Carbon Credit Validation Verification and Certification Market Size, Share & Industry Analysis, By Type (Compliance and Voluntary), By Service (Validation, Verification, and Certification), By End-User (Energy and Power, Industrial, Transportation, Agriculture and Others), and Regional Forecast, 2024-2032

The global carbon credit validation verification and certification market size was valued at USD 216.85 million in 2023. The market is projected to be worth USD 267.79 million in 2024 and reach USD 1,570.75 million by 2032, exhibiting a CAGR of 24.75% during the forecast period.

Carbon credit validation verification and certification are essential processes that ensure the integrity and credibility of carbon credits, which represent the reduction or removal of one metric ton of carbon dioxide equivalent (CO₂e) emissions. Governments worldwide are implementing stricter environmental regulations and carbon pricing mechanisms to combat climate change. These policies create a demand for carbon credits as companies seek to comply with emissions targets. For instance, the Indian government's Energy Conservation Bill passed in 2022, aims to establish a robust carbon credit market, supporting the country’s climate goals. The expansion of organizations such as Verra, Climate Action Reserve, and The Gold Standard in the credit validation verification and certification is fueled by a growing need for reliable carbon offsets, a commitment to sustainable development goals, heightened regulatory requirements, boosted credibility, and technological progress.

MARKET DYNAMICS

MARKET DRIVERS

Implementation of Policies and Regulations to Reduce Carbon Footprint Propels Product Demand

International agreements, such as the Paris Agreement, have set ambitious targets for greenhouse gas emissions reductions. Countries are now required to demonstrate their progress toward these targets, leading to an amplified demand for carbon credits as a means of offsetting emissions. The effectiveness of policies in reducing emissions has been documented, with significant progress attributed to initiatives supporting clean energy technologies and carbon pricing.

The European Union, for instance, has implemented over 3,000 policies aimed at reducing emissions, with a target of at least a 55% reduction below 1990 levels by 2030. Similarly, the U.S. Environmental Protection Agency (EPA) is improving regulations on emissions across various sectors, which will necessitate severe validation and certification processes for carbon sequestration to ensure compliance with these regulations.

Increasing Number of Companies Commitment to Net-Zero Emissions Targets Boosts Market Growth

As organizations commit to reducing their greenhouse gas emissions to net zero, they often find that achieving these targets necessitates purchasing carbon credits to offset emissions that cannot be eliminated through direct reductions.

According to Net Zero Tracker, 37% of the world's largest companies have publicly committed to net-zero targets, marking a notable increase from previous years. This trend is driven by regulatory pressures and a growing recognition of corporate responsibility in combating climate change. For instance, Patagonia aims to become carbon neutral across its entire value chain by 2025, exemplifying the proactive steps companies are taking to align with climate science. The Science Based Targets Initiative (SBTi) emphasizes that companies must set near-term, science-based targets to halve their emissions by 2030 and achieve net zero by 2050.

MARKET RESTRAINT

Substantial Initial Costs and Feasibility Challenges Linked to New Projects Could Limit Market Growth

The complexities and financial burdens of establishing these projects often deter companies from pursuing carbon credits, despite the growing need for emissions offsets. The lengthy timeline for project developers, often taking two to five years requires companies to allocate resources to projects that may not yield immediate financial returns, complicating their operational strategies.

• Taskforce on Scaling Voluntary Carbon Markets (TSVCM) estimates that while demand for carbon credits could increase dramatically, the actual supply may only reach 1 to 5 gigatons of CO2 per year by 2030, significantly lower than the potential demand. This discrepancy underscores the critical need for streamlined processes and financial support mechanisms to enhance project feasibility and encourage wider participation in the carbon credit market.

MARKET OPPORTUNITY

Increased Adoption of Renewable Energy Sources to Unlock New Potentials for the Industry

Governments worldwide are implementing rigorous environmental regulations and carbon pricing mechanisms, such as the European Union Emissions Trading System (EU ETS) and California's Cap-and-Trade Program. These frameworks necessitate the validation and verification of carbon credits to ensure compliance with emissions reduction commitments.

Corporate sustainability initiatives are also becoming more prevalent, with businesses voluntarily purchasing carbon credits to enhance their environmental credentials and meet stakeholder expectations. This trend is particularly evident in sectors such as energy and utilities, where companies are under pressure to demonstrate their commitment to sustainability.

MARKET TREND

Increasing Regulatory Requirements for Carbon Emissions Reduction to Promote Market Expansion

Increasing regulatory requirements for carbon emissions reduction have led to a surge in demand for carbon credits as companies and governments seek ways to offset their emissions and meet compliance obligations. As a result, the carbon credit market has experienced significant growth.

• The Paris Agreement sets a global target to limit global warming to well below 2°C and pursue efforts to limit it to 1.5°C above pre-industrial levels. This requires countries to submit Nationally Determined Contributions (NDCs) outlining their plans to reduce emissions.


• The IMO has introduced mandatory measures aimed at reducing greenhouse gas emissions from ships including developing a maritime GHG emissions pricing mechanism. This will require shipping companies to engage in carbon credit markets to meet their emissions targets.

The convergence of regulatory pressure, corporate accountability, and global climate commitments is creating a robust environment for the carbon credit validation verification and certification market. As organizations strive to comply with these increasing regulatory requirements, the demand for credible carbon credits will continue to grow, reinforing the market's significance in the fight against climate change.

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IMPACT OF COVID-19

The global impact of the COVID-19 pandemic on the carbon credit validation verification and certification market growth was moderate, as the pandemic hampered expansion of many end-use industries due to disruption of services, production plants closures, and hindrance in activities caused by social distancing norms. Furthermore, China, the U.S., and India are among the significant countries growing in the industrial economy.

SEGMENTATION ANALYSIS

By Type

Compliance is Dominating the Market Due to Regulatory Frameworks, Climate Agreements, and Sustainability Pressures

Based on type, the market is segmented into compliance and voluntary.

Compliance is the dominating segment in the carbon credit validation verification and certification market due to stringent regulatory frameworks, international climate agreements, corporate sustainability pressures. Compliance programs ensure that carbon credits are generated from projects that reduce greenhouse gas emissions or sequester carbon dioxide. Programs, such as the Verified Carbon Standard (VCS) and the Gold Standard have established rigorous standards for the development, validation, verification, and certification of carbon credit trading projects. These standards ensure that carbon credits are genuine, measurable, and verifiable, thereby increases trust in the market.

Voluntary is the second dominating segment in the carbon credit validation verification and certification market due to corporate sustainability committments, and an increasing need for flexibility. In addition, a growing demand for high-quality credits, substantial market growth predictions, a trend toward emission removal projects, external pressures from stakeholders, advancements in technology, heightened public awareness, and a wide range of project options also propel the segment growth.

By Service

Validation Segment is Dominating the Market Due to its Rising Accountability and Transparency 

Based on service, the market is segmented into validation, verification, and certification.

The validation service segment is dominating the carbon credit validation verification and certification market share due to the rising accountability and transparency in the carbon market. Validation refers to the process of assessing whether a carbon reduction project meets specific standards before it can generate carbon credits. This service is essential for establishing the legitimacy of projects in a largely unregulated voluntary carbon market. As companies seek to offset their emissions, they require assurance that the credits they purchase are credible and effective.

Verification services are crucial for maintaining buyer confidence in carbon credits, as they confirm that projects deliver real environmental benefits. The verification process typically involves third-party auditors who scrutinize project data and methodologies to ensure compliance with relevant standards. These factors to drive the carbon credit validation verification and certification market.

By End-User

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Energy and Power is Dominating the Market Due to Technological Advancements, Diverse Project Types, and Climate Initiatives

Based on end-user, the market is segmented into energy and power, industrial, transportation, agriculture, and others.

Energy and power is the dominating segment in the carbon credit validation verification and certification market. The energy and power sector is the largest consumer of carbon capture technologies, primarily due to its significant contribution to CO2 emissions. The majority of carbon capture initiatives are focused on natural gas processing and coal-fired power generation, which are major sources of emissions. For instance, natural gas plants are projected to continue growing in prominence, accounting for nearly 30% of global energy generation by 2040. The integration of carbon credit validation verification and certification in energy production helps reduce emissions and enhances the overall sustainability of these operations.

Industries such as cement, steel manufacturing, and chemical are significant contributors to global CO2 emissions. These sectors are increasingly adopting carbon capture technologies to comply with stringent environmental regulations such as in agriculture forestry to meet corporate sustainability goals. Additionally, the demand for CO2 in enhanced oil recovery (EOR) techniques further incentivizes industrial players to invest in CCUS (Carbon Capture, Utilisation and Storage) and carbon credit validation verification and certification solutions.

CARBON CREDIT VALIDATION VERIFICATION AND CERTIFICATION REGIONAL OUTLOOK

The market has been studied geographically across five main regions: North America, Europe, Asia Pacific, Latin America, and Middle East & Africa.

Asia Pacific

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The market value in Asia Pacific stood at USD 134.84 million in 2023 and is anticipated to dominate the global market during the forecast period. The region is increasing its decarbonization initiatives, despite challenges, such as unfavorable geological conditions for carbon capture, utilization, and storage (CCUS). Research from Rystad Energy identifies Australia, Malaysia, and Indonesia as emerging hubs within the Asia Pacific region, propelled by the carbon dioxide (CO2) storage capabilities of their depleted oil and gas reservoirs and increasingly stringent environmental regulations. This positioning enables the region to attract a significant share of the anticipated USD 15 billion investment in CCUS over the next decade.

Australia has implemented its Safeguard Mechanism, which sets emissions limits for large facilities while allowing companies to earn tradeable credits for exceeding reduction targets. This mechanism encourages emissions reductions and stimulates investment in carbon credit validation and verification processes.

North America

The carbon credit validation verification and certification market in North America is witnessing substantial growth, driven by regulatory frameworks, corporate sustainability initiatives, and technological advancements.

The carbon credit process involves assessing the design of a project that claims to reduce greenhouse gas (GHG) emissions. In North America, organizations such as the Climate Action Reserve (CAR) and the Verified Carbon Standard (VCS) often provide validation services. An independent third-party validator evaluates whether the project adheres to the methodologies outlined by the chosen carbon standard. For example, projects must meet standards set by ISO 14064-2 or similar guidelines for carbon offset projects, ensuring that the project’s approach to reducing emissions is sound and meets regulatory standards.

U.S.

The U.S. market is largely fueled by the increasing adoption of carbon pricing mechanisms, such as cap-and-trade systems and carbon taxes, which incentivize companies to reduce emissions and invest in carbon offset projects. For instance, the California cap-and-trade program has been a pioneering model in American carbon credit validation verification certification, allowing businesses to buy and sell carbon credits while establishing a robust framework for emission reductions.

Europe

The European carbon credit validation verification and certification market is growing through stricter emission reduction targets and the expansion of both compliance and voluntary markets. The integration of these credits into Environmental, Social, and Governance (ESG) initiatives further boosts their adoption.

The European Union (EU), Emissions Trading System  (ETS)  covers over 11,000 installations across 31 European countries and is responsible for approximately 45% of the EU's greenhouse gas emissions. This system sets a cap on emissions and allows companies to trade allowances, creating a financial incentive for reducing emissions. The recent revision of the EU Regulation on Land Use, Land Use Change and Forestry (LULUCF) aims to achieve net carbon removals of 310 million tonnes of CO2 equivalent by 2030. This ambitious target is expected to stimulate demand for carbon credits as companies seek compliance with stringent regulations.

Latin America

Latin American countries are actively working to establish carbon pricing mechanisms, such as carbon taxes and emissions trading systems (ETS). Mexico has taken the lead with its ETS, which began its pilot phase in 2020 and is now transitioning toward full operational status. Brazil is currently awaiting approval for its draft bill to create a carbon market, while Argentina has proposed an ETS in its recent omnibus bill under new leadership. Colombia has implemented a carbon tax since 2017, which complements its offset program. These regulatory developments are critical as they create a structured environment for carbon trading, enhancing the credibility of carbon credits.

In September 2023, Petrobras, Brazil's state-owned oil company, purchased 175,000 carbon credits for USD 120 million as part of its strategy to mitigate emissions and promote sustainability. This investment underscores the growing recognition among companies of the importance of carbon credits in achieving net-zero targets. The demand for validated credits is further fueled by international investments in carbon reduction projects from developed nations seeking to secure offsets through projects in Latin America.

Middle East & Africa

The Middle East and Africa are witnessing significant growth, propelled by regulatory initiatives, corporate commitments, and increasing international collaboration. In October 2023, Saudi Arabia launched the Greenhouse Gas Crediting and Offsetting Mechanism (GCOM) during the MENA Climate Week. This initiative aimed to help entities achieve emission reduction targets while promoting sustainable practices. Moreover, the Regional Voluntary Carbon Market Company (RVCMC), established by Saudi Arabia's Public Investment Fund and the Saudi Tadawul Group, is at the forefront of expanding the voluntary carbon market. These factors are expected to drive the carbon credit validation verification and certification market demand.

COMPETITIVE LANDSCAPE

KEY INDUSTRY PLAYERS

SGS is focused on New Product Development to Boost Its Market Presence

The global market is highly fragmented, with key players and medium-scale regional players delivering a wider focus on the carbon credit sector at local and country levels across the value chain. Companies are increasingly required to demonstrate their emissions reductions helping organizations align their carbon management practices with regulatory requirements, making it easier for them to engage in carbon credit trading.

In November 2021, SGS société générale de surveillance sa introduced S-Carbon, the world's first dual-standard intelligent cloud carbon management platform, developed in collaboration with Microsoft. This platform utilizes Microsoft Azure to help organizations track and manage their carbon emissions in compliance with international and national standards, enhancing their competitiveness and sustainability efforts.

Key Companies Profiled in the Report:

• Verra (U.S.)


• The Gold Standard (Switzerland) 


• SCS Global Services (U.S.)


• Climate Action Reserve (U.S.)


• American Carbon Registry (U.S.)


• Green-e Climate Standard (France) 


• DNV GL (Norway)


• TUV SUD (Germany)


• Intertek Group Plc (U.K.)


• Bureau Veritas (France)

KEY INDUSTRY DEVELOPMENTS:

• June 2024- Verra introduced the Verified Carbon Standard (VCS) Methodology VM0049 for Carbon Capture and Storage. This methodology provides a globally applicable framework for technology-driven carbon capture and storage (CCS) activities that facilitate carbon dioxide removals (CDRs) and emission reductions. CDRs are considered a critical element in corporate strategies aimed at achieving net-zero climate targets. 


• May 2024- Gold Standard introduced a new methodology for reducing methane emissions from landfills through decentralized organic waste processing. This methodology allows for the issuance of carbon credits that reflect the emission reductions achieved by processing food waste on-site, thereby eliminating the need to transport waste to landfills.


• December 2023- TÜV SÜD introduced the TÜV SÜD CMS 77 standard for certifying low-carbon hydrogen and blue hydrogen, along with their derivatives. This new standard will be regularly updated to align with current and future developments, as well as legal and normative requirements.


• November 2023- Verra announced an update to its methodology for calculating the climate benefits of REDD forest conservation projects it certifies. This update aimed to enhance the credibility of these credits and boost buyer confidence by utilizing the latest scientific advancements and technologies to refine the precision of its carbon accounting.


• May 2023- Verra approved three new validation/verification bodies (VVBs) for the Verified Carbon Standard (VCS) Program: Ecolance, TÜV Rheinland, and Internat Energy Solutions Canada. These Verra-approved VVBs conduct thorough evaluations of VCS methodologies, their components, and VCS projects to confirm compliance with the requirements of the VCS Program and adherence to best practices specific to various sectors.

Investment Analysis and Opportunities

The Government of India announced the rollout of a Carbon Credit Trading Scheme by 2026. The Indian government is developing the ICM to establish a national framework aimed at decarbonizing the economy through carbon credit trading. This initiative is designed to price greenhouse gas (GHG) emissions and mobilize investments for sustainable projects that generate carbon credits.

REPORT COVERAGE

The report provides a detailed analysis of the market and focuses on key aspects such as leading companies, product/service process, and leading source of the battery. Besides, the report offers insights into the market trends and highlights key industry developments. In addition to the factors above, the report encompasses several factors that contributed to the growth of the market in recent years.

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Report Scope and Segmentation