June 18, 2024
Global Carbon Credit Market

Global Carbon Credit Market projected to flourish by growing Demand for Eco-friendly Alternatives

The global carbon credit market facilitates reduction of greenhouse gas emissions by providing an environmentally sustainable alternative. Carbon credits represent the rights to emit one ton of carbon dioxide or its equivalent of other greenhouse gases. Entities that emit greenhouse gases can buy carbon credits from other organizations that have reduced their emissions, allowing buyers to meet emission reduction targets cost-effectively. Project developers generate carbon credits by implementing projects that reduce or remove greenhouse gas emissions such as industrial carbon capture, afforestation programs, and renewable energy infrastructure. Credits are traded on global exchanges such as European Climate Exchange and Chicago Climate Exchange.

The global carbon credit market is estimated to be valued at US$ 36.34 Mn in 2023 and is expected to exhibit a CAGR of 3.0% over the forecast period 2024 to 2031, as highlighted in a new report published by Coherent Market Insights.

Market Dynamics
The growth of the carbon credit market is driven by the growing demand for eco-friendly alternatives to reduce emissions. Government mandates and regulations in various countries aimed at meeting international climate goals are also expected to boost market growth. For example, the European Union Emission Trading Scheme has created demand for credits that can be used to achieve mandatory caps on greenhouse gas emissions by large factories and power plants. Similarly, California runs a carbon market that has increased the need for affordable offset credits. Another driver is the rising corporate focus on sustainability and commitments to achieve net-zero emissions targets, which is increasing voluntary purchasing of carbon credits. However, lack of standardized rules and methodologies for development and trading of credits remains a challenge.

Segment Analysis
The global carbon credit market is primarily segmented into forestry, renewable energy, transportation, and power generation. Among these, the forestry segment dominates the market and accounted for over 30% share in 2024 owing to the vast potential of capturing and storing carbon from the atmosphere through afforestation and reforestation programs. The transportation segment is expected to witness the fastest growth during the forecast period due to stringent government rules and regulations aimed at reducing emissions from vehicles and promoting the use of electric mobility.

PEST Analysis
Political: The carbon credit market is significantly driven by supportive government policies and regulations towards carbon emissions reduction across major countries. Stricter carbon emission norms by regulatory bodies will compel more companies to trade carbon credits for compliance.
Economic: A growing economy often leads to rise in carbon emissions. However, economic incentives provided by governments in the form of carbon tax and trading schemes are influencing industries to lower emissions and invest in carbon offsets.
Social: Rising environmental consciousness among public and stakeholders is encouraging voluntary adoption of emission reduction initiatives. Social media campaigns are enhancing awareness about climate change issues.
Technological: Emergence of technologies like afforestation, renewable energy, electric mobility are enabling cost-effective ways to reduce and offset carbon footprint. Monitoring technologies helps in accurately measuring carbon sequestration.

Key Takeaways
The Global Carbon Credit Market Size is expected to witness high growth during the forecast period due to stringent government regulations and carbon pricing mechanisms being adopted worldwide to curb emissions. The global carbon credit market is estimated to be valued at US$ 36.34 Mn in 2023 and is expected to exhibit a CAGR of 3.0% over the forecast period 2024 to 2031.

Regionally, North America dominates currently owing to the mature carbon trading scheme in countries like US. However, Asia Pacific is poised to be the fastest growing regional market led by China which is the largest carbon market globally.

Key players operating in the carbon credit market are ASLAN Pharmaceuticals, Takeda Pharmaceutical Company Limited, CHIESI Farmaceutici S.p.A., CSL, NIOX, Fountain Therapeutics, Eli Lilly and Company, GSK plc., Infinity Pharmaceuticals, Inc., Mabtech, Kineta Inc., Marinomed Biotech AG, Mycenax Biotech Inc., AstraZeneca, and Panacea Biotec. Voluntary carbon offsetting is gaining traction through initiatives by these key players in collaboration with offset aggregators and local communities.

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