In terms of valuation, Europe held the largest market share (51.2%) for Carbon Credits worldwide in 2022, followed by North America and Asia Pacific. The largest market share is anticipated to be held by Europe during the forecasted timeframe. The industrialized nations of Europe, including the United Kingdom, Germany, and other nations in the continent, are regarded as major consumers of carbon credits worldwide. The European Union established the EU Emissions Trading System (EU ETS), a global carbon trading system, in 2005 with the goal of becoming a climate-neutral EU by 2050. In order to reduce greenhouse gas effects by at least 40% by 2030, the EU Emissions Trading System (EU ETS) plan is split into four timely phases.
During the forecast era, Asia Pacific is anticipated to experience significant growth. India is one of the market's up-and-coming nations for carbon credits. Indian businesses are allowed to offer excess credits to developed nations because India's greenhouse gas (GHG) emission is below the carbon cap limit.
Global Carbon Credit Market: Drivers
Greenhouse gases are the major human-influenced drivers of climate change. These gases warm the Earth's surface by trapping heat in the atmosphere. The Earth's climate is warming, mostly due to human activities such as changes in land cover and emissions of certain pollutants Burning fossil fuels, cutting down forests and farming livestock are increasingly influencing the climate and the Earth’s temperature net zero targets, companies are putting considerable effort and capital into decarbonization. Climate change usually requires a complete economic shift. The demand for carbon credits will significantly grow in the coming decades as the companies are focused on net zero targets and are working toward reducing carbon emissions. A carbon credit represents the right to emit greenhouse gases equivalent to one ton of carbon dioxide. Several businesses are now adopting this technique of partially using carbon credits, which is benefitting them significantly. They are getting involved in projects and activities that are helping them generate offsets. They use as many credits as they want according to the limit set for a project and if they have a few left, they are used later for another project. This not only helps them save a significant amount of money, but which can aid them in investing in more such credits in the future when required. Hence, these factors help in driving the market for carbon offset/credits.
Global Carbon Credit Market: Opportunities
The last 70 years, growth of economy has been tied to an extensive increases in fossil fuel consumption, growth of agriculture and production of material. Since 1950, global average prosperity has increased more than four-fold. After the same time as we cut down forests, deplete soils, and excavate the ocean floor, our use of fossil fuels has increased from 20,000 terawatt hours to nearly 140,000 hours per year. Our global economic model is currently undergoing transformation. We are moving from today's Waste, Idle, Bigotry and Dirty (WILD) system to a new model. One in which growth is decoupled from extraction and instead coupled to regenerative power.
Global Carbon Credit Market: Restraints
Addressing the triple threat of pollution, climate change, and biodiversity decline requires a shift to a circular economy. Since no one nation can successfully implement a circular economy on its own, international commerce will be crucial in facilitating this transition. The Global North currently receives the majority of the economic benefits from circular commerce, while the Global South is responsible for the majority of the environmental and human costs. Therefore, greater global cooperation is required to stop the growth of a circular trade division. Even though the circular economy is crucial to achieving the world's environmental and human development goals, few trade actors are aware of it or comprehend it.
Global Carbon Credit Market- Impact of Coronavirus (Covid-19) Pandemic
Globally, most of countries are affected by COVID-19 and most of the countries have announced lockdowns. Pollution and GHG emissions have fallen across the continents as countries imposed lockdowns and restrictions to contain the spread of the Covid-19. The COVID-19 has brought about short-term environmental benefits as temporary reduction in carbon dioxide and other greenhouse gases, as people were forced to stay at home and industries such as mining, construction, and textiles remained closed for a period. According to the OECD (The Organization for Economic Co-operation and Development) Organization, in China, carbon emission reduced by 25% which is equivalent to around 200m tons of CO2 (MtCO2) in month of February 2020, compared with the same month in 2019. Also, the pandemic has interrupted global supply chains, including those for renewable energy projects, which could delay or obstruct their completion. The carbon offset registries are also considering Covid-19’s impact on reporting period deadlines. If there are hold ups, such a delayed site visits, it may be difficult to finish verification within given reporting timeframe. The Climate Action Reserve is allowing programmatic deadlines to extend by 6 months – if the extension reason is directly Covid-19 related.
Key Takeaways:
The Global Carbon Credit Market was valued at US$ 25.35 Bn in 2022 and is forecast to reach a value of US$ 145.04 Bn by 2030 at a CAGR of 24.4% between 2023 and 2030.
Global Carbon Credit Market: Competitive Landscape
WGL Holdings, Inc., Enking International, Green Mountain Energy, Native Energy, Cool Effect, Inc., ClearSky Climate Solutions, Sustainable Travel International, 3 Degrees, terrapass, and Sterling Planet, Inc.
Global Carbon Credit Market: Recent Developments
In July 2022, the Air carbon exchange (ACX), signed a collaboration agreement with the Nairobi international financial center (NIFC) and the Nairobi Securities Exchange (NSE) to develop a Kenya carbon exchange during the official launch of the Nairobi international financial center (NIFC). The partnership will establish a carbon ecosystem in Kenya connected to ACX’s international client order book, allowing buyers and sellers, international and domestic, to transact efficiently and transparently.
In March 2022, CarbonX, a carbon asset developer, signed a memorandum of understanding (MOU) with the Air Carbon Exchange (ACX) to develop a carbon marketplace in Indonesia jointly The Partnership will provide Indonesian Carbon project developers with a domestic Carbon market linked to ACX’S international Client order book, also the carbon market place will allow the growing Indonesian carbon market to rapidly scale up.
