The global carbon credit market size was valued at USD 470.11 billion in 2023 and is expected to be worth around USD 13,321.67 billion by 2033, growing at a compound annual growth rate (CAGR) of 39.71% from 2024 to 2033.
A carbon credit is an allowance that lets its holder emit one metric ton of carbon dioxide or the equivalent of other greenhouse gases. Credits are used in cap-and-trade systems aimed at reducing overall emissions. Such a system allows organizations to buy and sell credits, which creates a financial incentive to reduce greenhouse gas emissions. Carbon credits are a central tool in efforts to combat global climate change by stimulating investment in cleaner technologies and practices, which aligns with the transition toward a more sustainable and environmentally friendly economy.
Report Highlights
Report Scope
| Area of Focus | Details |
| Market Size in 2024 | USD 656.80 Billion |
| Expected Market Size in 2033 | USD 13,321.67 Billion |
| Growth Rate 2024 to 2033 | 39.71% |
| Prominent Region | Europe |
| Key Segments | Type, Project Type, Regulatory Framework, Source, Business Size, Selling Platform, End User, Region |
| Key Companies | Verra, Gold Standard, Carbon Trust, Climeworks, Carbon Clean Solutions, NativeEnergy, Ecologi, South Pole, Verde Impact, Pachama, EcoAct |
Challenges
Based on type, the carbon credit market is segmented into voluntary carbon credits and compliance carbon credits.
Voluntary carbon credits: The carbon credits are purchased voluntarily by those individuals, businesses, or organizations who desire voluntary carbon offsets for the released carbon. In such markets, there is legal scope to allow participants in these carbon-reducing projects. Here, the companies will have these credits for enhanced sustainable credentials, reaching more consumers who care about the environment as well as preparing the corporations for regulatory changes later down the road. Projects that are supported by these credits include forestation, wind and solar farms, and small-scale community-based projects. These are usually associated with corporate social responsibility goals as well as environmental stewardship.
Carbon Credit Market Revenue Share, By Type, 2023 (%)
| Type | 2023 (%) |
| Voluntary | 2.60% |
| Compliance | 97.40% |
Compliance Carbon Credits: It is governed under governmental frameworks that require certain units to meet the required set of emissions reduction targets. Compliance carbon credits are primarily part of cap-and-trade systems, where regulatory authority caps the total amount of greenhouse gas emissions and then delegates allowances or credits to contributors. The organizations have to hold enough credits to back their emissions, and over their limits, they need to either buy more credits or face penalties. This mechanism of the market encourages other reductions in emissions through the selling of excess credits to companies that need them to those who have reduced their emissions below their allocated cap. Compliance credits, therefore, play a central role in meeting national and international climate goals.
Based on project type, the the carbon credit market is segmented into forestry projects, renewable energy projects, and energy efficiency projects.
Forestry Projects: They are viewed as essential in the carbon credit industry. They are predominantly concerned with reforestation, afforestation, and the conservation of forests. All these projects play a very significant role in sequestering carbon dioxide from the atmosphere since trees naturally absorb CO2 during photosynthesis. Reforestation refers to replanting trees in areas where they had previously been cleared. Afforestation refers to planting trees in regions that were never covered with forests. Another conservation project is through forest protection, which also aims at conserving remaining forests so that they are not degraded further and become carbon sinks. Better livelihoods and the preservation of biodiversity could be further advantages.
Renewable energy projects: These also constitute another massive segment of the carbon credit industry whereby energy is generated from renewable energy sources such as wind, sun, and hydropower. Such projects once again bring about more emission reduction of greenhouse gases since in this case, also fossil fuel substitution is responsible for those emissions, hence it would be helpful in the proper production of clean energy. For example, sunlight is tapped to produce electricity in solar farms, while wind energy is converted into power through wind turbines. These projects give carbon credits directly due to the emission cut-off, and indirectly from energy security and sustainability influence. Local economies are increased together with generating local employment upon investment in renewable energy making it a more attractive spot for carbon offset projects.
Energy Efficiency Projects: These reduce energy consumption and emissions by replacing equipment, improving building insulation, or enhancing industrial processes. The consumption of energy is reduced with energy efficiency projects while more energy is conserved since energy is used efficiently. It decreases dependency on fossil fuels and emissions of greenhouse gases. The savings for firms and households from using energy-saving technologies will be significant. This provides a good incentive to generate carbon credits. In addition, these projects contribute to supporting sustainable practices and new technology that align with more international environmental targets.
Based on regulatory framework, the the carbon credit market is segmented into cap-and-trade system end and offsets & credits.
Cap-and-Trade System End: It is a regulatory system under which total emissions allowed in a given jurisdiction are capped so that the greenhouse gases generated do not exceed the total levels of emissions allowed within such jurisdiction. Under such a system, governments allocate limited quantities of emissions allowances or credits to the participating entities who would buy or sell credits as necessary. This gives businesses a financial reason to reduce their emissions. The businesses that are over the cap must purchase additional credits from those that have reduced their emissions below their allowance. This is driven by the market and rewards innovation and efficiency by allowing the lowest-cost reductions in emissions to occur.
Offsets and Credits: These refer to systems that allow projects to generate carbon credits, which can be bought and sold independently of the requirements of compliance. Consequently, most projects are conducted out of the compliance markets and can be done at a choice. In return, an organization will be credited with an equivalent amount of the CO2 it has reduced in its emission profile when it invests in a project that will reduce emissions—that is, the installation of renewable energy or a reforestation project. These credits can be bought and sold to other entities with a desire to limit the net emissions they may or may not generate through industrial activities. This would thus encourage a wide variety of projects and foster a compliance-buyer market, a combination that would further strengthen investments in sustainable initiatives.
The carbon credit market is segmented into several key regions: North America, Europe, Asia-Pacific, and LAMEA (Latin America, Middle East, and Africa). Here’s an in-depth look at each region
The United States and Canada are the largest players in the carbon credit market of North America. Regional carbon trading programs in the United States include the California Cap-and-Trade Program and a few Northeastern states involved in the Regional Greenhouse Gas Initiative. These regional carbon trading programs cap greenhouse gases and allow businesses to buy and sell allowances for compliance. The carbon pricing scheme adopted by Canada for its federations requires every province to establish its system. A rising demand in both nations for carbon credits is recorded because of increasing participation by more corporations, aligned with these corporations' sustainable goals.
Europe's most developed and operational carbon credit market is due mainly to the European Union Emissions Trading System, which is the world's biggest carbon trading mechanism. It encompasses everything from power generation and heavy industry to binding, unavoidable reduction targets of emissions for its member states. For instance, the key countries involved are Germany, France, and the UK, as they are major players in renewable energy and carbon offset projects. Commitment by the EU to reach a posture of climate neutrality by 2050 further heightens the significance of carbon credits in this region and results in innovation in carbon accounting and trading mechanisms.
China, Japan, and Australia are also taking positions in the carbon credit market. The national carbon trading scheme currently undertaken in China started with the power sector and is soon going to expand further into other sectors. Japan has pledged itself to achieve carbon neutrality by 2050. Programs on voluntary carbon markets where companies can offset their emissions through various projects have begun following such a commitment. A carbon credit market is booming in Australia through its Emissions Reduction Fund which encourages projects to reduce emissions. Awareness in the region about climate change is creating more participation and investment in carbon markets.
The LAMEA region has a fair amount of opportunities and challenges in the carbon credit market. Countries such as Brazil and Chile are doing a remarkable job in Latin America. Brazil focuses on forest preservation and reforestation projects, whereas Chile is slowly moving forward with renewable source initiatives that offset carbon output. The Middle East has carbon capture technologies and investment in renewable energy through developing the carbon market. African nations include South Africa and Kenya, which undertake carbon credit projects relating to sustainable agriculture as well as renewable energy, and the challenges are that these regulatory frames are not as developed; funding opportunities to aid growth in the carbon credit market have been minimal.
The carbon credit industry has a considerable influence from major players such as Verra, Verde Impact, Pachama, and EcoAct among many others. They take advantage of their skills in carbon accounting, project development, and market mechanisms to build and operate carbon credits. With the application of various technologies, such as remote sensing and blockchain, they develop and improve the processes and mechanisms for transparency and verification to validate the legitimacy of carbon credits. They work on various projects, reforestation, renewable energy, and sustainable agriculture among others that promote innovation and increase market capacity to satisfy the increasing demand for carbon offsets. Many of the organizations also collaborate with governments, NGOs, and corporations in their quest to effectively address the needs of a sustainable future.
CEO Statements
Mandy Rambharos, CEO of Verra
Diego Saez-Gil, CEO of Pachama
William Theisen, CEO of EcoAct
Recent partnerships and acquisitions within the carbon credit market, such as those involving companies like Pachama and EcoAct, are indeed indicative of high innovation and strategic cooperation at a rapid pace among main industry players- especially in bringing better indoor cycling experiences for customers. At the helm of this change are Pachama, EcoAct, Verra, and Verde Impact, each featuring performance analytics, real-time carbon tracking, and personal sustainability insights. These developments make consumers increasingly aware of what they are doing during the selling process and enhance the quality of the user experience while trying to promote a greener environment.
Some notable examples of key developments in the carbon credit industry include:
Current happenings in the carbon credits market by companies such as Verra, Verde Impact, Pachama, and EcoAct are setting a bar for sustainability. This sets a new standard with greater visibility and methodology in measurements leading to a higher trust factor among the stakeholders. Through high technologies combined with a standards approach, they are shaping the landscape for carbon credits in ways that reflect much more effective assessments of impacts on the environment and further development of stronger ties between real carbon offset projects and the benefits of real carbon offset projects aligned with global climate goals.
Market Segmentation
By Type
By Project Types
By Regulatory Framework
By Source
By Selling Platform
By Business Size
By End User
By Region