Carbon Offsets Market Size, Share & Industry 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, 2024-2032

The global carbon offsets market size was valued at USD 1,064.81 billion in 2023. The market is projected to grow from USD 1,205.40 billion in 2024 to USD 3,230.29 billion by 2032, exhibiting a CAGR of 13.1% during the forecast period.

Carbon offset is a key carbon neutralization process that contributes to the reduction of carbon emissions or greenhouse gas emissions in the environment. This process includes various carbon capture technologies, such as carbon sequestration and 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) by utilizing measurement units, such as tCO2e or MTCO2e. This monetary value for carbon neutralization will boost the voluntary involvement of end-use industries in carbon offsets programs. These activities have gained momentum after the signing of a few global agreements, such as the Kyoto Protocol of 1977 and the Paris Agreement of 2015. These agreements and the protocols have resulted in the establishment of net zero carbon emission targets for nations across the globe. Therefore, 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 of 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 limits in climate change agreements.

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

The COVID-19 pandemic impacted the market owing to the restrictions on carbon emission activities and gas purification. Governments across the globe had to impose lockdowns and restrictions on the movement of people, transportation systems, and business activities, such as manufacturing units and sales departments. This drastically reduced the amount of greenhouse 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 key companies that were about to get carbon credit in exchange for CO2e. Thus, these factors impacted the number of carbon offset projects across the globe.

Carbon Offsets Market Trends

Increasing Adoption of Carbon Offsets by Voluntary Projects to Emerge as Key Market Trend

The rise in global warming owing to the increasing greenhouse gas emissions has created a potential opportunity for voluntary carbon neutralization projects. Many small Greenhouse Gas (GHG) emitters have 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 a currency for carbon trading on stock exchange platforms, resulting in a high profit for the company. These financial advantages in the market 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 to Boost Market

Over the past years, carbon emissions from core industries, such as cement, coal, crude oil, natural gas, and steel have crossed the permissible limits. Thus, an increase in CO2e and other toxic gases are depleting the ozone layers, leading to serious health issues in adults and newborns. The U.S. EPA (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, exposing the earth’s surface to harmful UV rays. These UV rays or UV radiation increase the short-term or long-term risk of premature aging, skin damage, skin cancer, and blindness. According to the National Center for Environmental Health, UV radiation can increase the risk of chronic diseases in people who are over the age of 50 and have light skin and eyes. Such a rise in health hazards due to the increasing volume of carbon emissions will surge the demand for carbon capture technologies.

After the Paris Agreement of 2015 and the Kyoto Protocol of 1977, governments of various nations set limits on their CO2e emissions. These agreements and protocols aimed to ensure carbon neutrality, which would be beneficial for business. Governments promoted and offered a 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 governments of various nations to reach net zero carbon emissions is driving the carbon offsets market growth.

Corporate Sustainability Initiatives to Boost Market Growth

Corporations are increasingly recognizing the importance of sustainability and environmental stewardship. Many of them have set ambitious targets to achieve net-zero emissions, and such steps can act as a critical component of their strategies. They are increasingly integrating sustainability into their business strategies, driven by the need to address environmental concerns, enhance their brand reputation, meet regulatory requirements, and respond to stakeholder pressures. This trend has led to a significant rise in the demand for carbon offsets as companies aim to achieve their sustainability and climate goals.

Corporate Social Responsibility (CSR) is the practice of companies taking responsibility for their impact on society and the environment. As part of their CSR initiatives, many companies are committing to reducing their carbon footprint by investing in carbon offset projects. These projects range from reforestation and renewable energy to methane capture and energy efficiency improvements.

RESTRAINING FACTORS

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

Carbon offsetting is one of the newly 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 that will be emitted in the coming years, which increases the difficulty of issuing funds to governments. Moreover, there is no globally accepted standardized way or process to measure carbon offsets. In addition to these unfavorable conditions, the limited awareness of carbon offsetting and carbon credit trade is another key factor that will impact the global market during the forecast period.

Moreover, a few of the carbon neutralization schemes do not fall under the scheme, such as 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 that in the European countries. Also, 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 Segment Dominated Market Due to Imposed Govt. Restrictions on CO2 Gas Emissions

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 2023. 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 their 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 emissions. These activities have boosted the segment’s growth.

Increasing awareness of carbon neutralization among 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 taken to achieve net-zero carbon gas emissions under Article 6 of the Paris Agreement. Therefore, the end-use industries started investing in renewable energy, including hydro and wind. Such an increase in voluntary activities have boosted the segment’s growth.

By Project Type Analysis

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

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 2023. The rapid depletion of the ozone layer boosted the segment’s growth. Over the past years, the number of carbon dioxide avoidance projects to reduce carbon emissions in the atmosphere has increased in Europe, Asia Pacific, and North America.

The removal/sequestration projects segment is growing gradually in the market. The segment’s 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 in the industrial segment as well owing to their cost-effectiveness. Therefore, the increasing emission of carbon dioxide is driving the segment’s growth in the market.

By End-user Analysis

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Renewable Energy Segment Held Major Market 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 2023. The growth of the segment is associated with the rapid increase in CO2e emissions, which has impacted the environment and human health. Furthermore, increased CO2e has caused serious health problems, such as respiratory diseases. These negative effects have surged the demand for carbon removal processes to remove carbon emissions 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 segment.

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.

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Europe held the largest market share for carbon offsets in 2023. The noteworthy environment policies and a substantial increase in investment for sustainability projects will drive the growth of the market in the region. Europe has a strong presence in the carbon credit trading sector. Therefore, key end-use industries are engaging in carbon offset programs to increase their revenue and achieve their target of net zero carbon emissions by 2050. These factors are anticipated to boost the market in Europe.

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North America is growing gradually due to the implementation of environmental policies 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, an increasing number of government policies for end-use industries have raised the investment in renewable energy projects to reduce CO2e.

Asia Pacific is expected to record a significant CAGR during the forecast period. China is one of the largest carbon dioxide emitters in the region. Every year, the country 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 few years. Thus, these factors are anticipated to boost the market in Asia Pacific during the forecast period.

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

KEY INDUSTRY PLAYERS

Key Players Are Shifting Toward Sustainability to Gain Competitive Edge

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

List of Top Carbon Offsets Companies:

• Carbon Credit Capital (U.S.)


• Native (U.S.)


• Green Mountain Energy Company (U.S.)


• EcoAct (U.K.)


• Greenfleet (U.S.)


• ALLCOT (Switzerland)


• 3Degrees Group, Inc.  (U.S.)


• WayCarbon (Brazil)


• South Pole (Switzerland)


• TerraPass (U.S.)

KEY INDUSTRY DEVELOPMENTS:

• May 2024: 3Degrees debuted a new solution to help organizations achieve scope 3 emission targets within their agricultural supply chains. The Smart Launch Solution includes a blended supply of carbon credits and Renewable Natural Gas (RNG) certificates. It also includes the marketing tools and program management support necessary to get a program approved and launched as efficiently and cost-effectively as possible.


• April 2024: The South Pole teamed up with GenZero, which launched a new center to scale ‘high-impact, first-of-a-kind’ carbon credits to accelerate climate action in Asia. The two companies launched an initiative called the Asia Centre of Carbon Excellence (ACCE) based in Singapore to develop carbon projects relevant to the region.


• 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.


• March 2023: Sweep, a carbon management and reduction platform, announced its partnership with 3Degrees, a global climate solution. The two certified B Corporations will team up to provide a seamless experience for organizations looking to measure and take action on their operational and value chain emissions.


• March 2022: WayCarbon was acquired by Banco Santander Spain, accelerating its ambition to contribute to the adoption of commitments and implementation of effective solutions to address climate change. WayCarbon is 80% owned by Banco Santander, one of Europe's largest banks. It is a leading developer of carbon removal projects and a pioneer in climate change mitigation and sustainability solutions.

REPORT COVERAGE

The report provides a detailed analysis of the market and focuses on crucial aspects, such as leading companies, projects, and end-users. It also offers insights into market trends and highlights vital industry developments. It includes historical data and forecasts the market’s revenue growth at the global, regional, and country levels. Furthermore, it gives an analysis of the 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.

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