The increasing number of public and private organizations engaging in carbon credit trading to advance environmental sustainability is expected to bolster market demand in the foreseeable future.
In a recent report by Allied Market Research, the carbon credits market exhibited substantial growth in 2022, with a valuation of $2 billion. It is projected to experience a meteoric rise, soaring to an estimated $143.5 billion by 2032, marking an impressive compound annual growth rate (CAGR) of 55.5% from 2023 to 2032. Key industry players highlighted in the report include South Pole, 3Degrees, EKI Energy Services Ltd, TerraPass, NATUREOFFICE, Moss.Earth, Climate Impact Partners, Carbon Credit Capital, LLC, CarbonBetter, and NativeEnergy.
In 2022, the Asia-Pacific region emerged as the dominant force in the global carbon credits market, and it is anticipated to maintain its status as the fastest-growing region throughout the forecast period. The surge in popularity of carbon credits can be attributed to various sustainability initiatives undertaken by companies in countries such as China, Japan, India, and others. Carbon credits play a pivotal role in curbing greenhouse gas emissions, as they can be bought and sold in dedicated carbon markets. Various entities, including corporations, governments, and individuals, procure carbon credits to offset their emissions and align with sustainability objectives. These credits are transferred from sellers to buyers, often through specialized platforms or exchanges, serving as a tool for companies to minimize their carbon footprint.
To achieve the ambitious goal of net-zero carbon emissions, it is imperative to reduce greenhouse gas emissions by approximately 50% by 2030 and ultimately reach net zero by 2050. Carbon credits serve as certificates representing the amount of greenhouse gases removed from the atmosphere, offering a crucial solution in this journey. Participation in voluntary carbon credit markets allows companies to demonstrate climate leadership and a commitment to combatting climate change beyond regulatory compliance. Such involvement can drive innovation in clean technologies and sustainable practices, further propelling the carbon credits market in the years ahead.
The International Emissions Trading Association (IETA) has established an international framework for trading in greenhouse gas emission reductions, with leading global corporations actively participating. IETA plays a pioneering role in promoting market-based approaches to tackle climate change, offering invaluable data on market activity and greenhouse gas emissions trading. Market segmentation includes types such as regulatory and voluntary, systems including cap-and-trade and baseline-and-credit, and end-use industries spanning aviation, energy, industrial, petrochemical, and more. Geographically, the market is analyzed across North America, Europe, Asia-Pacific, and LAMEA. Despite its promising growth, the carbon credits market is not without challenges. Price volatility influenced by policy changes, market speculation, and economic conditions may create uncertainty for market participants, posing a hindrance to long-term emission reduction strategies. Nevertheless, the overall outlook remains optimistic as the world strives towards a greener future.