CARBON CREDITS MARKET REPORT OVERVIEW
The global Carbon Credits market size expanded rapidly USD 114.8 billion in 2024 and is projected to grow substantially USD 545.33 billion by 2033, exhibiting a prodigious CAGR 15% during the forecast period.
Carbon credits are certificates or permits which are issued to give the holder the authorization to emit one metric ton of CO₂ or an equivalent of other GHGs. Carbon credits are associated with the global fight against climate change through controlling carbon emission, and encouraging of environmental friendly practices.
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COVID-19 IMPACT
Carbon Credits Industry Had a Positive Effect Due to Reduced Emissions Due to Lockdowns during COVID-19 Pandemic
The global COVID-19 pandemic has been unprecedented and staggering, with the market experiencing higher-than-anticipated demand across all regions compared to pre-pandemic levels. The sudden market growth reflected by the rise in CAGR is attributable to market’s growth and demand returning to pre-pandemic levels.
Global industrial production, transportation, and even energy usage were dampened due to the increased application of ‘lockdowns’ around the world during the Covid-19. Therefore, global carbon emission declined, depending on the source, there was an approximate of 7% reduction in carbon emission in 2020 as compared to previous years . This decrease, however, was temporary in nature and hence decreased the requirement of organizations to purchase carbon credits since they would emit lesser greenhouse gases.
LATEST TRENDS
"Rise of Corporate Sustainability Goals to Propel Market Growth"
More businesses nowadays, that work in the technological industry in particular, including Microsoft, Google, and Apple, have signed development goals stated for net-zero carbon emissions in multiple decades. These commitments are leading to greater demand for carbon credits since corporations need to mitigate emissions they cannot efficiently scale down.
CARBON CREDITS MARKET SEGMENTATION
By Type
Based on type the global market can be categorized into Forestry, Renewable Energy, Landfill Methane Projects and Others.
- Forestry- For the forestry sector, carbon credits arise from projects developed under the categories of avoided UNF, reforestation, and afforestation.
- Renewable Energy- These credits are issued based on projects that involve the production of energy from renewable sources including solar power, wind power, hydropower and bio power.
- Landfill Methane Projects- Methane projects in the landfill deal with the extraction of methane gas from landfill sites along with making the same convert for energy or a flare instead of it being released into the atmosphere.
By Application
Based on application the global market can be categorized into Personal and Enterprise.
- Personal- People can buy carbon credits more or less as a private assurance that they are not directly contributing to the planet’s carbon emissions through things like driving, flying, powering our homes, and making lifestyle decisions
- Enterprise- Carbon credits act simply as a tool that businesses embrace in their green initiative to neutralize their direct emissions that stem from carrying out business operations, production processes, energy use, transportation, and other activities.
Driving Factor
"Rising Global Concerns About Climate Change to Drive Market Advancement"
One of the key driving factors in the Carbon Credits market growth is the Rising Global Concerns About Climate Change. Global awareness and constant disasters due to climate change have forced governmental, commerce organizations and people into minimizing their carbon footprint. The carbon credits market is considered to be the mechanism facilitating the balance of emissions which cannot be eradicated directly. International climate conventions such as Paris accord are urging nations to pledge to a higher level of carbon emission reduction which in turn increases the array demand for carbon credits.
"Government Regulations and Carbon Pricing to Expand the Market"
Relationships between markets, critical impetus of carbon credit Which institutions, regulation and carbon pricing mechanism Carbon taxes, Cap and trade programs, Emission Trading System (ETS) are the main drivers of the carbon credit market? The below policies precisely decree that industries and sectors achieve specific and stringent emissions reduction goals, which makes the companies purchase carbon credits as a means of meeting the legislation requirements.
Restraining Factor
"Lack of Standardization and Transparency to potentially impede Market Growth"
Another issue within the carbon credits market is limited harmonisation of certifications with measurement and verification methods. Some carbon credit schemes and offsetting initiatives could have different practises that are hard to determine the accuracy with the credits purchased. Lack of standardized protocols across the world and disparate reporting can erode investor confidence in the market raising scepticism about the actual effectiveness of some carbon offset initiatives.
Opportunity
"Rising Demand for Climate Change Mitigation To Create Opportunity for the Product in the Market"
Consumers’ awareness of the climate emergency is rising, and both national authorities and companies are setting their net-zero emission goals. This has stimulated demand for carbon credits since organizations and nations seek for appropriate ways of cutting emissions. The increasing awareness of the requirements to act quickly and on a massive scale to minimize emissions has turned carbon credits into the key mechanism to deliver many global climate targets.
Challenge
"Regulatory Uncertainty Could Be a Potential Challenge for Consumers"
At present the changing laws of different countries and regions present major unpredictability in the carbon credits market. Challenges in setting long term strategies for carbon offsetting arise from differences in rules, pricing mechanisms and the legal framework for carbon offsetting that keeps changing in the future. Government might also introduce fluctuating policies or even neglect the existing regulations and thus, bring uncertainty to the carbon credit market and, in result, fluctuating credit prices.