Voluntary Carbon Credit Market Overview

The estimated valuation of the global voluntary carbon credit market was USD 1,908.41 million in 2023. A CAGR of 25.3% is anticipated for the market, which is projected to grow from USD 2,388.76 million in 2024 to USD 14,560.17 million by 2032.

A voluntary carbon credit (VCC) is a market-based mechanism where individuals or organizations can voluntarily purchase carbon credits to offset their greenhouse gas emissions. These credits represent the reduction or removal of one metric ton of carbon dioxide from the atmosphere. The VCM is not legally mandated, meaning the purchase of VCCs is not required but rather a voluntary choice driven by factors like corporate social responsibility or a desire to reduce one's environmental impact. Projects that reduce or remove greenhouse gases (e.g., reforestation, renewable energy, industrial emissions reduction) can generate carbon credits. These credits are then sold on the voluntary carbon market. 

The purchase and use of VCCs are not mandated by regulations or laws, meaning individuals and organizations choose to participate based on their own goals and priorities. VCCs provide a way for companies and individuals to take responsibility for their emissions, even when they have already taken steps to reduce their footprint. They also help finance climate action projects that might not otherwise receive funding. VCCs can also have other positive impacts, such as biodiversity protection, pollution reduction, and job creation.

The shift to renewable energy sources like solar, wind, and hydropower provides a major avenue for the voluntary carbon credit market, as these technologies displace fossil fuels. Nature-based solutions such as reforestation, afforestation, and sustainable land management can effectively sequester carbon, offering another source of carbon credits. Developing and deploying carbon capture and storage technologies to capture emissions from industrial processes and power plants presents a significant opportunity. Projects focused on capturing and utilizing industrial gases like methane, often from waste, can reduce greenhouse gas emissions and generate credits. Engaging in voluntary carbon credit can demonstrate a company's commitment to sustainability and enhance its environmental reputation.

Carbon Credit Market Trends

Increased Demand for Carbon Removal

An emerging trend is the growing number of corporate commitments to net-zero targets and increased awareness of the importance of removing carbon dioxide from the atmosphere. This trend is projected to continue, with demand for carbon removal credits expected to increase significantly in the coming years. As the understanding deepens that emissions reduction alone is insufficient, carbon removal is increasingly recognized as a vital component for meeting net-zero targets and mitigating climate change.

Rising Digital Transformation

The voluntary carbon credit market is undergoing rapid digitalization,  driven by the growing demand for greater transparency, accuracy, and efficiency in monitoring, reporting, and verification of carbon credits. This shift is facilitated by the adoption of technologies such as AI, remote sensing, IoT sensors, blockchain, and cloud computing. These innovations enable more precise tracking of emissions, making it easier to verify the quality and effectiveness of carbon offset projects.

Focus on High-Quality Credits

The voluntary carbon credit market is increasingly focused on high-quality carbon credits due to stricter standards, rising corporate demand, and the integration of compliance markets. This trend is driving up prices for these credits and making them a more reliable and sustainable investment. Companies are also seeking high-quality credits to meet their sustainability goals and demonstrate their commitment to decarbonization, leading to a demand for more credible and verifiable offsets.

Carbon Credit Market Growth Drivers

Growing Emphasis on Net-Zero Commitments

Net-zero commitments are driving significant growth and activity in the voluntary carbon credit market, as companies increasingly rely on carbon credits to offset emissions and achieve their sustainability targets. The market facilitates the purchase and sale of carbon credits, which represent verified reductions or removals of greenhouse gas emissions, allowing businesses to compensate for residual emissions and contribute to global emissions reduction efforts. As more companies pledge to achieve net-zero emissions, they need mechanisms to offset the emissions they can't fully eliminate through direct decarbonization efforts. Investing in carbon credits allows companies to take immediate action towards long-term sustainability goals and contribute to global emissions reduction efforts.

Technological Advancements in VCCs

Innovations such as blockchain technology, AI, and satellite monitoring are streamlining processes, reducing fraud, and providing more accurate data, making the market more attractive to both buyers and sellers. Satellite imagery and drones can monitor project sites, particularly in hard-to-reach areas, providing real-time data on carbon sequestration and emission reduction. Internet of Things (IoT) sensors can collect data from various project sites, providing a more comprehensive and accurate picture of their performance. Digital technologies can be used to implement anti-money laundering measures, ensuring that the market is not used for illicit activities. Thus, technological advancements are significantly boosting the voluntary carbon credit market expansion by improving transparency, efficiency, and traceability.

Rising Adoption of High-Durability Carbon Credits

Companies are increasingly seeking credible and effective ways to reduce their carbon footprint, leading to a surge in demand for high-durability carbon credits. As organizations strive for net-zero targets, they are prioritizing carbon removal projects that offer long-term storage of carbon dioxide, like direct air capture and engineered solutions. High-durability credits allow organizations to demonstrate a genuine commitment to climate action and make their climate-neutral claims more credible. These durable offsets are seen as more robust and impactful, aligning with the growing market shift toward high-quality carbon credits. As confidence in these long-term solutions grows, high-durability carbon credits are emerging as a key driver of the voluntary carbon market development.

Voluntary Carbon Credit Market Segment Insights

The voluntary carbon credit market is bifurcated based on end user, project type, and region.

Voluntary Carbon Credit Market Evaluation by Project Type

Based on project type, the voluntary carbon credit market is bifurcated into avoidance/reduction projects and removal/sequestration projects. The avoidance/reduction projects segment is anticipated to experience the fastest growth over the forecast period, owing to established methodologies and verification processes that enhance their accessibility and ease of implementation. These initiatives have an established history and are well-known for their success in lowering emissions. In addition, several avoidance/reduction projects, such as renewable energy installations and energy efficiency improvements, typically have lower upfront costs compared to advanced removal technologies. This cost efficiency enhances the attractiveness of avoidance/reduction projects and drives segmental growth in the global market.

Voluntary Carbon Credit Market Assessment by End User Insights

Based on end user, the market is bifurcated into energy, aviation, buildings, power, industrial, transportation, forestry, and others. The power segment accounted for the largest market share in 2023, highlighting the essential importance of renewable energy in lowering greenhouse gas emissions. Projects involving wind, solar, and hydropower successfully substitute fossil fuels, resulting in substantial volumes of carbon credits. Firms with bold sustainability objectives, such as shifting to entirely renewable energy, consider it crucial to acquire these credits to achieve their environmental goals and support global emission reduction efforts.

Voluntary Carbon Credit Industry Developments

In September 2024, the Kenya Private Sector Alliance (KEPSA) and EcoSecurities entered into a strategic partnership focused on carbon credits. This collaboration aims to expand access to catalytic carbon and climate finance, supporting businesses in Kenya and across the African continent as they transition toward low-carbon, climate-resilient economic growth.

In July 2024, Verra, the leading nonprofit standards-setter for the voluntary carbon market, introduced its new ABACUS market label. Designed to simplify the accounting of emission reductions, the ABACUS label aims to improve transparency and credibility within the voluntary carbon market.

Voluntary Carbon Credit Market Key Players

Key participants in the voluntary carbon credit market include project developers, brokers, standards bodies, and purchasers from different industries. The market is highly fragmented, featuring many small and large participants engaged in various facets of the market. This fragmentation results in a competitive environment where innovation, growth, trustworthiness, and collaboration are essential factors.

Some of the major market players are:

• 3Degrees
• Carbon Credit Capital
• CarbonBetter
• Climate Partner GmbH
• EKI Energy Services Ltd.
• Finite Carbon
• Natureoffice GmbH
• South Pole Group
• TEM (Tasman Environmental Markets)
• Terrapass