Revenue Forecast

The revenue estimate for the base year 2023 is $105.60 billion, with a CAGR of 8.5% during the study period from 2023 to 2030.

The Impact of the Top 3 Strategic Imperatives on the Global Carbon Credits Industry

Innovative Business Models

• Why:

  • Companies are integrating net zero into their corporate strategies as a response to both legal requirements, in the case of companies subject to emissions trading systems (ETSs), and market demands, striving to create green brands that appeal to environmentally conscious clients.
  • Corporations are under public scrutiny regarding their Scope 1, 2, and 3 emissions, driving growth for monitoring, reporting, and verification (MRV) tools and voluntary carbon trading schemes.
• Frost Perspective:
  • The push for this green transformation will be crucial to the expansion of voluntary carbon markets, compelling companies to participate to ensure they are aligned with market requirements and to prepare themselves for potential legal obligations as the compliance market expands as well.
  • Companies can maximize sales revenues across an environmentally concerned client base by offering buyers a way of offsetting their emissions, creating a solid brand and loyal customers. Protection against greenwashing becomes especially relevant in this case.

Geopolitical Chaos

• Why:

  • Rising emissions are met with increasing worry from global private and public actors concerned with the impact of climate change and global warming.
  • The establishment and achievement of net-zero targets are dependent on governmental priorities, which are not always aligned with sustainable development and emissions reductions because many other factors come into play, including geopolitical conflicts, economics, and commerce.
• Frost Perspective:
  • Climate disasters across metropolitan cities and economic centers will emphasize global vulnerability, caused by a lack of global resilience and preparedness in the face of climate change.
  • This can have a positive impact in compelling governments to strengthen their pledges and lead to the development of carbon pricing mechanisms to reduce emissions.
  • The public perception of the impact of climate change can be another decisive factor driving the adoption of voluntary and compliance carbon pricing schemes.

Disruptive Technologies

• Why:

  • Developments, such as artificial intelligence (AI), machine learning (ML), Internet of Things (IoT), blockchain, cloud, and computer vision, are facilitating the traceability of environmental assets, guaranteeing security around the carbon value chain and the lifecycle of credits.
  • The digital MRV of emissions can act as a first step toward establishing carbon pricing mechanisms.
• Frost Perspective:
  • Network technologies have unlocked new levels of transparency and traceability that are central to performance monitoring and achieving climate targets.
  • Suspicion and doubts regarding the quality of credits can be resolved by ensuring traceability audits, where each company involved can provide accountability, thus facilitating market scalability.

Scope of Analysis

The compliance and voluntary carbon markets are expanding as the targets set by the Paris Agreement to reduce greenhouse gas emissions (GHG) based on national plans, also known as nationally determined contributions (NDCs), are approached. These targets constituted the International Compliance Markets, where credits are traded for the achievement of the NDCs or other targets set by sector-specific programs, such as the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). Parallely, carbon pricing instruments were introduced to reduce global emissions by applying a price to the GHGs emitted by a certain activity, leading to the creation of several instruments based on either carbon taxes or emissions trading systems, which represent the Domestic Compliance Markets, where credits are purchased to comply with national obligations set by the carbon mechanisms in place.

While carbon taxes penalize businesses for emitting carbon dioxide (CO2), thus fostering a reduction of emissions and purchasing of credits for carbon offsetting, ETS enable the exchange of carbon allowances (government-issued authorizations to emit a certain amount of CO2) to compensate for excess emissions between institutions. Currently, only 7 carbon taxes and 23 ETS (accounting for 40% of the pricing instruments in place) allow for the purchase of credits as an offsetting mechanism, complementing emission allowances. As of 2023, some of these systems are the Western Climate Initiative, China National ETS, Xero ETS, Kazakhstan ETS, Regional Greenhouse Gas Initiative, Tokyo Cap-and-Trade Program, and Chinese and Mexican subnational pilots. Respectively, each system can establish its rules regarding the purchase of credits, excluding certain projects or jurisdictions, or only allow the purchase of domestic-based credits.

Apart from governments enforcing the carbon targets through legally binding systems, consumers are becoming increasingly aware of the environmental impact of their actions, pressing companies to incorporate sustainable practices to maximize profit and sales. The Voluntary Carbon Markets are articulated around the proactive purchase of carbon credits to reduce a company’s or an individual’s carbon footprint. The legal requirement to offset emissions, therefore, differentiates both segments of the carbon market.

Carbon credits or offsets are generated under the umbrella of a crediting mechanism, which can correspond to an international, Governmental or Independent Crediting Mechanism, according to the nature of the system. International mechanisms are managed by an international organization, such as the ones established under the Kyoto Protocol (including the Clean Development Mechanism and Joint Implementation) and Article 6 of the Paris Agreement. Governmental mechanisms can be nationally or regionally administered, such as the California Compliance Offset Program and the Australian Carbon Credit Unit (ACCU) Scheme. Lastly, independent mechanisms are run by non-governmental entities, such as Verra and Gold Standard, representing the largest partition of the market.

Segmentation by Market Type

Carbon Credits Market:

• Compliance Carbon Market:
• Domestic Compliance Carbon Market
• In the context of an ETS or a Carbon Tax System established by governmental policies, organizations might be allowed to trade carbon credits to fulfil their obligations.

• International Compliance Carbon Market

• Carbon credits are traded to achieve Nationally Determined Contributions in the context of the Paris Agreement or as part of other industry-specific programs, such as CORSIA.

Voluntary Carbon Market

Organizations and individuals can proactively and voluntarily purchase carbon credits to offset their emissions as part of a corporate strategy, in preparation for the establishment of a compliance pricing instrument or because of personal commitments.

Competitive Environment

Key Competitors

• Vida Carbon
• Carbon Growth Partners
• Terra Natural Capital
• Respira
• Climate Bridge
• TASC
• HeavyFinance
• Green Finance Institute
• Pilotiation
• Finance Earth
• Arcadis
• TPG Rise Climate
• Finite Carbon
• 3Degrees
• Forest Carbon
• South Pole
• C-Quest Capital
• ClimatePartner
• Anew
• Agreena
• Earthbank
• DGB Group
• Verified Carbon Standard (Verra)
• Gold Standard
• Climate Action Reserve
• Social Carbon
• Plan Vivo
• Cercarbono
• Puro.earth
• ACR Standard
• Global Carbon Standard
• City Forest Credits
• Green-e Climate Standard
• TUV North/South
• S&A Carbon LLC
• SGS Global Services
• AENOR International
• RINA Services
• Carbon Check
• Ecolance
• Earthored Services
• Ampe
• Enviance
• Re-Carbon
• Sylvera
• BeZero
• Calyx
• Renoster
• American Carbon Registry
• EcoRegistry
• International Carbon Registry
• Open Forest Protocol
• The Climate Registry
• APX
• Climate Action Reserve
• Gold Standard Impact Registry
• Verra
• Chicago Climate Exchange
• Eco-Consortium
• European Energy Exchange
• AirCarbon Exchange
• Intercontinental Exchange
• Xpansiv
• Carbon Trade Exchange
• Pachama
• Nori
• Climate Impact X
• CME Group
• Patch
• Toucan
• Shell
• Volkswagen
• Chevron
• Comcast
• PetroChina
• AxA
• BMW
• Total Energies
• Apple
• Microsoft
• Allianz