May 27, 2024
Carbon Offset Market

Carbon Offset Market Is Expected To Be Boosted By Increasing Focus On Attaining Net-Zero Emission Targets

The carbon offset market involves reducing emissions of carbon dioxide or other greenhouse gases to compensate for emissions made elsewhere. It allows individuals, organizations, and governments to fund projects that reduce greenhouse gas levels, such as renewable energy projects, efficiency upgrades, and forestation efforts. Carbon offsets are measured in metric tons of carbon dioxide-equivalent (CO2e) and may represent reductions from energy efficiency, fuel switching, forestation, or other activities.

The global carbon offset market is estimated to be valued at US$ 414.8 billion in 2023  and is expected to exhibit a CAGR of 8.6%  over the forecast period 2023 to 2030, as highlighted in a new report published by Coherent Market Insights.

Market Dynamics

Increasing focus on attaining net-zero emission targets: Various countries and corporations have announced ambitious net-zero emission targets to limit global warming. For example, over 130 countries have committed to achieving net-zero emissions by 2050 as part of the Paris Agreement. Similarly, over 3000 companies have pledged net-zero targets through initiatives like Science Based Targets and the UN Race to Zero Campaign. Achieving these targets will require large-scale deployment of carbon removal technologies, driving demand for carbon offsets.

Focus on emission targets driving the market: Many countries and regions have implemented carbon pricing mechanisms and set emission trading schemes to reduce their carbon footprint. For example, the European Union Emission Trading System is the largest carbon market in the world, valued at over $20 billion annually. Similarly, China launched its national emissions trading scheme in 2021. Companies can meet their compliance obligations under such schemes by purchasing carbon offset credits, boosting market growth.

The growing focus on attaining ambitious net-zero emission targets globally, coupled with widespread implementation of carbon pricing policies, is expected to drive robust growth of the carbon offset market over the next eight years. However, the report does not cover individual company profiles.

Segment Analysis

The global carbon offset market can be segmented based on type which includes forestry, renewable energy, landfill methane projects, and other types. Among these, the forestry segment dominates the market and accounts for over 35% share due to widespread availability of land for afforestation and reforestation activities across regions.

PEST Analysis

Political: Stringent regulations regarding emission cuts and carbon neutrality plans by governments across nations is positively impacting the market. For instance, the European Union has set a net zero emissions target by 2050.
Economic: Growth in carbon trading programs and availability of tax incentives foroffsets is fueling the business opportunities. At the same time, high participation costs can hinder the small players.
Social: Rising environmental awareness among public and private organizations is driving the adoption of offsetting as a sustainability strategy. However, additionality and permanence concerns still prevail.
Technological: Emergence of blockchain for offset tracking and satellite imagery for monitoring forest cover is enhancing transparency and efficiency.

Key Takeaways

The global  Carbon Offset Market Demand is expected to witness high growth supported by growing corporate pledges for reducing carbon footprint. The global carbon offset market is estimated to be valued at US$ 414.8 Bn  in 2024  and is expected to exhibit a CAGR of 8.6%  over the forecast period 2023 to 2030.

Regional analysis
The Asia Pacific region dominates currently due to large forest cover in countries like India and China. North America also has significant share owing to the presence of California cap-and-trade program and voluntary retail market. Europe is slated to be the fastest growing market supported by the Green Deal initiatives.

Key players operating in the carbon offset market are Apta, South Pole, 3Degrees, and Carbon Credit Capital. Apta and South Pole have established themselves as leading project developers.

1. Source: Coherent Market Insights, Public sources, Desk research
2. We have leveraged AI tools to mine information and compile it