There were over 6,200 carbon projects registered across the 12 largest international crediting registries at the end of 2024.[1] These projects issued 305 MtCO2e of credits in 2024 and have now issued more than 2.1 billion credits since the Paris Agreement was signed in late 2016.
Last year, 180 MtCO2e of these credits were “retired,” meaning that they were permanently removed from the market, typically because a corporation has voluntarily used them as part of their climate strategy.[2] As shown in the chart below, after a period of rapid growth up until 2022, retirements were pretty much flat last year for the third year running.[3]
In a slight increase on 2023, around 9% of last year’s retirements came from projects that remove CO2e from the atmosphere and 91% from projects that reduce the amount of CO2e entering the atmosphere.[4] Nearly all removal credits retired last year came from nature-based projects, as did circa 36% of the reduction-based retirements.
Annual retirements by project type (MtCO2e)
While retirements were relatively unchanged, spot prices for carbon credits were again weak last year, averaging just USD 4.8 per tCO2e. This was down 20% on the average price in 2023, which itself was down 32% on 2022. Prices continued to vary significantly by project type, with nature restoration and carbon-engineering credits often trading at many multiples of the rest of the market, particularly when traded on a forward basis.[5]
On ice
As a result, the size of the carbon credit market remained on ice. In 2024, credits worth a total of USD 1.4 billion were used by corporations, slightly below 2022’s peak of USD 1.7 billion, as illustrated below.
This chill persisted despite increasing momentum on improving the integrity of carbon projects and further growth in the number of corporations announcing targets for their net emissions — 2,732 companies had a new climate target validated by the Science Based Targets initiative (SBTi) in 2024, an increase of 65% on the end of 2023.[6]
Instead, other factors combined to cool the market in 2024, including negative publicity about the quality of some projects and a possible lack of urgency among some corporations when it comes to meeting faraway climate targets. The result was steady but not soaring demand, and a modestly downward trend in average credit spot prices.
Historical market size of credits retired (USD billion, 2024 prices)
A coming thaw?
Ice thaws as temperatures rise, and there is no doubt the world’s temperature is rising. Something similar may be on the cards for the carbon credit market. MSCI Carbon Markets’ latest modeling suggests that the global carbon credit market could rise in value to at least USD 7 billion, and perhaps as much as USD 35 billion, by 2030. Roll forward to 2050, and the market could be worth USD 45 to USD 250 billion, as our final exhibit depicts.
These market scenarios are modeled on the assumption that corporate and governmental climate commitments already announced are achieved. Sources of demand include voluntary corporate action (from, for example, companies making a net-zero or carbon-neutrality claim), the CORSIA[7] market for international aviation, the potential use of carbon credits within compliance markets and the use of carbon credits by governments as part of Article 6 of the Paris Agreement.
Several trends are at play in our 2030 projections. One is that many companies have set tough targets to be met by that year, and the gap between those and the direct emissions-reduction steps they can realistically make in their own operations (such as through greater energy efficiency) may yet widen. For many corporations, their desire to get their net emissions down in line with targets may result in their paying for carbon credits as well as making changes in their own businesses.
Another change is that corporate buyers have increasingly been choosing higher-quality credits, and these cost more than lower-quality ones. Tied to this is the trend among some corporations to focus almost exclusively on removal credits, which tend to trade at higher prices.
Removal credits made up, until recently, only a small proportion (less than 20%) of market value. However, as our first exhibit shows, they accounted for about a third of the value of retirements in 2024 (around USD 500 million). MSCI Carbon Markets’ scenarios project that the removal market will rise in value more quickly than reductions, to between USD 4 and 11 billion by 2030, potentially matching or even outstripping reduction credits, which are projected to reach between USD 1 and 13 billion by 2030.
Longer-term growth
By 2050, many companies will be up against, or past, their net-zero deadlines, and the same factors — urgent corporate demand and the shift to higher-quality credits — could send the value of the market up into new territory. The greater the length of a forecast, the greater the uncertainty, but if commitments are maintained, we estimate that the market could be worth between USD 45 and USD 250 billion (at 2024 prices).
Potential value of carbon credit market under different scenarios (USD billion, 2024 prices)
The mix of credits used is also expected to evolve. Around two-thirds of the value by 2050 could be in removal credits. Even more eye-catching is likely to be the growth of “engineered” removal credits, such as from projects that capture CO2 directly from the air or that trap carbon in the soil through biochar. Despite their high costs and limited scale today, their high permanence and perceived integrity could see their market value grow to as much as USD 42 billion by 2050.
Although these long-term projections may seem lofty, they are probably affordable. The upper estimate of market size by 2050 of USD 250 billion would represent less than 1.5% of global corporate profits in 2050.[8]
And there are already signs of cracks in the ice. The Integrity Council for the Voluntary Carbon Market is rolling out its Core Carbon Principles (CCPs) and approving project types, and carbon-project-rating agencies, such as MSCI Carbon Markets, are delivering the additional levels of quality assessment required by buyers.
New sources of demand are also emerging. Airlines are starting to make plans for the first phase of the CORSIA scheme, the deadline for which is 2027, and the U.N. negotiators finally agreed the preliminary rules for trading carbon credits under the Paris Agreement. Together these developments could signal the turning point in the global carbon credit market many have been long predicting.
For more insights on what happened in the carbon credit market in 2024 and a look ahead to 2025, please join our ‘2024 In Review’ webinar on January 23 – sign up here.
