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Carbon Offsets Market Size, Share & COVID-19 Impact Analysis, By Type (Compliance Market and Voluntary Market), By Project Type (Avoidance/Reduction Projects and Removal/Sequestration Projects), By End-user (Renewable Energy, Forestry and Land, Industrial, Household and Appliances, Transportation, and Others), and Regional Forecast, 2023-2030

Last Updated: May 13, 2024 | Format: PDF | Report ID: FBI109080

 

KEY MARKET INSIGHTS

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The global carbon offsets market size was valued at USD 938.75 billion in 2022 and is projected to grow from USD 1,067.74 billion in 2023 to USD 2,549.42 billion by 2030, exhibiting a CAGR of 13.1% during the forecast period.


Carbon offset is the key carbon neutralization process that contributes to the reduction of carbon gas emissions or greenhouse gas emissions in the environment. This process includes various carbon capture technologies, such as carbon sequestration and the investment in renewable energy that reduces and measures industrial and commercial gases in tons. The government issues the monetary value for each ton of carbon dioxide or carbon dioxide equivalent (CO2e) utilizing measurement units such as the tCO2e or MTCO2e. This monetary value for carbon neutralization will boost the voluntary involvement of end-use industries in the carbon offsets program. These activities have gained momentum after a few global agreements, such as the Kyoto Protocol of 1977 and the Paris Agreement of 2015. These agreements and the protocol have resulted in the net zero carbon emission target for nations across the globe. Therefore, all these activities are expected to boost the market during the forecast period.


The conflict between Russia and Ukraine had a high impact on the core industries in Europe and worldwide. The military uses war equipment such as tanks, guns, and grenades that emit large amounts of greenhouse gases. According to the Collective Innovation to Fight Climate Change, the military across the globe emits nearly 6% of all greenhouse gas emissions as these defenses do not fall under any international bounds for climate change agreements.


The growth of this market is associated with the imposed compliance and independent contribution of the end-use industries to neutralize greenhouse emissions. Governments issue carbon credits per ton of CO2e for the different end-use industries that can be sold as per the current trading price. The end-user industries and traders invested in the carbon credit market, which raised the demand for carbon offsets. Thus, all these war activities impacted the market.


COVID-19 IMPACT


Pandemic Impacted the Market due to the Reduction in Greenhouse Gas Emissions


The pandemic impacted the carbon offsets market owing to the restrictions on carbon emission activities and gas purification. Governments across the globe had to impose lockdowns on the movement of people, transportation systems, and business activities, such as manufacturing units and sales departments. This drastically reduced the amount of greenhouse gases and other toxic gases in the environment and decreased the investment in carbon neutralizing projects temporarily. Furthermore, the carbon credit prices were fluctuating on the stock exchange platforms, which created an uncertain situation for the investors and the key companies that were about to get carbon credit in exchange for CO2e. Thus, all these factors impacted the number of carbon offset projects across the globe.


Carbon Offsets Market Trends


Increasing Adoption of Carbon Offsets by Voluntary Projects is the Emerging Trend in the Market


The rise in global warming owing to the increasing greenhouse gas emissions has created a potential opportunity for voluntary carbon neutralization projects. The small greenhouse gas (GHG) emitters started to participate in the carbon offsets program to achieve net zero carbon emissions. Additionally, these small volunteers get carbon credit for neutralizing each ton of carbon. These credits can be used as the currency for carbon trading on stock exchange platforms, resulting in a high profit for the company. All these financial advantages in the market of carbon offsets have created novel opportunities for new and existing volunteers to maximize their revenue.


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Carbon Offsets Market Growth Factors


Strict Government Regulations to Neutralize Carbon Emissions by 2050 Have Boosted the Market


Over the past years, the carbon emissions from the core industries such as cement, coal, crude oil, natural gas, and steel have crossed the permissible limits of green gases. Thus, an increase in CO2e and other toxic gases depleted the ozone layers, leading to serious health issues in adults and newborns. EPA (U.S. Environmental Protection Agency) confirms that one atom of chlorine can destroy over 100,000 ozone molecules in the stratosphere. Thus, these atmospheric reactions weaken the ozone layer, allowing unlimited exposure to the UV rays on the earth's surface. These UV rays or UV radiation increase the short-term or long-term risk of premature ageing, skin damage, skin cancer, and blinding of the eyes.  According to the National Center for Environmental Health, UV radiation can increase additional risk in people who are over age 50 and have light skin and eyes. Such a rise in health hazards due to the increasing carbon emission surge the demand for carbon capture.


After the Paris Agreement of 2015 and the Kyoto Protocol of 1977, the governments of the nation’s set limits on CO2e emissions. These agreements and the protocol aimed to ensure carbon neutrality would be beneficial for the business. The government promoted and offered the carbon credit system for projects including renewable energy, carbon capture, and reforestation. These issued carbon credits differ for different end-use industries. According to the Perspectives Climate group, it is estimated that carbon credit for the voluntary market would fall USD 12.9 - 25.8/t CO2e between 2026 and 2030. Thus, the increasing involvement of the governments of various nations to reach net zero carbon emission is driving the carbon offsets market growth.


RESTRAINING FACTORS


Limited Awareness of the Carbon Offsetting and Low Carbon Credit Scores in Multiple Countries May Hamper Market Growth


Carbon offsetting is one of the newest introduced chains of carbon capture processes tagged with the carbon trading system. Wealthier countries usually fund these credits. However, it is difficult to measure the quantity of carbon or CO2e emitted in the coming years, which raises the difficulty of issuing funds to governments. Moreover, there is no standardized way or process to measure carbon offsets worldwide. Despite these unfavorable conditions, the limited awareness of carbon offsetting and carbon credit trade is another key factor impacting the global market during the forecast period.


On the other hand, a few of the carbon neutralization schemes do not fall under the carbon offsets scheme, such solar panel systems. Moreover, the key carbon emitting countries such as China are not effectively involved in the carbon offsetting system as the price per ton of CO2e is low compared to the European countries. However, the carbon offsetting process is new in the carbon reduction market. However, nations across the globe are voluntarily participating in reducing CO2e by 2050.


Carbon Offsets Market Segmentation Analysis


By Type Analysis


Compliance Market Held a Dominant Share Due to Imposed Restrictions on Carbon Dioxide Gas Emission by the Governments


On the basis of type, the market is categorized into compliance market and voluntary market.


The compliance market segment held the largest market share in 2022. The growth of the segment is associated with the rise in carbon gas emissions worldwide. The governments of different nations and independent organizations have imposed a limit on the emission of greenhouse gases as per the Paris Agreement 2015. The government issued carbon credits for end-use industries to neutralize carbon emissions. This has resulted in the companies starting to invest in carbon offset projects such as avoidance/reduction projects and removal/sequestration projects to maximize their revenue by selling their carbon emission. All these activities have boosted the segment’s growth.


Increasing awareness of carbon neutralization among the end-use industries is driving the voluntary market segment growth. The demand for carbon credit has increased after the Paris Agreement 2015 owing to the initiatives to achieve net-zero carbon gas emissions under the published article 6 of the Paris Agreement. Therefore, the end-use industries started to invest in renewable energy, including hydro and wind. Such increasing voluntary activities have boosted the segment growth.


By Project Type Analysis


Avoidance/Reduction Projects Held the Largest Market Share Owing to the Need for Reducing Hazardous Gas Emissions from the Environment


Based on project type, the market is segmented into avoidance/reduction projects and removal/sequestration projects.


The avoidance/reduction projects accounted for the largest market share in 2022. The rise in the depletion of the ozone layer boosted the segment growth. Over the past years, the number of carbon dioxide avoidance projects to reduce carbon gas emissions in the atmosphere has increased in Europe, Asia Pacific, and North America. An increase in these projects drives segment growth.


The removal/sequestration projects segment is growing gradually in the market. Growth is associated with the removal of carbon dioxide gas from various sources using procedures such as oxy-fuel, post-combustion, pre-combustion, and industrial separation. The utilization of these processes has increased from the industrial segment owing to their cost-effectiveness. Therefore, the increasing emission of carbon dioxide is driving the segment growth in the market.


By End-user Analysis


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Renewable Energy Segment Held Major Share Owing to Increased Product Deployment


Based on end-user, the market is segmented into renewable energy, forestry and land, industrial, household and appliances, transportation, and others.


The renewable energy segment accounted for the largest carbon offsets market share in 2022. The growth of the segment is associated with the rapid increase in CO2e emission, which has impacted the environment and human health. Furthermore, the increased CO2e has caused serious health problems such as respiratory diseases. These negative effects have surged the demand for carbon removal from the environment. Renewable energy projects such as hydro and air reduce the dependency on coal and fossil fuels, which leads to lower carbon emissions. Thus, increasing CO2e emissions have boosted investment in renewable energy projects, leading to the growth of the market.


The growth of forestry and land, industrial, household appliances, transportation, and other segments is associated with supportive government initiatives to reduce carbon footprint and hazardous gas emissions. These end-use industries get credit for each ton of carbon neutralization. Thus, increasing government initiatives for a carbon-free future are surging investment in these end-use applications, further propelling the market.


REGIONAL INSIGHTS


Based on region, the market is segmented into North America, Europe, Asia Pacific, and the rest of the world.


Europe Carbon Offsets Market Size, 2022 (USD Billion)

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Europe held the largest market share in 2022. The noteworthy environment policy and a substantial increase in investment for sustainability projects drive the growth of the market in the region. On the other hand, Europe has a strong presence in the carbon credit trading sector. Therefore, key end-use industries are engaging in carbon offsets programs to increase their revenue along with the target to net zero carbon emission by 2050. All these factors are anticipated to boost the market in Europe.


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The market in North America is growing gradually. The growth factors for carbon offsets are associated with the rise in environmental policy in the U.S. For instance, In September 2006, the U.S. government issued California’s Global Warming Solutions Act (AB 32) to reduce GHG emissions. Moreover, in 1977, the U.S. government set the emission standards for carbon dioxide in Oregon and Washington. Thus, increasing government policies for end-use industries have raised the investment in renewable energy projects to reduce CO2e.


Asia Pacific is expected to grow at a significant CAGR during the forecast period. China is one of the largest carbon dioxide emitters in the Asia Pacific. Every year, China emits a large amount of hazardous gases such as GHG, carbon monoxide, and carbon dioxide. These gases can deplete the ozone layer. Therefore, the number of carbon capture projects has increased over the past years. Thus, all these factors are anticipated to boost the market in the Asia Pacific during the forecast period.


The market growth in the rest of the world is associated with the increasing awareness of carbon neutralization. Governments of the nations are encouraging end-use industries to achieve the net zero carbon emission targets by issuing carbon credits in exchange for the neutralized carbon dioxide in units of tons. All these activities are expected to boost the market expansion in the rest of the world.


List of Key Companies in Carbon Offsets Market


Key Players are Shifting toward Sustainability to Gain a Competitive Edge in the Market


Major players operating in the market are Carbon Credit Capital, NativeEnergy, Green Mountain Energy Company, EcoAct, GreenTrees, and others. These companies are focusing and increasing their investments in sustainability activities. Moreover, these companies are involved in new project launches, joint ventures, acquisitions, and partnerships to gain a competitive edge in the market. The other key market players have established a strong regional presence, robust distribution channels, and varied product offerings.


LIST OF KEY COMPANIES PROFILED:



  • Carbon Credit Capital (U.S.)

  • NativeEnergy (U.S.)

  • Green Mountain Energy Company (U.S.)

  • EcoAct (U.K.)

  • GreenTrees (U.S.)

  • Allcot Group (Switzerland)

  • 3Degrees (U.S.)

  • WayCarbon (Brazil)

  • South Pole (Switzerland)

  • TerraPass (U.S.)


KEY INDUSTRY DEVELOPMENTS:



  • August 2023 – The Doha-based Global Carbon Council announced plans to list its carbon credits on the MENA exchanges platform. This initiative is expected to increase the number of carbon offset investors and boost the number of active carbon emission projects in the Middle East region.


REPORT COVERAGE


An Infographic Representation of Carbon Offsets Market

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The market report provides a detailed analysis of the market and focuses on crucial aspects such as leading companies, projects, and end-users. The report also offers insights into market trends and highlights vital industry developments. This report includes historical data and forecasts revenue growth at the global, regional, and country levels. Furthermore, it gives an analysis of the industry's latest market dynamics and opportunities. In addition to the factors mentioned above, the report encompasses various factors contributing to the market growth in recent years.


Report Scope & Segmentation



















































ATTRIBUTE



DETAILS



Study Period



2017-2030



Base Year



2022



Estimated Year



2023



Forecast Period



2023-2030



Historical Period



2017-2021



Growth Rate



CAGR of 13.1% from 2023 to 2030



Unit



Value (USD Billion)



Segmentation 


 


 


 



By Type



  • Compliance Market

  • Voluntary Market



By Project Type



  • Avoidance/Reduction Projects  

  • Removal/Sequestration Projects



By End-user



  • Renewable Energy

  • Forestry and Land

  • Industrial

  • Household and Appliances

  • Transportation

  • Others



By Geography



  • North America (By Type, Project Type, End-user, and Country)

    • U.S. (By End-user)

    • Canada (By End-user)



  • Europe (By Type, Project Type, End-user, and Country)

    • European Union (By End-user)

    • U.K. (By End-user)



  • Asia Pacific (By Type, Project Type, End-user, and Country)

    • China (By End-user)

    • South Korea (By End-user)

    • New Zealand (By End-user)

    • Rest of Asia Pacific (End-user)



  • Rest of the World (By Type, End-user, and Country)






Frequently Asked Questions

Fortune Business Insights says that the global market size was USD 938.75 billion in 2022 and is projected to reach USD 2,549.42 billion by 2030.

Growing at a CAGR of 13.1%, the market will exhibit steady growth over the forecast period (2023-2030).

By end-user, the renewable energy segment accounted for a leading market share in 2022.

Strict government regulations to neutralize carbon emissions by 2050 are a major factor boosting market growth.

Carbon Credit Capital, NativeEnergy, Green Mountain Energy Company, EcoAct, and GreenTrees are a few of the leading players in the market.

Europe dominated the global market in 2022.

The increasing greenhouse gas emissions at the global level are expected to drive the product adoption.

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