services Ltd
• TerraPass
• NATUREOFFICE
• Moss.Earth
• Climate Impact Partners
• Carbon Credit Capital LLC
• CarbonBetter
• NativeEnergy

For instance, in September 2021, Terrapass, the leader in carbon offset along with Just Energy Corp., distributor of electricity and natural gas, announced Terrapass Coin (TPSC) a digital asset that helps in reducing the carbon footprints by giving companies the control to carbon offset.