Carbon Offset Market To Witness Strong Growth Due To Increasing Carbon Emissions
Carbon Offset Market
The Carbon Offset
Market is estimated to be valued at US$
414.80 billion in 2023 and is expected to exhibit a CAGR of 31.7% over the forecast period 2023 to 2030, as highlighted in a new report published by Coherent
Market Insights.
Market Overview:
Carbon offsetting involves balancing carbon emissions by funding projects that
reduce greenhouse gas (GHG) from the atmosphere. This is done by supporting
renewable energy projects, reforestation efforts, agricultural practices that
store carbon in soils or projects that capture methane from landfills. The need
for carbon offsets arises due to increased emissions from various sources like
transportation, electricity generation, industrial activity etc. Carbon offsets
provide a way to mitigate climate change through investments in green projects.
Market key trends:
One of the major trends fueling the carbon offset market is increasing carbon
emissions globally due to fast industrialization and growing population. As per
International Energy Agency (IEA), global carbon emissions rose by 1.7% in 2021
compared to previous year and touched highest levels in history. Transport
sector accounted for 24% of global emissions. This has increased the need for
offsetting emissions through renewable projects. Many companies are now
committing to become carbon neutral by offsetting their residual emissions
through investments in certified carbon offset projects. Governments are also
emphasizing on decreasing reliance on fossil fuels to mitigate climate change
impacts. This is expected to drive further growth in carbon offsets market over
the coming years.
Porter’s Analysis
Threat of new entrants: Low capital requirements and established distribution
channels lower barriers to entry. However, industry players have strong brands
and customer loyalty.
Bargaining power of buyers: Large buyers can negotiate lower prices but
individual consumers have limited influence given the commodity nature of
offsets.
Bargaining power of suppliers: A few large offset project developers and
registries exist, giving them some pricing power depending on scarcity of
certain project types.
Threat of new substitutes: Alternatives like direct emissions reductions and
carbon removal technologies pose risks long-term but are not yet direct
substitutes.
Competitive rivalry: Fierce competition exists on price and variety of offset
types offered resulting in industry consolidation.
SWOT Analysis
Strengths: Voluntary offset market is growing rapidly due to increased
corporate net-zero pledges. Offsets offer a flexible, cost-effective solution
to balance hard-to-abate emissions.
Weaknesses: Additionality and permanence concerns undermine
integrity and consumer trust in some offset types. Administrative burdens
increase costs for small buyers and sellers.
Opportunities: Expanding compliance offset demand from
emerging carbon pricing initiatives worldwide presents major opportunities. New
offset standards and registries emerging to strengthen environmental integrity.
Threats: Policy uncertainty around future use and
eligibility of offsets in emission regulations pose challenges. Competition
from alternatives like carbon removal technologies and direct emissions
reductions.
Key Takeaways
The global Carbon Offset Market is expected to
witness high growth, exhibiting CAGR of 31.7% over the forecast period 2023 to
2030, due to increasing corporate net-zero commitments and emergence of carbon
pricing policies worldwide. The market size is projected to reach US$ 414.80
billion in 2023.
The North American region currently dominates the carbon offset market,
accounting for over 35% of global transaction volume in 2022. Strong regional policy
drivers like sub-national carbon pricing initiatives in Western Climate
Initiative and RGGI states are fueling offset demand. The regional market is
projected to grow at 30.2% CAGR during the forecast period, driven by emergence
of federal carbon pricing and stricter net-zero plans at state/provincial
level.
Asia Pacific region is identified as the fastest growing regional market for
carbon offsets, projected to expand at 33.6% CAGR between 2023-2030. The
strength of industrial and energy sector along with government initiatives in
countries such as China, Japan, India, South Korea are strengthening regional
carbon offset demand.
Key players operating in the carbon offset market are 3Degrees Inc.,
NativeEnergy, ClimatePartner, Carbon Credit Capital, Terrapass, Renewable
Choice Energy, Gold Standard, Offsetters, South Pole Group, Veridium, Cool
Effect, ClimateCare, MyClimate, Forest Carbon, Verified Carbon Standard. Among
these, Gold
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