by Carbon credits, also known as carbon offsets, are tradable permits that allow companies and individuals to comply with limits on greenhouse gas emissions. They work on the premise that emissions reductions obtained in one place can be used to compensate for emissions elsewhere. Carbon credits are typically awarded for activities that reduce or remove carbon from the atmosphere such as switching to renewable energy, improvement in energy efficiency, forestry projects, and more. With growing emphasis on lowering carbon footprint across industries, the demand for carbon offsetting through credits is witnessing strong growth.
The global carbon credit market is estimated to be valued at US$ 31.54 Bn in 2023 and is expected to exhibit a CAGR of 3.0% over the forecast period 2023 to 2030, as highlighted in a new report published by Coherent Market Insights.
Market Dynamics:
Growing support from stringent government regulations regarding carbon emission reduction is a key driver fueling growth of the global carbon credit market. For instance, governments across many countries have set carbon neutrality targets and goals to lower emissions through policy initiatives like carbon pricing and emissions trading schemes. This is increasing uptake of carbon credits among industries to comply with regulations in a cost-effective manner. Additionally, growing carbon footprint of industries along with rising awareness about climate change is also prompting companies to lower their carbon emissions through offset programs that utilize carbon credits, thereby propelling market growth.
SWOT Analysis
Strength: The global carbon credit market has immense growth potential. Stringent regulations and policies related to carbon emissions reduction across various countries are driving the demand for carbon credits. Carbon credits help various organizations and companies to offset their carbon footprint in a cost-effective manner.
Weakness: Lack of standardization across different carbon credit programs leads to confusion. There are also issues related to additionality and eligibility which need to be addressed. Dependence on policy support and regulatory framework fluctuations pose challenges.
Opportunity: Growing focus on sustainability and need to achieve net zero emissions targets opens up opportunities. Development of robust carbon accounting frameworks would help expand the size of the carbon credit market. New sectors like transportation and waste management can leverage carbon credits.
Threats: Potential changes in political leadership and priorities pose risks. Economic slowdowns negatively impact clean energy investments and demand for carbon credits. Disputes regarding cross-border carbon trading act as a restraint.
Key Takeaways
The Global Carbon Credit Market Share is expected to witness high growth over the forecast period supported by initiatives to reduce carbon footprint. The global carbon credit market is estimated to be valued at US$ 31.54 Bn in 2023 and is expected to exhibit a CAGR of 3.0% over the forecast period 2023 to 2030.
The Asia Pacific region currently dominates due to early adoption of carbon reduction programs in countries like China, India, and Japan. Stringent emissions norms and incentives for renewable energy usage have accelerated the growth of carbon credits in the region.
Key players operating in the global carbon credit market are South Pole, Carbon Credit Capital, 3Degrees, EcoAct, and Terrapass. These companies offer carbon offsetting solutions, help organizations assess their carbon footprint and achieve sustainability targets through carbon credits. South Pole is one of the largest global providers of carbon credits, having facilitated over 150 million tonnes of carbon reductions. It has a diversified portfolio of projects across various categories like clean cookstoves, wind power etc.
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Source: Coherent Market Insights, Public sources, Desk research
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