by Carbon credit trading, also known as carbon offsets, allows countries and businesses to meet carbon emission compliance requirements by purchasing verified carbon credits generated through emission reduction projects and activities taking place elsewhere. Carbon credit trading addresses multiple environmental goals such as reducing pollution while supporting sustainable development. Carbon credits are issued for greenhouse gas emission reduction projects that meet specific quality standards, giving them a monetary value.
The global carbon credit trading market is estimated to be valued at US$ 31.54 billion in 2024 and is expected to exhibit a CAGR of 3.0% over the forecast period of 2023 to 2030, as highlighted in a new report published by Coherent Market Insights.
Market Opportunity:
The opportunity to meet carbon emission compliance requirements through purchasing carbon credits is expected to drive the growth of the global carbon credit trading market over the forecast period. Stringent regulations related to carbon emission limits for industries and countries under international agreements such as the Paris Agreement have increased the demand for carbon credits. Businesses and countries can meet their emission targets by purchasing verified carbon credits from emission reduction projects taking place worldwide. This allows flexibility to companies struggling to reduce emissions from their existing operations. The market is expected to grow further owing to rising compliance needs and initiatives supporting high-quality carbon credit generation worldwide.
Porter’s Analysis
Threat of new entrants: The threat of new entrants in the global carbon credit market is moderate. New players need substantial capital investments and expertise to establish themselves in this competitive market.
Bargaining power of buyers: The bargaining power of buyers in the carbon credit market is high. Buyers have numerous options to choose from for offsetting their carbon emissions.
Bargaining power of suppliers: The bargaining power of suppliers is moderate as the suppliers have to comply with strict standards and regulations set by regulatory authorities for carbon credits.
Threat of new substitutes: The threat of substitutes is low as there are limited alternatives available for offsetting carbon emissions other than carbon credits.
Competitive rivalry: The competitive rivalry in the global carbon credit market is high due to the presence of numerous national and international players competing on factors like pricing and quality.
SWOT Analysis
Strength: Carbon credits help organizations meet their emissions reduction targets in a cost-effective manner. They provide flexibility to emitters for offsetting emissions.
Weakness: Verification and additionality of carbon credits are difficult and complex processes. Carbon markets are still evolving with regional inconsistencies in rules and regulations.
Opportunity: Growing emphasis on decarbonization and achieving net-zero emissions provides significant growth opportunities. Emerging carbon markets in developing countries offer untapped potential.
Threats: Stringent regulations and policies around carbon trading can impact demand-supply dynamics. Technological advancements enabling cheaper direct carbon removal may challenge the need for offsetting via credits.
Key Takeaways
The Global Carbon Credit Market Share is expected to witness high growth over the forecast period supported by stringent government policies and regulations around the world to curb greenhouse gas emissions and address climate change. The global carbon credit trading market is estimated to be valued at US$ 31.54 billion in 2024 and is expected to exhibit a CAGR of 3.0% over the forecast period of 2023 to 2030.
The North American region currently dominates the market owing to the presence of developed carbon trading schemes like the Western Climate Initiative (WCI) in North America. The European Union Emissions Trading System (EU ETS) is the largest carbon market globally and will continue leading over the coming years. Europe was the second largest region with strengthening carbon pricing framework under the EU ETS contributing to over 30% share. Asia Pacific is estimated to be the fastest growing region during the forecast period led by developing carbon markets in China, South Korea, and emerging opportunities in Southeast Asian countries under supporting policies and regulations.
Key players operating in the global carbon credit market are South Pole, General Carbon, Carbon Clear, 3Degrees, NativeEnergy, GreenTrees, Bioassets, Terrapass, and Climate Abundance. These players are focusing on strategic partnerships and collaborations to expand their geographical footprint. South Pole has emerged as the largest private carbon credit supplier globally with a portfolio of over 200 projects in 60 countries.
Note:
Source: Coherent Market Insights, Public sources, Desk research
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