The global carbon credit market experienced a period of stagnation last year, with a modest market size of approximately $1.4 billion, according to data compiled by MSCI.
Credit retirements, indicating their permanent removal from circulation, remained largely unchanged from the previous year, while average spot prices declined by 20%.
However, several indicators suggest a potential upsurge in market activity in the coming years. These include the escalating number of companies setting ambitious climate targets and a series of favorable policy and market developments.
At the close of 2024, over 6,200 carbon projects were registered across the 12 leading international crediting registries. These projects collectively issued 305 MtCO2e of credits in 2024, bringing the cumulative issuance since the Paris Agreement’s ratification in late 2016 to over 2.1 billion credits.
In 2024, 180 MtCO2e of these credits were retired, signifying their permanent removal from the market, primarily due to voluntary utilization by corporations as part of their climate strategies. Following a period of rapid growth until 2022, retirements plateaued for the third consecutive year.
Despite the relatively stable retirement levels, spot prices for carbon credits exhibited weakness, averaging only $4.8 per tCO2e, a 20% decline from the 2023 average.
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Several factors contributed to this market stagnation, including negative publicity surrounding the quality of certain projects and a potential lack of urgency among some corporations in fulfilling long-term climate goals.
Nevertheless, MSCI Carbon Markets’ latest modeling forecasts a significant increase in the global carbon credit market value, ranging from a minimum of $7 billion to a maximum of $35 billion by 2030. By 2050, the market could reach a valuation of $45 to $250 billion.
These market projections are predicated on the assumption that corporate and governmental climate commitments are fulfilled.
Demand drivers include voluntary corporate action, the CORSIA market for international aviation, the potential integration of carbon credits within compliance markets, and the utilization of carbon credits by governments under the Paris Agreement’s Article 6.
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By 2050, many companies will be approaching or surpassing their net-zero deadlines, and the same factors – robust corporate demand and a preference for high-quality credits – could propel the market value to unprecedented levels.
New sources of demand are also emerging. Airlines are initiating preparations for the first phase of the CORSIA scheme, with a 2027 deadline, and UN negotiators have finalized the preliminary rules for trading carbon credits under the Paris Agreement.
These developments collectively could mark the long-anticipated turning point for the global carbon credit market.
