Carbon Credit Market Expected to Expand Rapidly at 12.3% CAGR Through 2033 Says Persistence Market Research

The global carbon credit (carbon offset) market is undergoing unprecedented expansion as businesses and governments accelerate efforts to combat climate change. Carbon credits, representing one ton of CO2 emissions either avoided or removed from the atmosphere, have become critical tools for organizations aiming to meet emissions reduction targets. The market includes compliance-driven carbon trading systems, such as the European Union Emissions Trading System (EU ETS) and the Carbon Border Adjustment Mechanism (CBAM), as well as voluntary offsets purchased by corporations seeking to achieve net-zero targets beyond regulatory obligations.

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In 2026, the global carbon credit market is projected to reach US$ 1,260.3 billion, with forecasts estimating it could surge to US$ 2,838.8 billion by 2033, growing at a CAGR of 12.3%. This growth is underpinned by both regulatory compliance and voluntary corporate initiatives. Europe currently leads the market with nearly 80% share, driven by well-established compliance infrastructure, stringent climate regulations, declining emissions caps, and high carbon prices that incentivize active participation. North America is the fastest-growing region, expanding at 16.5% CAGR through 2033, supported by state-level compliance schemes like the Regional Greenhouse Gas Initiative and increasing corporate sustainability commitments.

The compliance segment dominates the market with 99% share, reflecting mandatory obligations under established frameworks. Meanwhile, the carbon removal and sequestration segment is the fastest-growing, benefiting from declining costs, improved renewable energy integration, and emerging commercial opportunities for captured CO2 in synthetic fuels and industrial chemicals.

Key Highlights from the Report

• The global carbon credit market is projected to reach US$ 2,838.8 billion by 2033.
• Europe holds the largest market share, accounting for nearly 80% in 2026.
• North America is the fastest-growing regional market with a 16.5% CAGR through 2033.
• The compliance carbon market maintains dominance with a 99% share.
• Carbon removal/sequestration projects are the fastest-growing segment at 19.2% CAGR.
• Article 6 of the Paris Agreement offers significant international trading opportunities.

Market Segmentation

The carbon credit market is segmented primarily by business model, project type, and end-user industry. By business model, the compliance market dominates, accounting for almost the entire market value due to legal requirements under emission trading schemes, cap-and-trade systems, and regional carbon pricing mechanisms. Conversely, the voluntary carbon market is expanding rapidly, driven by corporate net-zero pledges, ESG mandates, and supply chain decarbonization initiatives. Verified carbon credits in the voluntary market allow companies to offset emissions exceeding regulatory obligations, often at premium prices reflecting project quality and additionality.

Project type segmentation differentiates avoidance/reduction projects from removal/sequestration projects. Avoidance projects, such as renewable energy deployment, methane capture, and energy efficiency improvements, account for roughly 70% of current carbon credit transactions. Removal and sequestration projects-including afforestation, reforestation, soil carbon storage, biochar, and direct air capture-are gaining momentum as businesses shift focus toward permanent CO2 removal. These projects not only meet regulatory compliance but also support corporate credibility in long-term net-zero strategies.

End-user segmentation highlights the power sector as the dominant category, representing nearly 30% of demand in 2026 due to its significant greenhouse gas emissions. Other high-demand sectors include oil and gas, aviation, industrial manufacturing, and transportation. The aviation sector, in particular, is increasingly reliant on carbon credits under the CORSIA scheme to offset international flight emissions, creating niche demand for high-quality removal projects.

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Regional Insights

Europe maintains its position as the global leader in carbon credits, driven by mature compliance markets like the EU ETS, strict emissions caps, and carbon border adjustment mechanisms. Voluntary market growth is also strong, fueled by corporate ESG commitments and investor scrutiny. The region is increasingly shifting toward high-integrity removal credits, including engineered solutions and nature-based offsets.

North America is the fastest-growing region, propelled by established compliance schemes such as California's cap-and-trade program and the Regional Greenhouse Gas Initiative (RGGI). Robust corporate net-zero commitments and technological infrastructure further accelerate market expansion, particularly for voluntary offsets.

Asia Pacific is the primary supply hub for carbon credits. By 2024, the region accounted for 56% of global issuance, with China generating 48% and India 23% of the total. Emerging markets, including Indonesia, Vietnam, and Thailand, are actively expanding project pipelines and preparing for compliance and voluntary schemes. Article 6 implementation enables cross-border trading, increasing the international role of Asian carbon credits.

Market Drivers

Corporate net-zero pledges and ESG mandates are key drivers reshaping the carbon credit market. Companies are increasingly seeking carbon credits to neutralize residual emissions that cannot be eliminated internally. Investor pressure, evolving credit-rating frameworks, and consumer expectations for transparency intensify demand. Regulatory compliance mechanisms, including the EU ETS, CBAM, and CORSIA, also create inelastic demand for carbon credits, compelling regulated entities to purchase credits regardless of economic cycles. International agreements such as the Paris Agreement further strengthen structural demand by translating global climate commitments into enforceable domestic policies.

Market Restraints

Despite robust growth, the market faces significant challenges. High verification and certification costs limit participation for small-scale and community-based projects, particularly in emerging economies. Technical expertise is required for monitoring, reporting, and verification under standards like Verra and Gold Standard, creating entry barriers. Fixed costs for certification and compliance restrict smaller initiatives, reducing diversity in carbon supply sources. These structural hurdles limit the scalability of low-cost, high-impact projects such as tropical reforestation and sustainable land management, despite their climate mitigation potential.

Market Opportunities

The carbon credit market is moving toward high-integrity carbon removal and long-term sequestration projects. Corporate net-zero strategies increasingly demand durable removal credits, creating premium pricing opportunities. Technologies and methodologies such as direct air capture, afforestation, biochar, and soil carbon storage are emerging as key growth areas. The Article 6 framework under the Paris Agreement enables cross-border trading, allowing Asian project developers to participate in international markets. Advances in monitoring and verification reduce integrity risks, improving investor confidence and supporting sustainable market growth.

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Company Insights

The global carbon credit market features both established climate solution providers and emerging project developers. Key players include:

• EKI Energy Services Ltd.
• 3Degrees
• Finite Carbon
• Climeco LLC
• CarbonBetter
• Tasman Environmental Markets
• ClimatePartner GmbH
• Terrapass
• Carbon Credit Capital LLC
• South Pole Group
• Puro.earth
• Xpansiv
• Carbon Trade Exchange
• AirCarbon Exchange
• Deloitte

Market Segmentation

By Business Model

Voluntary Market
Compliance Market

By Project Type

Avoidance/Reduction Projects
Removal/Sequestration Projects

By End-User

Power
Energy
Aviation
Transportation
Buildings
Industrial
Others

By Region

North America
Europe
East Asia
South Asia & Oceania
Latin America
Middle East & Africa

Recent Developments:

In October 2025, EKI Energy Services registered a floating solar installation certified under Verra's Verified Carbon Standard, pioneering renewable energy-based carbon credits.

In December 2025, a tech-backed carbon removal coalition invested $44.2 million in high-integrity carbon removal credits from NULIFE GreenTech, signaling growing investment in durable removal solutions.

Conclusion

The carbon credit (carbon offset) market is entering a phase of unprecedented growth driven by regulatory compliance, corporate net-zero commitments, and the rise of high-integrity carbon removal projects. Europe continues to dominate with well-established compliance infrastructure, while North America demonstrates rapid growth fueled by voluntary and compliance schemes. Asia Pacific, particularly China and India, serves as a critical supply hub, leveraging renewable energy and reforestation initiatives to meet international demand.

While challenges such as high certification costs and technical barriers limit smaller project participation, opportunities in carbon removal, Article 6 trading frameworks, and technology-driven verification systems are creating long-term growth potential. The transition from avoidance-based offsets to permanent carbon removal is reshaping the market landscape, offering premium pricing, investor confidence, and global scalability. With continued innovation, policy support, and corporate engagement, the carbon credit market is poised to play a pivotal role in achieving global net-zero and climate-resilient futures.

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