June 25, 2024
Carbon Credit Market

The Global Carbon Credit Market Is Driven By Increasing Carbon Emission Regulations

The global carbon credit market plays a vital role in mitigating climate change by enabling governments and organizations to regulate carbon emissions. Carbon credits, also known as carbon offsets, allow high polluting entities to offset their emissions by purchasing credits from other organizations that have surplus credits for emitting less carbon than their quota. This market-based emissions trading scheme helps administrations to curb greenhouse gas pollution cost-effectively. It also encourages green investments in renewable energy resources, reforestation projects, and other carbon sequestering activities. The global carbon credit market is estimated to be valued at US$279 billion in 2023 and is expected to exhibit a CAGR of 3.0% over the forecast period 2023-2030, as highlighted in a new report published by Coherent Market Insights.

Market key trends:

One of the major trends in the global carbon credit market is the rise in voluntary carbon credit trades. Voluntary carbon markets allow individuals and organizations to offset emissions beyond regulatory compliance. It gives an opportunity to neutralize carbon footprints through socially beneficial projects. Growing environmental consciousness and corporate sustainability goals are driving the demand for voluntary carbon credits. Large corporates are actively participating in this space to boost their ESG credentials. Additionally, innovations in carbon accounting and verification technologies are expected to make the carbon markets more transparent and trusted. Blockchain applications show promise to streamline carbon credit issuance and exchange in a secure digital ledger. This will further foster the growth of the voluntary carbon trading sector.

Porter’s Analysis

Threat of new entrants: The threat of new entrants into the Global Carbon Credit Market Size is moderate. Establishing operations requires major investments and technical expertise which provides advantages to existing players.

Bargaining power of buyers: The bargaining power of buyers is moderate to high due to the availability of many regional level carbon credit programs and exchanges. Buyers can select from a variety of offset programs and vintages.

Bargaining power of suppliers: The bargaining power of suppliers is moderate due to the presence of many small project developers supplying carbon credits. However, established players have better access to finance.

Threat of new substitutes: No close substitutes to carbon credits currently exist, but renewable energy and energy efficiency certificates represent potential substitutes.

Competitive rivalry: Competition is intense with the presence of many compliance and voluntary market participants globally. Pricing pressure exists due to abundant supply in some markets.

Key Takeaways

The global carbon credit market is expected to witness high growth over the forecast period. The Asia Pacific region currently dominates the carbon credit market and is expected to grow at the fastest pace owing to the presence of large emitters such as China, India, Japan, and South Korea. Countries in the region are actively participating in carbon credit programs and capacity building activities which will drive growth.

North America is another major regional market for carbon credits accounting for over 30% share in 2020. The region is an early mover in carbon trading and significant opportunities exist in the voluntary carbon market. The growth of compliance carbon markets in Canada will also support the North American carbon credit market expansion going forward.

Key players operating in the carbon credit market are Carbon Credit Capital, Terrapass, Renewable Choice, 3Degrees, NativeEnergy, GreenTrees, South Pole Group, Aera Group, Allcot Group, Carbon Clear. These players are focusing on projects in the renewable energy, waste management, forestry sectors to generate a variety of carbon credits for the compliance and voluntary markets.

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