The Global Carbon Credit market was valued at US$ 25,345.8 Mn in 2022, exhibiting a compound annual growth rate (CAGR) of 24.4% from 2023 to 2030.
A carbon credit is a tradable permit or certificate that provides the holder of the credit the right to emit one ton of carbon dioxide or an equivalent of another greenhouse gas – it is essentially an offset for producers of such gases. The main goal for the creation of carbon credits is the reduction of emissions of carbon dioxide and other greenhouse gases from industrial activities to reduce the effects of global warming. A carbon credit is a mechanism for the minimization of greenhouse gas emissions. Governments or regulatory authorities set caps on greenhouse gas emissions. For some companies, immediate reduction of emissions is not economically viable. Therefore, they can purchase carbon credits to comply with the emission cap. A carbon offset that is exchanged in the over-the-counter or voluntary market for credits is referred to as Voluntary Emissions Reduction (VER). Whereas, emission units (or credits) created through a regulatory framework with the purpose of offsetting a project’s emissions are called Certified Emissions Reduction (CER). The main difference between the two is that there is a third-party certifying body that regulates the CER as opposed to the VER.
International carbon credit is being adopted by various countries and state government bodies, which is a major trend in the global carbon credit market. The Kyoto mechanism is vastly adopted by the European Union, for which the European Union launched European Union Emission Trading Scheme (EU ETS) in 2015. Through this, EU employs a basic cap and trade model for EU companies and countries. However, the government of the U.S. did not sign the Kyoto Protocol, thus there is no cap limit for carbon emissions in the country. Nevertheless, many companies and state government bodies are adopting voluntary commitment to reduce carbon emissions.
Global Carbon Credit Market: Regional Insights
Europe held a dominant position in the global carbon credit market in 2022, accounting for 51.2% share in terms of value, followed by North America and Asia Pacific. Europe is expected to account for the largest market share during the forecast period. The developed countries in Europe such as the U.K, Germany, and other European countries are considered prominent buyers in the global carbon credit market. In order to become climate-neutral EU by 2050, the European Union launched EU Emissions Trading System (EU ETS) in 2005, an international emissions trading system. The EU Emissions Trading System (EU ETS) initiative is divided into four timely phased manner in which carbon emission is reduced in order to reduce greenhouse gas effects by at least 40% by 2030 compared to 1990 (as per Paris agreement, initiated in December 2015).
Figure 1: Global Semiconductor Memory Market Share (%), in terms of Value, By Region, 2022
Asia Pacific is expected to exhibit significant growth during the forecast period. India is becoming one of the emerging players in the global carbon credit market. As India's greenhouse gas (GHG) emission is below the carbon cap limit, Indian companies are entitled to sell surplus credits to developed countries.
Global Carbon Credit Market: Drivers
Government regulations around the world have implemented various regulations to reduce carbon emissions, such as setting limits on the number of greenhouse gases that companies can emit. This creates a demand for carbon credits as companies seek to meet these regulations. Corporate sustainability goals Many companies have set sustainability goals and are actively seeking ways to reduce their carbon footprint. Purchasing carbon credits is one way for them to offset their emissions and reach their sustainability targets. Public pressure Consumers are increasingly aware of the environmental impact of their choices and are pressuring companies to take action to reduce their carbon footprint. This can lead to companies purchasing carbon credits to demonstrate their commitment to sustainability.
| Report Coverage | Details | ||
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| Base Year: | 2022 | Market Size in 2022: | US$ 25,345.8 Mn |
| Historical Data for: | 2017 to 2021 | Forecast Period: | 2023 to 2030 |
| Forecast Period 2023 to 2030 CAGR: | 24.4% | 2030 Value Projection: | US$ 145,041.8 Mn |
| Geographies covered: |
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| Companies covered: |
WGL Holdings, Inc., Enking International, Green Mountain Energy, Native Energy, Cool Effect, Inc., Clear Sky Climate Solutions, Sustainable Travel International, 3 Degrees, terrapass, and Sterling Planet, Inc. |
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Global Carbon Credit Market: Restraints
Addressing the triple threat of pollution, climate change, and biodiversity decline requires a shift to a circular economy. Since no one nation can successfully implement a circular economy on its own, international commerce will be crucial in facilitating this transition. The Global North currently receives the majority of the economic benefits from circular commerce, while the Global South is responsible for the majority of the environmental and human costs. Therefore, greater global cooperation is required to stop the growth of a circular trade division. Even though the circular economy is crucial to achieving the world's environmental and human development goals, few trade actors are aware of it or comprehend it.
Global Carbon Credit Market: Opportunities
Cost savings Companies can save money by reducing their carbon emissions through energy efficiency measures, renewable energy, and other low-carbon practices. They can then sell the carbon credits they generate on the market, providing an additional revenue stream. New revenue streams Companies that generate excess carbon credits can sell them on the market, generating new revenue streams. This can be especially beneficial for companies in industries with high carbon emissions, such as energy, transportation, and manufacturing. Brand reputation: Companies that purchase carbon credits can improve their brand reputation by demonstrating their commitment to sustainability. This can help attract customers, investors, and employees who value environmental responsibility.
Global Carbon Credit Market - Impact of Coronavirus (Covid-19) Pandemic
Globally, most countries are affected by COVID-19 and most of the countries have announced lockdowns. Pollution and GHG emissions have fallen across the continents as countries imposed lockdowns and restrictions to contain the spread of Covid-19. COVID-19 has brought about short-term environmental benefits as a temporary reduction in carbon dioxide and other greenhouse gases, as people were forced to stay at home and industries such as mining, construction, and textiles remained closed for a period. According to the OECD (The Organization for Economic Co-operation and Development) Organization, in China, carbon emissions were reduced by 25% which is equivalent to around 200m tons of CO2 (MtCO2) in the month of February 2020, compared with the same month in 2019. Also, the pandemic has interrupted global supply chains, including those for renewable energy projects, which could delay or obstruct their completion. The carbon offset registries are also considering Covid-19’s impact on reporting period deadlines. If there are hold-ups, such as The Climate Action Reserve allowing programmatic deadlines to extend by 6 months – if the extension reason is directly Covid-19 related.
Figure 2: Global Semiconductor Memory Market Share (%), in terms of Value, By Segmentation, 2022
Among sector, the energy segment is expected to hold dominant position in the global carbon credit market during the forecast period. For instance, according to Coherent Market Insights’ analysis, energy segment accounted for around 53.3 billion across the globe in 2019. Solar or Wind power is used to inject power to the grid, this can replace the power generated from the conventional energy sources thereby reducing the carbon dioxide emissions. Such projects can earn carbon credits in the form of Clean Development Mechanism (CDM) projects. The global carbon credit market was valued at 25,345.8 Mn US$ in 2022 and is expected to reach 145,041.8 Mn by 2030 at a CAGR of 24.4% between 2023 and 2030.
Major players operating in the global carbon credit market include WGL Holdings, Inc., Enking International, Green Mountain Energy, Native Energy, Cool Effect, Inc., Clear Sky Climate Solutions, Sustainable Travel International, 3 Degrees, Terrapass, and Sterling Planet, Inc.
*Definition: In a nutshell, carbon markets are trading systems in which carbon credits are sold and bought. One tradable carbon credit equals one tonne of carbon dioxide or the equivalent amount of a different greenhouse gas reduced, sequestered, or avoided
The global carbon credits provide business with a verified method to balance unavoidable carbon footprint by directly supporting projects that are proven to reduce carbon emissions. One Carbon Offset/Credit represents the reduction of greenhouse gases equal to one metric ton of carbon dioxide equivalent (CO2e). The United Nations' Intergovernmental Panel on Climate Change (IPCC) developed a carbon credit proposal to reduce worldwide carbon emissions in a 1997 agreement known as the Kyoto Protocol. The Kyoto Protocol was signed in Kyoto, Japan, in 1997 by 192 industrialized countries. Countries that ratify the Kyoto Protocol are assigned a maximum limit of CO2 emission levels. Emitting more than the assigned limit will result in a penalty for the violating country in the form of lower emissions limit for the following period. However, if a country wants to emit more greenhouse gases than its allowed limit (without penalty), then it may participate in carbon trading using an Emissions Reduction Purchase Agreement (ERPA).
The global carbon credit market is divided into two types, suppliers market and buyers’ market. The emerging economies such as China, India, and others (with relaxed rules for carbon emission as per Paris agreement in 2015) are considered as global suppliers for carbon credit market. India is becoming one of the emerging players for global carbon credit market, however, lack of awareness about carbon credit market among the Indian companies is expected to hamper the Indian carbon credit market growth. As India's GHG emission is below the carbon cap limit, Indian companies are entitled to sell surplus credits to developed countries.
Market Dynamics
Credit market is expected to grow significantly during the forecast period, owing to the increasing investment in the carbon credit market. At present, the carbon credit market is only limited to companies that are dealing with carbon emissions and its regulations. However, the rapidly growing global carbon credit market is expected to attract funding from various financial institutions such as venture capitals, banks, and others. On the other hand, international non-profit organizations are also investing in the carbon credit market in order to fund and promote scalable climate and environmental actions. . The demand for carbon credits will significantly grow in the coming decades as the companies are focused on net zero targets and are working toward reducing carbon emissions. A carbon credit represents the right to emit greenhouse gases equivalent to one ton of carbon dioxide. Several businesses are now adopting this technique of partially using carbon credits, which is benefitting them significantly. They are getting involved in projects and activities that are helping them generate offsets. They use as many credits as they want according to the limit set for a project and if they have a few left, they are used later for another project. This not only helps them save a significant amount of money, which can aid them in investing in more such credits.
Among sector, forestry segment is expected to exhibit the highest growth during the forecast period. Forests play a vital role in combating climate change. Tropical forests cover about 15 percent of the world’s land surface and contain about 25 percent of the carbon on the planet’s surface. The loss and degradation of forests accounts for 15 - 20 percent of global carbon emissions. The majority of these emissions are the result of deforestation in the tropics, largely due to conversion of the forest to more lucrative economic activities such as agriculture and mining. The market for forest carbon credits has been significantly growing over the past ten years. Currently, there are three different project types that are eligible to produce carbon offsets; afforestation or reforestation, avoided conversion, and improved forest management (IFM). Improved forest management projects are the most common compliance offsets traded in California’s cap and trade program.
Key features of the study:
This report provides in-depth analysis of global carbon credit market size (Mn US$ Billion) and compound annual growth rate (CAGR %) for the forecast period (2023– 2030), considering 2022 as the base year
Detailed Segmentation
“*” marked represents similar segmentation in other categories in the respective section.
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