The global Carbon Credit market is valued at USD 418.05 billion in 2023 and is expected to reach USD 4,098.24 billion by 2029, to grow at a CAGR of 29.1% % during the forecast period.
Carbon credits serve as a valuable mechanism enabling businesses to counterbalance their carbon emissions. This is achieved through the acquisition of credits from initiatives designed to curtail greenhouse gas emissions. Such endeavors encompass a wide range of activities, such as renewable energy production, afforestation, energy conservation campaigns, and more. Through the procurement of carbon credits, enterprises can offset a portion of their emissions, contributing to the overarching goal of diminishing greenhouse gases. Governments across the globe are fostering favorable policies and regulations aimed at emission reduction, with many nations pledging their commitment to the Paris Agreement, which establishes emissions reduction targets. Carbon credits thus become instrumental in helping companies fulfill their obligations under these international accords.
Numerous corporations acknowledge the significance of sustainability and the imperative to shrink their carbon footprint as integral components of their Corporate Social Responsibility (CSR) endeavors. Environmental sustainability holds paramount importance, not solely in the context of climate change mitigation but also for preserving their societal permission to operate and aligning with the expectations of stakeholders. Consequently, companies are proactively exploring avenues to curtail their greenhouse gas emissions and affirm their dedication to sustainable practices. Carbon credits furnish these companies with a vehicle to neutralize their emissions and shoulder responsibility for their environmental influence. The mounting apprehension over climate change and its potential ramifications has spurred heightened consciousness and a sense of duty across diverse sectors, resulting in an amplified demand for carbon credits as a means of offsetting emissions and contributing to global emission abatement endeavors.
Companies that surpass their allocated emission quotas are obligated to procure carbon credits, often referred to as allowances or offsets, to counterbalance their surplus emissions. The proceeds generated from the sale of these allowances are frequently reinvested into clean energy projects or employed to bolster climate mitigation endeavors.
However, the fluctuating prices of carbon credits present a challenge for companies that rely on price stability to plan and invest in emission reduction projects. Such price volatility can complicate the assessment of the financial feasibility and return on investment for these projects. To manage their exposure to price fluctuations, companies may deploy various strategies, including forward contracts, hedging mechanisms, or long-term purchasing agreements.
In response to these challenges, concerted efforts are being made to address price volatility and enhance market stability. These efforts encompass initiatives such as market reforms, enhanced transparency, standardization of offset quality, and the formulation of mechanisms to stabilize prices. Regulatory frameworks and institutions are also being established to oversee and administer carbon credit markets more effectively, with the ultimate goal of reducing price volatility and ensuring the long-term efficacy of carbon pricing mechanisms.
Governments worldwide are increasingly enacting policies and regulations aimed at curbing greenhouse gas emissions and combatting climate change. A prevalent strategy involves establishing emissions reduction targets and creating regulatory frameworks that compel companies to proactively address their emissions. These regulations frequently incorporate mechanisms that either encourage or mandate companies to acquire carbon credits for offsetting their emissions.
Carbon credits signify a tangible reduction or elimination of greenhouse gas emissions, a fact that is independently verified and certified in accordance with recognized standards. Through the acquisition of carbon credits, companies gain the means to effectively counterbalance a portion of their emissions by actively supporting projects that result in emissions reductions or the adoption of sustainable practices. This symbiotic relationship between regulatory measures and carbon credits facilitates a dual benefit: companies align with emission reduction goals, while simultaneously contributing to the global effort to combat climate change.
By Project Type
- Avoidance / Reduction Projects
- Removal / Sequestration Projects
By End Use
- North America (U.S., Canada)
- Europe (France, Germany, UK, Italy, Netherlands, Spain, Russia)
- Asia Pacific (Japan, China, India, Malaysia, Indonesia. South Korea)
- Latin America (Brazil, Mexico, Argentina)
- Middle East & Africa (Saudi Arabia, UAE, Israel, South Africa)
By Type Analysis:
The compliance segment dominates the carbon credit market, holding the largest market share. Within this segment, there are companies and organizations that are bound by government regulations or specific authorities, compelling them to offset their carbon emissions. These regulations establish precise emissions reduction targets or limitations and mandate that companies procure carbon credits to offset any surplus emissions they generate. The carbon credits purchased under compliance obligations represent authenticated emission reductions derived from sanctioned projects, encompassing activities like the installation of renewable energy systems, energy efficiency campaigns, and other qualified initiatives.
By Project Type Analysis:
In 2022, the avoidance segment claimed the largest share of revenue in the carbon credit market. This segment is primarily driven by renewable energy projects like wind farms, solar power installations, and hydroelectric plants. These projects generate carbon credits by preventing or displacing emissions that would have materialized if electricity had been produced using fossil fuels such as coal-fired power plants. The calculation of avoided emissions is rooted in the difference between the greenhouse gas emissions associated with the renewable energy project and the emissions that would have transpired in a baseline scenario where fossil fuels were utilized.
Another notable category within the avoidance/reduction segment includes methane capture facilities. Methane is a potent greenhouse gas emitted during the extraction and transportation of coal, oil, natural gas, as well as from landfills and agricultural activities. These projects encompass the capture and responsible utilization or destruction of methane emissions that would otherwise have been released into the atmosphere. Examples of such initiatives comprise methane recovery from coal mines, methane capture from livestock operations, and methane capture from waste management facilities. Carbon credits stemming from methane capture projects signify the avoided emissions that would have occurred if the methane had not been captured and had been released into the atmosphere instead.
The European region maintained its supremacy in the global carbon credit market, boasting a substantial market share. This dominance can be attributed to several factors, including the long-established presence and maturity of the EU Emissions Trading System (EU ETS) and the widespread coverage of installations across numerous European countries. The EU ETS has been highly effective in building a robust carbon market infrastructure, fostering emissions trading, and stimulating the transition towards a low-carbon economy.
Within the EU ETS framework, a cap is placed on the overall greenhouse gas emissions allowed from covered installations. Each installation is allotted a specific number of allowances, which represent the authorization to emit a defined quantity of greenhouse gases. Should a facility surpass its allocated emissions limit, it is compelled to procure additional allowances or carbon credits from the market to compensate for the excess emissions. Conversely, if an installation reduces its emissions below the allocated allowances, it can trade or sell surplus allowances or credits.
In North America, there has been notable growth, driven in part by price volatility. This volatility creates opportunities for companies to enter the market and participate in emissions trading, as well as for investors seeking potential returns in the carbon market. The allure of such volatility, coupled with the potential for market-driven incentives and the impetus to meet emissions reduction targets, has garnered substantial interest and contributed to the popularity of carbon credits in the region. Governments and regulatory authorities have implemented frameworks and targets that generate demand for carbon credits, fostering the development of renewable energy projects and motivating companies to offset their emissions through credit purchases. Top of Form
The carbon credit market can be described as moderately fragmented, with a multitude of participants actively involved in research and development (R&D) and technological innovation. This fragmentation arises from the diverse array of entities and stakeholders engaged in carbon credit-related activities. These include project developers, verification and certification bodies, brokers, financial institutions, and technology providers, all contributing to the market's complexity and diversity.
Research and development play a pivotal role in the carbon credit market, as participants continuously seek inventive solutions and technologies to curtail greenhouse gas emissions and augment the efficiency of emissions reduction projects. This pursuit of innovation encompasses advancements in various domains, such as renewable energy technologies, measures to enhance energy efficiency, initiatives related to carbon capture and storage, and other strategies aimed at reducing emissions. This collective drive for innovation fuels progress in the carbon credit market and contributes to its ongoing evolution.
Some of the Major Players operating in the global market include 3Degrees, Carbon Care Asia, CarbonBetter, ClearSky Climate Solutions, EKI Energy Services, Finite Carbon, NativeEnergy, South Pole, Torrent Power, and WGL Holdings.
In March 2023, the Integrity Council for Voluntary Carbon introduced a novel initiative known as the "Core Carbon Principles and Program-level Assessment Framework" for carbon credits. This framework was established with the primary objective of defining a benchmark for carbon emissions, particularly in the context of sustainable development. This initiative signifies a concerted effort to standardize and assess carbon credits, ensuring that they meet rigorous criteria and align with sustainability goals. By setting clear principles and assessment criteria, the Integrity Council aims to enhance the credibility and reliability of carbon credits in contributing to sustainable development and addressing climate change.
Carbon Credit Market Report Scope
Market size value in 2023
USD 418.05 billion
Revenue forecast in 2032
USD 4,098.24 billion
29.1% from 2023 – 2029
2019 – 2022
2023 – 2029
Revenue in USD billion and CAGR from 2023 to 2029
By Type, By Project Type, By End Use, By Region
North America, Europe, Asia Pacific, Latin America; Middle East & Africa
3Degrees, Carbon Care Asia, CarbonBetter, ClearSky Climate Solutions, EKI Energy Services, Finite Carbon, NativeEnergy, South Pole, Torrent Power, and WGL Holdings.
1 Market Overview
1.2 Market Analysis by Type
1.2.1 Overview: Global Revenue by Type: 2022 Versus 2023 Versus 2029
1.3 Market Analysis by Application
1.3.1 Overview: Global Revenue by Application: 2022 Versus 2023 Versus 2029
1.4 Global Market Size & Forecast
1.4.1 Global Sales in Value (2017-2029))
1.4.2 Global Sales in Volume (2017-2029)
1.4.3 Global Price by Type (2017-2029) & (US$/Unit)
1.5 Global Production Capacity Analysis
1.5.1 Global Total Production Capacity (2017-2029)
1.5.2 Global Production Capacity by Geographic Region
1.6 Market Drivers, Restraints and Trends
1.6.1 Market Drivers
1.6.2 Market Restraints
1.6.3 Trends Analysis
2 Manufacturers Profiles
**This is for each company**
2.1.1 Company Details
2.1.2 Company Major Business
2.1.3 Company Product and Services
2.1.4 Company Sales, Price, Revenue, Gross Margin and Market Share (2019-2022)
3 Sales by Manufacturer
3.1 Global Sales in Volume by Manufacturer (2020-2022)
3.2 Global Revenue by Manufacturer (2020-2022)
3.3 Key Manufacturer Position in Market
3.4 Market Concentration Rate
3.4.1 Top 3 Manufacturer Market Share
3.4.2 Top 6 Manufacturer Market Share
3.5 Global Production Capacity by Company
3.6 Manufacturer by Geography: Head Office and Production Site
3.7 New Entrant and Capacity Expansion Plans
3.8 Mergers & Acquisitions
4 Market Analysis by Region
4.1 Global Market Size by Region
4.1.1 Global Sales in Volume by Region (2017-2029)
4.1.2 Global Revenue by Region (2017-2029)
4.2 North America Revenue (2017-2029)
4.3 Europe Revenue (2017-2029)
4.4 Asia-Pacific Revenue (2017-2029)
4.5 South America Revenue (2017-2029)
4.6 Middle East and Africa Revenue (2017-2029)
5 Market Segment by Type
5.1 Global Sales in Volume by Type (2017-2029)
5.2 Global Revenue by Type (2017-2029)
5.3 Global Price by Type (2017-2029)
6 Market Segment by Application
6.1 Global Sales in Volume by Application (2017-2029)
6.2 Global Revenue by Application (2017-2029)
6.3 Global Price by Application (2017-2029)
7 North America by Country, by Type, and by Application
7.1 North America Sales by Type (2017-2029)
7.2 North America Sales by Application (2017-2029)
7.3 North America Market Size by Country
7.3.1 North America Sales in Volume by Country (2017-2029)
7.3.2 North America Revenue by Country (2017-2029)
7.3.3 United States Market Size and Forecast (2017-2029)
7.3.4 Canada Market Size and Forecast (2017-2029)
7.3.5 Mexico Market Size and Forecast (2017-2029)
8 Europe by Country, by Type, and by Application
8.1 Europe Sales by Type (2017-2029)
8.2 Europe Sales by Application (2017-2029)
8.3 Europe Market Size by Country
8.3.1 Europe Sales in Volume by Country (2017-2029)
8.3.2 Europe Revenue by Country (2017-2029)
8.3.3 Germany Market Size and Forecast (2017-2029)
8.3.4 France Market Size and Forecast (2017-2029)
8.3.5 United Kingdom Market Size and Forecast (2017-2029)
8.3.6 Russia Market Size and Forecast (2017-2029)
8.3.7 Italy Market Size and Forecast (2017-2029)
9 Asia-Pacific by Country, by Type, and by Application
9.1 Asia-Pacific Sales by Type (2017-2029)
9.2 Asia-Pacific Sales by Application (2017-2029)
9.3 Asia-Pacific Market Size by Region
9.3.1 Asia-Pacific Sales in Volume by Region (2017-2029)
9.3.2 Asia-Pacific Revenue by Region (2017-2029)
9.3.3 China Market Size and Forecast (2017-2029)
9.3.4 Japan Market Size and Forecast (2017-2029)
9.3.5 Korea Market Size and Forecast (2017-2029)
9.3.6 India Market Size and Forecast (2017-2029)
9.3.7 Southeast Asia Market Size and Forecast (2017-2029)
9.3.8 Australia Market Size and Forecast (2017-2029)
10 South America by Country, by Type, and by Application
10.1 South America Sales by Type (2017-2029)
10.2 South America Sales by Application (2017-2029)
10.3 South America Market Size by Country
10.3.1 South America Sales in Volume by Country (2017-2029)
10.3.2 South America Revenue by Country (2017-2029)
10.3.3 Brazil Market Size and Forecast (2017-2029)
10.3.4 Argentina Market Size and Forecast (2017-2029)
11 Middle East & Africa by Country, by Type, and by Application
11.1 Middle East & Africa Sales by Type (2017-2029)
11.2 Middle East & Africa Sales by Application (2017-2029)
11.3 Middle East & Africa Market Size by Country
11.3.1 Middle East & Africa Sales in Volume by Country (2017-2029)
11.3.2 Middle East & Africa Revenue by Country (2017-2029)
11.3.3 Turkey Market Size and Forecast (2017-2029)
11.3.4 Egypt Market Size and Forecast (2017-2029)
11.3.5 Saudi Arabia Market Size and Forecast (2017-2029)
11.3.6 South Africa Market Size and Forecast (2017-2029)
12 Sales Channel, Distributors, Traders and Dealers
12.1 Sales Channel
12.1.1 Direct Marketing
12.1.2 Indirect Marketing
12.2 Typical Distributors
12.3 Typical Customers
13 Research Findings and Conclusion
14.2 Research Process and Data Source
Secondary Research Information is collected from a number of publicly available as well as paid databases. Public sources involve publications by different associations and governments, annual reports and statements of companies, white papers and research publications by recognized industry experts and renowned academia etc. Paid data sources include third party authentic industry databases.
Once data collection is done through secondary research, primary interviews are conducted with different stakeholders across the value chain like manufacturers, distributors, ingredient/input suppliers, end customers and other key opinion leaders of the industry. Primary research is used both to validate the data points obtained from secondary research and to fill in the data gaps after secondary research.
The market engineering phase involves analysing the data collected, market breakdown and forecasting. Macroeconomic indicators and bottom-up and top-down approaches are used to arrive at a complete set of data points that give way to valuable qualitative and quantitative insights. Each data point is verified by the process of data triangulation to validate the numbers and arrive at close estimates.
The market engineered data is verified and validated by a number of experts, both in-house and external.
REPORT WRITING/ PRESENTATION
After the data is curated by the mentioned highly sophisticated process, the analysts begin to write the report. Garnering insights from data and forecasts, insights are drawn to visualize the entire ecosystem in a single report.