Carbon Credit Trading Platform Market

Market Overview

The global carbon credit trading platform market size was valued at USD 130 million in 2023 and is projected to reach USD 536 million by 2032, registering a CAGR of 17.2% during the forecast period (2024-2032). The market is substantially increasing, primarily due to the growing worldwide emphasis on sustainable practices and the pressing necessity to address climate change.

Carbon credit trading platforms play a crucial role in facilitating this effort, offering a dynamic marketplace for purchasing and selling carbon credits. These platforms are essential in promoting a shift towards a low-carbon economy, providing inventive options for businesses looking to compensate for their carbon emissions.

The growth of the carbon credit trading platform market is primarily fueled by the escalating need for emissions reductions as mandated by regulations, the increasing focus of corporations on sustainability, the growing demand from investors and consumers for environmentally friendly practices, the advancements in technology that enable transparent and efficient trading, and the global efforts such as the Paris Agreement. These drivers contribute to developing a solid market as firms look for cost-efficient methods to achieve emissions targets. They utilize digital platforms to facilitate efficient trading, verification, and reporting of carbon credits. The increased awareness and pressure from stakeholders contribute to the acceptance and expansion of these platforms.

Highlights

• Voluntary generates the highest revenue share based on type.
• Cap and trade accounts for the largest market share by system type.
• Industrial accounts for the largest market share in the end-user industry.

Market Dynamics

Global Carbon Credit Trading Platform Market Drivers

Government Scrutiny and Regulations

Governments worldwide have implemented strict requirements for carbon neutrality, positively impacting carbon trading systems. According to the European Climate Law, the objective outlined in the European Green Deal is for Europe's economy and society to achieve climate neutrality by 2050. The legislation also establishes a specific goal of decreasing net greenhouse gas emissions by a minimum of 55.0% by 2030, compared to the levels recorded in 1990. Climate neutrality by 2050 refers to the objective of attaining a state where the European Union countries emit no more greenhouse gases than they remove from the atmosphere. This goal is primarily accomplished by reducing emissions, investing in environmentally friendly technologies, and preserving the natural environment.

In addition, the Danish parliament has recently passed a new corporate carbon tax expected to be the highest in Europe. Denmark has established a challenging objective of reducing greenhouse gas emissions by 70.0% from 1990 to 2030. Hence, such regulations around the globe drive market growth. 

Growing Implication of Cap Trade Systems by Governments 

Since the implementation of the 2015 Paris Agreement, there has been a rapid expansion of market-based mechanisms aimed at reducing carbon emissions. One such mechanism is carbon trading, which governments employ to mitigate emissions and offset the excess carbon emissions of significant companies. According to the United Nations Development Programme (UNDP), in 2023, 73 national and subnational jurisdictions emitted 11.6 billion tons of CO2e, equivalent to approximately 23.0% of global greenhouse gas emissions. The EU, the UK, Sweden, and China are included in this group.

Additionally, cap-and-trade programs are alternatives designed to establish economic incentives for nations and enterprises to reduce their environmental footprint. In June 2021, China implemented a nationwide Carbon Emissions Trading Scheme (ETS), which is anticipated to become the largest carbon market globally. This scheme aims to mitigate the impacts of climate change and help China accomplish its targets of reaching peak emissions by 2030 and net zero emissions by 2060. Therefore, the increasing importance of cap trading systems enhances the market demand. 

Global Carbon Credit Trading Platform Market Restraints

Rising Cost of Carbon Credits

The increasing expense of carbon credits can limit the market during the forecast period. Price volatility leads to an increase in pricing, and drives increased transaction volumes. The voluntary carbon credit market faced significant challenges in 2023 due to ongoing scrutiny and reputational difficulties. 2024 is expected to be crucial in shaping the market's future hinges on restoring carbon credits. By taking this action, firms may be compelled to buy billions of carbon credits yearly, causing prices to rise above $200 per ton and creating a market worth more than $1.1 trillion annually by 2050. Nonetheless, the Long-Term Carbon Offsets Outlook 2024 analysis by BloombergNEF (BNEF) suggests that if unsuccessful, it could lead to the demise of the overall market.

Additionally, certification and verification procedures for carbon offset projects can be challenging and costly. Lengthy verification procedures and bureaucratic hurdles may discourage project developers from participating in the international carbon credit trading platform marketplaces, thereby limiting the availability of credits and hindering the growth of the global carbon credit trading platform market.

Global Carbon Credit Trading Platform Market Opportunity

Integration of Renewable Energy Project Offsetting

Integrating renewable energy project offsetting is a crucial factor driving the growth of the energy sector's Carbon Credit Trading Platform Market. Carbon credit trading systems are becoming more prevalent in enabling transactions that finance and assist renewable energy projects to compensate for carbon emissions. Platforms are utilizing blockchain technology to track Renewable Energy Credits (RECs). These RECs, based on blockchain technology, create an unchangeable record of where the renewable energy comes from and guarantee transparency in the offsetting process. This technological advancement improves the trustworthiness of renewable energy initiatives within the carbon credit trading market.

Furthermore, blockchain enables the use of smart contracts to verify the generation of electricity from renewable sources. These contracts autonomously trigger the delivery of carbon credits when predetermined criteria, such as generating a specific quantity of renewable energy, are fulfilled. The automated verification procedure improves the efficiency and precision of credit generation.

Similarly, carbon credit trading platforms use Internet of Things (IoT) sensors to enable real-time monitoring of renewable energy plants. They deployed sensors and monitoring equipment to track energy production, validating the claimed emissions reductions with precise and current data. Technology integration improves the trustworthiness and dependability of carbon credits linked to renewable energy projects. Artificial Intelligence (AI) is also used to analyze and anticipate renewable energy projects' environmental impact and financial feasibility. Machine learning algorithms utilize historical data and market patterns to offer valuable information regarding renewable energy efforts' long-term viability and efficiency. This software application aids investors and businesses in making well-informed decisions about their involvement in carbon credit trading associated with renewable energy. As a result, it could contribute significantly to the market's expansion.

Regional Analysis

The global carbon credit trading platform market analysis is conducted across North America, Europe, Asia-Pacific, the Middle East and Africa, and Latin America.

North America Dominates the Global Market

North America is the most significant global carbon credit trading platform market shareholder and is estimated to grow at a CAGR of 17.3% over the forecast period. North America dominates the Carbon Credit Trading Platforms market, with the United States and Canada playing significant roles in creating this leadership. The U.S. has experienced a substantial increase in interest in carbon credit trading platforms due to the Biden administration's commitment to rejoin the Paris Agreement and the country's increasing focus on sustainability. To achieve carbon neutrality goals, the United States has observed a rise in corporate initiatives and legislative measures, leading to an increased need for carbon credits.

Similarly, the market's dominance in Canada is bolstered by several factors, including a robust carbon pricing framework and the federal government's objective of achieving net-zero emissions by 2050. Both countries strongly focus on environmental responsibility, leading to the widespread adoption of carbon credit trading systems as crucial tools in North America's transition to a low-carbon and more sustainable future.

Asia-Pacific is anticipated to exhibit a CAGR of 17.9% over the forecast period. In the Asia Pacific area, the Republic of Korea possesses the most sophisticated national emission trading system (ETS). China is seeking an emission trading system (ETS) that can optimize operations, demonstrate flexibility, be consistent with its environment, and be free of severe shortcomings. This initiative aims to enhance the consistency and coordination of carbon trading systems nationally in Asia. It also seeks to promote connectivity at both regional and global levels and identify practical approaches for the successful development and execution of these systems. Consequently, this region's global carbon credit trading market will continue to grow due to a substantial increase in demand for carbon credits to reduce carbon emissions.

Europe has a substantial portion of the market because of its innovative initiatives, strict regulations, and one of the largest carbon credit trading systems. The European Union has emerged as a prominent hub for carbon credit trading, driven by its commitment to achieve carbon neutrality by 2050 and its enforcement of regulations that require European nations to meet specified emission reduction targets within specific timeframes.

Furthermore, the European emissions trading scheme is the world's inaugural significant carbon market and the most extensive one. It governs around 40.0% of the overall greenhouse gas emissions in the European Union and encompasses around 10,000 power stations and manufacturing units inside the EU. In April 2023, parliament authorized a revision of the scheme to bring it in line with the carbon reduction targets of the European Green Deal. The reforms aim to reduce emissions in sectors regulated by the emissions trading system to 62.0% of 2005 levels by 2030.

Segmental Analysis

The global carbon credit trading platform market is segregated based on type, system type, and end-user industry. 

Based on type, the market is segmented into Voluntary Carbon and Regulated Carbon. 

The voluntary carbon segment dominated in 2023. Organizations and enterprises willingly engage in carbon credit exchanges in the Voluntary Carbon Market. These transactions are voluntary and not required by government rules. They are motivated by a company's dedication to sustainability, corporate social responsibility (CSR), and environmental stewardship. The Regulated Carbon Market operates under a system of emission reduction targets established by the government.

Additionally, companies operating in industries subject to emission caps, such as energy and manufacturing, engage in activities to adhere to regulatory obligations. Companies worldwide are progressively embracing voluntary carbon credits as a component of their corporate sustainability programs. The market for voluntary carbon credits has been propelled by firms' voluntary commitments to decrease their carbon impact and attain carbon neutrality. 

The regulated segment is the fastest growing. The main drivers bolstering the industry are international treaties and governmental agreements to diminish carbon emissions and achieve carbon neutrality. Governments are implementing tariffs and establishing trading systems to reinforce their agreements, fostering a favorable environment for the carbon credit trading platform industry.

Based on system type, the market is segmented into Cap and Trade, Baseline, and Credit.

The cap and trade segment dominated in 2023. The market determines the carbon price through the cap-and-trade system, and this price impacts market innovation and investment decisions. Consequently, it leads to a rise in the demand for the platform for trading carbon credits. Emissions are assigned a monetary value inside the cap-and-trade system. Industries with emissions credits might generate profitable income by selling them, thus creating additional sources of revenue.

The baseline and credit segment is the fastest growing. The baseline and credit system is essential for the expansion of the worldwide market for carbon credit trading. It establishes a benchmark for emissions levels, which is used to measure reductions. Entities that decrease emissions below their initial level produce credits, which can be exchanged. This encourages emissions reduction and participation in the market and guarantees measurable and provable environmental advantages. The system's transparency and trustworthiness are appealing to investors, which promotes the growth of the market.

Furthermore, it contributes to global climate objectives by establishing a uniform system for measuring emissions and enabling the exchange of carbon credits across borders. This, in turn, improves the efficiency and expandability of the market.

Based on the end-use industry, the market is segmented into Industrials, Utilities, Energy, Petrochemicals, Aviation, and Others.

The industrial segment dominated in 2023. The industrial sector is vital for expanding the worldwide carbon credit trading platform industry. Industries can offset their emissions by engaging in carbon credit trading, which involves purchasing credits from businesses with lower emissions. This practice serves as an incentive for the reduction of greenhouse gases. The demand for carbon credits stimulates the market's growth, encourages investment in environmentally friendly technologies, and facilitates international collaboration to mitigate climate change.

In addition, the carbon credit market's growth is being further accelerated by the increasing demand for enterprises to comply with more stringent emission norms imposed by regulatory frameworks. This is prompting corporations to actively seek cost-effective alternatives for meeting these requirements. 

The utilities segment is the fastest growing. The utilities segment's commitment to decarbonization activities in the battle against climate change is fueling an increase in demand for carbon credit trading systems, which is the primary reason for the expansion. Utility companies are significant contributors to greenhouse gas emissions, so they must reduce their carbon footprints to mitigate the effects of climate change. Utility companies can compensate for their emissions by purchasing carbon credits from other businesses that have decreased their emissions using carbon credit trading platforms.

The energy segment is the second largest. The energy sector significantly influences the expansion of the global carbon credit trading platform market by creating a demand for carbon credits as corporations endeavor to achieve emission reduction goals. Renewable energy initiatives, such as wind and solar plants, produce credits that can be exchanged, encouraging investments in cleaner energy sources.

Additionally, energy corporations frequently engage in carbon trading to compensate for emissions generated by conventional fossil fuels, thus enabling a transition towards sustainable practices. This environment promotes the market's growth, encourages the development of new methods for managing carbon, and facilitates international collaboration in the fight against climate change.

Recent Developments

• April 2024- ZERO13, an international carbon exchange, registry, and aggregation hub ecosystem that won the COP28 award, partnered with Decarb. Earth, CarbonCX, and XTCC. Together, they aim to offer the world's first comprehensive digital solution for measuring, reporting, and verifying carbon credits in the distribution, trading, and settlement of renewable energy projects.
• March 2024- Vietnam became the first country in the East Asia-Pacific region to receive a payment of USD 51.5 million from the World Bank's Forest Carbon Partnership Facility (FCPF). This payment was given to Viet Nam for successfully reducing deforestation and forest degradation (REDD+) and increasing the carbon stored in forests through reforestation and afforestation. These achievements were verified and rewarded with "carbon credits."