Carbon Credits Market Trends & Research Insights by 2032

Carbon credits are a key component of carbon trading and carbon offset programs, designed to reduce greenhouse gas (GHG) emissions and combat climate change. The basic concept revolves around assigning a monetary value to a certain amount of greenhouse gas emissions reduced or removed from the atmosphere. One carbon credit is typically equivalent to one metric ton of carbon dioxide (CO2) or its equivalent in other greenhouse gases.

The carbon credits market size was valued at $2 billion in 2022, and is estimated to reach $143.5 billion by 2032, growing at a CAGR of 55.5% from 2023 to 2032.

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Carbon credits, also known as carbon offsets, are tradable units that represent a reduction or removal of greenhouse gas (GHG) emissions from the atmosphere. They are used as a tool to mitigate climate change by enabling individuals, organizations, and governments to take responsibility for their emissions and support emission reduction projects.

Buyers, such as companies, governments, or individuals, purchase carbon credits to offset their own emissions and meet their sustainability goals. The carbon credits are transferred from the seller to the buyer, often facilitated through specialized platforms or exchanges. Carbon credits help the companies to minimize their greenhouse gas emissions.

The key players profiled in the carbon credits market report include South Pole, 3Degrees, EKI Energy Services Ltd, TerraPass, NATUREOFFICE, Moss.Earth, Climate Impact Partners, Carbon Credit Capital, LLC, CarbonBetter, and NativeEnergy.

Carbon credits are generated through projects that reduce or remove greenhouse gas emissions. These projects can include renewable energy installations, energy efficiency improvements, methane capture from landfills or agricultural operations, reforestation and afforestation initiatives, and other activities that lead to a decrease in GHG emissions.

Carbon credits work on the principle of "offsetting" emissions. When an entity, such as a company or individual, emits carbon dioxide or other greenhouse gases, they can purchase carbon credits equivalent to the amount of emissions they have produced. The money from the purchase goes towards funding emission reduction projects. By buying and retiring these credits, the entity is effectively offsetting their own emissions by supporting projects that reduce emissions elsewhere.

Emission reduction projects often deliver co-benefits beyond GHG reductions. For example, renewable energy projects contribute to the transition to clean energy sources, create jobs, and improve air quality. Reforestation initiatives enhance biodiversity and provide ecosystem services. Sustainable development principles are often integrated into the design and implementation of emission reduction projects to ensure they promote social, economic, and environmental benefits.

In order to meet the net-zero carbon emissions, it is necessary to lower greenhouse gas emissions to almost 50% by 2030 and to reduce to net zero by 200. Thus, purchasing carbon credits can help in addressing huge amount of greenhouse gas emissions.

Carbon credits are basically the certificates that represents the amount of greenhouse gases removed from the atmosphere.

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Here's how the process generally works:

Emission Reduction Projects: Organizations or individuals can undertake projects that help reduce greenhouse gas emissions. These projects can be in various forms, such as renewable energy installations, reforestation efforts, energy efficiency improvements, or methane capture from landfills.

Verification and Certification: Independent third-party organizations assess these projects to verify their emission reduction claims. Once the projects meet certain criteria and standards, they are certified, and the amount of emission reduction achieved is quantified in carbon credits.

Carbon Credit Trading: These certified carbon credits can be bought and sold on carbon markets. Buyers are typically companies or individuals looking to offset their own emissions to meet carbon reduction targets or voluntary commitments.

Carbon Offset: The buyer, by purchasing carbon credits, effectively offsets a corresponding amount of their own carbon emissions. This means that the overall carbon emissions in the atmosphere remain the same because the reduction achieved through the emission reduction project balances out the buyer's emissions.

Environmental Benefits: The projects funded by carbon credit purchases have a positive environmental impact by reducing overall greenhouse gas emissions and contributing to climate change mitigation efforts.

In addition, participating in voluntary carbon credit markets enables companies to showcase climate leadership and demonstrate their commitment to addressing climate change. This involvement often goes beyond basic compliance requirements, as companies voluntarily take additional measures to reduce their emissions and support emission reduction projects.

Such initiatives can drive innovation in clean technologies and sustainable practices. These factors are anticipated to drive the carbon credits market forecast in the upcoming years.

An increase in the number of public and private organizations that help in achieving environmental sustainability by trading carbon credits is anticipated to boost the market demand during the forecast period.

The carbon credits market share is segmented on the basis of type, system, end-use industry, and region. By type, it is classified into regulatory and voluntary. By system, it is classified into cap-and-trade and baseline-and-credit. By end-use industry, it is classified into aviation, energy, industrial, petrochemical, and others.

Impact of COVID-19

The carbon credits sector is largely monitored by the governments across several countries. The carbon credits market opportunities were hampered during the pandemic due to reduced investments on emission reduction projects such as carbon sustainability projects and renewable energy projects.

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The carbon credits market was negatively impacted by the COVID-19 pandemic, owing to economic crisis across several countries, travel restrictions, closure of manufacturing units, and reduced energy consumption.

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