Global Carbon Credit Market to Hit Valuation of USD 84.4 Billion By 2050 | Regulatory Pressure, Nature-Based Solutions, and Scaling Up Supply to Shape Market Says Astute Analytica

The carbon credit market is driven by increasing carbon emissions, the need for climate action, and the adoption of carbon pricing mechanisms worldwide. Europe dominates the market with a 51.1% share, followed by North America and Asia Pacific. The top five players, led by South Pole Group with a 12% share, collectively hold over 37% of the revenue share.

New Delhi, April 09, 2024 (GLOBE NEWSWIRE) — The global carbon credit market is projected to hit the market valuation of US$ 84.4 billion by 2050, up from US$ 1.0 billion in 2023 at a CAGR of 18% during the forecast period 2024–2050.

The battle against climate change continues to gain momentum, with 73 carbon pricing mechanisms operating globally as of April 1, 2023. These systems collectively cover a significant 23.04% of global greenhouse gas emissions. The weighted average price for offsetting a metric ton of carbon dioxide sits between $4-5, a figure that fluctuates with market dynamics. However, the EU ETS boasts the steepest carbon price in 2023, reaching an impressive $5.6 per metric ton.

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As public awareness grows and more companies in the global carbon credit market pledge to achieve net-zero emissions, the demand for carbon offsets is set to soar over the next decade, possibly expanding by five or even ten times the current levels. This surge is evident in the number of businesses setting net-zero targets, jumping from only 500 in 2019 to over 5,000 today.  A 2022 survey further highlights this shift, revealing that 69% of companies anticipate buying carbon credits in the next five years – a notable increase from 56% in 2020.

Nature-based solutions, particularly reforestation efforts, are playing a vital role in the voluntary carbon market, accounting for a significant 60% of its value in 2022. This emphasis on natural approaches indicates a growing recognition of their potential, a trend that could see the market for nature-based carbon credits reach a staggering $50 billion by 2050. Additionally, forestry and land use projects constituted a considerable 47% of voluntary carbon market credits issued in 2022, further solidifying the importance of these initiatives.

Key Findings in Global Carbon Credit Market

Market Forecast (2050) US$ 84.4 billion
CAGR 18%
Largest Region (2023) Europe (51.1%)
By Type Compliance Markets (99.6%)
By Project Type Carbon Removal Projects (75.3%)
By Source  Technology (46.9%)
By Selling Platform Climate Exchange Platform (64.9%)
By Industry Power Generation (22.1%)
By Business Size Medium and Large Enterprises (87.1%)
Top Trends
  • Growth of voluntary carbon markets
  • Focus on carbon removal projects
Top Drivers
  • Government regulations to reduce carbon emissions
  • Corporate sustainability goals
  • Desire to mitigate climate change impact
Top Challenges
  • Scaling up supply to meet growing demand
  • Ensuring the quality and integrity of carbon credits

Regulatory Pressure, Nature-Based Solutions, and Scaling Up Supply: Key Factors Shaping the Carbon Credit Market

The carbon credit market is rapidly transforming, fueled by regulatory pressure, a strong emphasis on nature-based solutions, and the urgent need to increase supply to match soaring demand. Governments worldwide are accelerating the adoption of carbon pricing, with 73 instruments now covering 23.04% of global greenhouse gas emissions. The EU ETS stands as the largest carbon market (90% of global turnover in 2021), while China’s 2021 launch of its national ETS has the potential to be the world’s biggest, covering 4 billion tonnes of CO2 emissions annually.

Nature-based solutions are increasingly sought-after in the carbon credit market. Reforestation, sustainable land management, and similar projects offer benefits beyond pure carbon removal.  In 2022, these solutions represented around 60% of the voluntary carbon market’s value, with 47% of all credits stemming from forestry and land use.  REDD+ programs, focused on forest conservation, are a popular mechanism, with over 350 projects across 79 countries promising to reduce emissions by 6.3 billion tonnes of CO2 equivalent by 2030.

However, a key challenge remains: scaling up high-quality carbon credit supply. The market needs consistent demand signals for suppliers to invest confidently.   A 2022 TSVCM survey revealed 80% of project developers found lack of demand a major barrier to scaling up. Projects also face long development times (3-5 years on average).  To address this, organizations like the VCMI are establishing clear standards for high-quality credits, aiming to boost investor confidence. Additionally, innovations like the World Bank’s Climate Warehouse seek to streamline the credit registration and tracking process, improving market efficiency.

Carbon Credit Market Booms: Segment-by-Segment Analysis

By Source: The carbon credit market can also be segmented based on the source of emissions reductions. The Technology Based segment, which includes projects such as renewable energy, energy efficiency, and industrial process improvements, holds the highest share of 46.9% in 2023.  However, the Nature Based segment, which includes projects such as reforestation, sustainable agriculture, and wetland restoration, is gaining traction due to the co-benefits these projects provide, such as biodiversity conservation and community development. In 2021, nature-based solutions represented nearly 60% of the voluntary carbon market value, with forestry and land use projects alone accounting for 47% of all credits issued.

By Project Type: Carbon credit projects can be broadly categorized into two types: Carbon removal projects and Carbon avoidance projects. As of 2023, the Carbon removal projects segment holds the highest share of 75.3%.  The Carbon avoidance projects segment accounts for the remaining 22.9% of the market.

By Selling Platform: The market can be further segmented based on the selling platform used for trading credits. The Climate Exchange Platform segment holds the highest share of 64.9% in 2023. The Over-the-Counter (OTC) segment accounts for the remaining market share.

By Industry: The carbon credit market can also be analyzed based on the end-use industries that purchase and retire carbon credits. As of 2023, the Power Generation segment holds the highest share of 22.1%. Other industries with significant shares in the market include oil and gas, manufacturing, and transportation.

Europe Tops the Chart of Carbon Credit Market, Contribute Over 51.1% Revenue

Europe has positioned itself as a global leader in the carbon credit market, its demand fueled by ambitious climate targets and a strong reliance on carbon pricing mechanisms. Key initiatives like the European Green Deal (launched in 2019) propel this leadership. This comprehensive plan sets the path to climate neutrality by 2050, a goal further reinforced by the European Climate Law. Additionally, the world’s largest carbon market, the EU ETS, underwent revisions in 2021 to better support the goals of the Green Deal, resulting in higher carbon prices and more demand for credits.  The introduction of the Carbon Border Adjustment Mechanism (CBAM) further solidifies Europe’s commitment, acting to prevent carbon leakage by putting a price on imports from countries with less rigorous climate standards.

These policy shifts are mirrored in encouraging statistics in the global carbon credit market. In 2022, the EU ETS carbon price peaked at €98 per tonne of CO2 equivalent. That same year saw remarkable progress with an 11% reduction in greenhouse gas emissions compared to 2019.  Europe’s dedication is clear in its increased emissions targets, raising the 2030 benchmark from a 40% reduction to at least 55% (compared to 1990 levels).  The European Investment Bank backs these efforts, pledging €1 trillion for climate and environmental sustainability investments through 2030.

The results of this focus are measurable. The EU surpassed its 2020 target for renewable energy share (22.1% vs. 20% goal), provided €23.39 billion in climate finance to developing countries in 2020, and even saw remarkable improvements in energy efficiency (32.5% improvement in 2020 against projections).  The recently adopted REPowerEU plan further demonstrates Europe’s resolve to cut ties with Russian fossil fuels and accelerate its clean energy transition.

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Top 5 Players in Global Carbon Credit Market Hold Over 37% Revenue Share

The global carbon credit market is highly competitive, with the top five players – South Pole Group, 3Degrees, EKI Energy Services Ltd., Finite Group, and Native Energy, LLC – collectively holding over 37% of the revenue share. Among these leaders, South Pole Group stands out with a market share exceeding 12%.

South Pole Group, based in Switzerland, has established itself as a frontrunner in the carbon offset market through its strong domestic supply network and deep expertise in climate action solutions. The company’s comprehensive portfolio of services, including carbon credit project development, advisory, and trading, has helped it secure a significant market share. Following closely behind is 3Degrees, a US-based company that has made notable strides in the market. In November 2022, 3Degrees collaborated with Merge Electric Fleet Solutions to provide actionable analysis and decades of knowledge to fleet customers, demonstrating its commitment to innovation and partnerships. The company’s focus on renewable energy solutions and carbon offsetting has positioned it as a key player in the market.

EKI Energy Services Ltd., an Indian company with over 14 years of experience, has emerged as one of the global leaders in carbon credit development and supply. The company’s extensive network and expertise have enabled it to capture a significant share of the market, particularly in developing countries.

The competitive landscape of the carbon credit market is further shaped by the presence of numerous other players, such as Carbon Credit Capital, Terrapass, Climetrek Ltd., and Forest Carbon. These companies are actively engaged in research and development, technological innovations, and framework development to improve their market share. For instance, in March 2023, The Integrity Council for the Voluntary Carbon Market launched its Core Carbon Principles and Program-level Assessment Framework for carbon credits, setting thresholds on carbon emissions and sustainable development. Such initiatives are expected to drive the growth of the market and intensify competition among the players. As the demand for carbon credits continues to rise, driven by increasing carbon emissions and the need for climate action, the market is expected to witness significant growth in the coming years.

Market Segmentation Overview:

By Type

  • Voluntary Markets
  • Compliance Markets

 By Source

  • Technology Based
  • Biomass
  • Forest Based
  • Sewage Treatment Plants
  • Wastewater Treatment Plants

By Project Type

  • Carbon Avoidance Projects
  • Carbon Removal projects
    • Nature Based
    • Technology Based

By Selling Platform

  • Direct Contact
  • Climate Exchange Platforms

By Business Size

  • Small and Micro Enterprises
  • Medium and Large Businesses

By Industry

  • Power Generation
    • Biomass
    • Geothermal
    • Hydrogen
    • Solar
    • Others
  • Waste Treatment Plant
    • Sewage Treatment
    • Commercial Waste Treatment
    • Industrial Waste Treatment
    • Municipal Solid Waste
    • Others Waster Treatment
  • Cement
  • Oil & Gas
  • Iron & Steel
  • Chemical & Petrochemical
  • Other Industries

By Region

  • North America
  • Europe
  • Asia Pacific
  • Middle East & Africa (MEA)
  • South America

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About Astute Analytica

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