Carbon Credit Market Highlights

The Carbon Credit market was estimated at US$ 410.40 billion in 2023 and is expected to grow at a CAGR of 33.07% during 2024-2030 to reach US$ 7,145.23 billion in 2033.

Carbon Credit Market CAGR

2023-2033

CAGR OF

33.07%

Carbon Credit Market

A carbon credit is an authorization that lets the holder release a specific quantity of greenhouse emissions. Projects that have cut or eliminated greenhouse gas emissions produce carbon credits. One tonne of carbon dioxide or another greenhouse gas equivalent (CO2e) is removed from the atmosphere for every credit. Emissions reduction initiatives related to climate change are financed by carbon credits. Reducing global emissions, promoting community development, and safeguarding delicate ecosystems are a few examples of these efforts. A company's emissions limit is represented by the quantity of credits it has been granted. A management team can have an excess of carbon credits if they can keep corporate emissions below a certain level.
Several causes, including the introduction of laws and regulations by governments aiming at lowering greenhouse gas emissions, have contributed to the rise in demand for carbon credits in recent years. It might be necessary for businesses that must abide by these restrictions to buy carbon credits to offset their emissions and meet compliance requirements. In December of that year, the Indian government passed the Energy Conservation Bill 2022, opening the door for the creation of the markets. The United States accounted for the majority of North America’s market in 2022. State-level initiatives and voluntary markets are the main forces behind the carbon credit market. Several states have introduced cap-and-trade policies, which impose restrictions on the overall amount of greenhouse gas emissions that are permitted inside the state and mandate that businesses buy carbon credits to offset their emissions. The Regional Greenhouse Gas Initiative (RGGI), a cap-and-trade scheme run by nine states in the nation's northeast, is one illustration of this.
The largest carbon market in the world, the EU's Emissions Trading System (ETS), serves as the foundation for the European market. More than 11,000 facilities in the industrial and power sectors across 31 European nations are covered by the ETS, which was founded in 2005. Approximately 45% of the greenhouse gas emissions in the EU are caused by these sites.
A major portion of the price of carbon offsets in the EU ETS is controlled by supply and demand. The EU has set a cap on the overall amount of allowances available, and the cost of carbon credits is subject to change in response to several factors, including energy prices, economic conditions, and climate policy. The cost of fossil fuels, the availability of renewable energy, and the uptake of low-carbon technology are some of the variables that might affect the demand for carbon credits.

Carbon Credit Market

by Type

Compliance

Voluntary

The Market will Grow

At the CAGR of:

33.07%

The Forecast Market

Size for 2033 in USD:

$7,145.23B

Over the course of the projection period, North America is anticipated to see the highest growth in the area. Demand, supply, price volatility, and market rules have all had an impact on the rising popularity of carbon credits in North America. The creation of carbon credit market, like the cap-and-trade system in California and the carbon market in Quebec and Ontario, has aided in providing a price signal for reducing greenhouse gas emissions and promoting the advancement of cleaner technology and renewable energy sources.
Companies can buy carbon credits on voluntary markets in the United States to offset their emissions in addition to state-level programs. Businesses who wish to lessen their carbon footprint but are not mandated by law to do so frequently use these voluntary markets. In comparison to certain other economies, like those of Europe, the U.S. market for carbon credits is still modest overall, but it is expanding and may eventually contribute more to the reduction of greenhouse gas emissions.
Several factors, including businesses' quick recognition of the value of sustainability and their efforts to reduce their carbon footprint as part of corporate social responsibility, are contributing to the rising demand for carbon credits. As a result, there is a constant need for carbon credits to make up for their emissions. Additionally, there is a greater market for carbon credits as worries about climate change and its possible effects in the future grow.
The carbon credit market faces a few significant obstacles, one of which is the price volatility of carbon credits, which varies based on supply and demand. Because of this, it may be difficult for businesses to create long-term plans and to guarantee that the cost of carbon credits offers a strong enough financial incentive for reducing emissions.
Several investments/guidelines in the industry have been directed in recent years, which would boost the overall carbon credit market. Some of them are:
•    A growing trend is the use of bio-based and recycled plastics in Carbon Credit production. This aligns with stricter environmental regulations and consumer demand for sustainable products. For instance, in 2021, BASF, a leading chemical company, announced its plans to invest €620 million ($716 million) in a new facility in Germany to produce cathode materials for electric vehicles (EVs) which will likely utilize efficient cooling systems incorporating sustainable Carbon Credits.
•    The e-commerce behemoth Shopify revealed in December 2022 that it has made a strategic investment in Forager, a firm that assists companies in acquiring premium carbon offsets. The growing emphasis that businesses are placing on incorporating carbon neutrality into their operations is reflected in this relationship.
•    In November 2023, Goldman Sachs launched a new investment fund focused on high-quality nature-based carbon credits. This move by a major Wall Street bank indicates the growing acceptance of carbon credits as a viable asset class.
•    In October 2023, the Asian Development Bank (ADB) approved a $30 million loan to support a bamboo bioenergy project in Cambodia that will generate renewable energy and create high-quality carbon offsets. This highlights the role of development finance institutions in promoting sustainable development through carbon markets.
•    In September 2023, Amazon pledged to invest $1 billion over a decade in global forest restoration efforts. This commitment will create new opportunities for forest carbon projects, which are a critical component of the voluntary carbon market.

Carbon Credit Market Segments' Analysis

Carbon Credit Market

By Project Type

XX%

Reduction

Removal

410.40

Total Market Size

USD (Billion), 2023

33.07%

CAGR

2023 - 2033

The carbon credit market is divided based on type, project type, end use, and region. Based on type, the market is segmented into compliance and voluntary.

Based on project type, the market is segmented into reduction and removal.
Based on end use, the carbon credit market is segmented into power, energy, aviation, transportation, buildings, industrial, and others.

The Carbon Credit market is broken down geographically into areas like North America, Europe, Asia-Pacific, and the Rest of the World (RoW).

Carbon Credit Market

By Region

The Market will Grow

At the CAGR of:

33.07%

The Forecast Market

Size for 2033 in USD:

$7,145.23B

Carbon Credit Market Key Players

There is stiff competition in the carbon credit market. The growth of the companies is directly dependent on the industry conditions and government support. These companies differentiate their offerings based on their quality and their penetration in the target and emerging markets. Also, there have been some major partnerships in the industry in recent years, which significantly influenced the competitive dynamics. For example:
•    To offer decades of experience and practical analysis to both new and current fleet customers, 3Degrees and Merge Electric Fleet Solutions joined in November 2022. In the clean fuel jurisdictions (CA, OR, WA), 3Degrees will monetize Merge's charging and offset all EV charging with RECs.
•    Johnson Controls and 3Degrees teamed together in August 2022 to quicken the race to net zero. With carbon reduction services, the partnership expedites the attainment of net zero goals.
•    In August 2022, Siemens Smart Infrastructure and South Pole partnered to offer a full range of solutions and financing models for companies to reduce energy-related emissions.
•    South Pole and Landcare NSW teamed up in August 2021 to create climate change initiatives throughout Australia's New South Wales. Through the variety of carbon and biodiversity project alternatives available, the partnership unites South Pole's local and global expertise as a project developer with Landcare NSW's robust community network, generating opportunities for Landcare members throughout the entire state.

The overall competitive landscape has been affected due to these strategic activities. The following are the major players in the Carbon Credit market:
•    3Degrees Group, Inc.
•    Carbon Care Asia Ltd.
•    CarbonBetter
•    ClearSky Climate Solutions
•    EKI Energy Services Limited
•    Finite Carbon
•    NativeEnergy
•    South Pole Group
•    Torrent Power Limited
•    WGL Holdings Inc

Carbon Credit Market Scope: