Written By: Albert SUTANTO
Verified By: Krishnan SRINIVASAN
In 2024, the global carbon credit market maintaned a valuation of approximately $1.4 billion, with the demand for carbon credits, measured by the volume of retired credits, showing little change from 2023. Average spot prices experienced a 20% decline. Despite this apparent inertia several indicators suggest a potential resurgence as 2030 approaches.
Shell's Predominance in the Carbon Credit Market
Shell emerged as the dominant player in the carbon credit market in 2024, retiring 14.9 million credits - more than twice as many as Italian energy producer Eni, the next largest user. This figure also surpasses the retirements by tech giants like Microsoft. Shell utilizes these credits to offset emissions from its operations and the end-use of its products, aiming to reduce emissions per unit of energy sold by 15-20% by 2030, compared to 2016 levels.
Critiques and Challenges of Carbon Credit Utilization
The volutary carbon market has faced critisism due to concerns over the quality and integrity of certain carbon projects, including allegations of fraud, double-counting, and flawed methodologies. These issues have led to increassed scrutiny and skepticism, causing some energy companies to pause new credit purchases and rely on existing stocks to meet climate goals. In contrast, tech companies like Microsoft have continued to invest in new offset projects to address their growing emissions.
Future Market Projections
Projections for the carbon credit market suggest siginificant growth in the coming years. Estimates indicate that the market could expand to between $7 billion and $35 billion by 2030, and further to between $45 billion and $250 billion by 2050. This anticipated growth is driven by several factors:
Corporate Climate Commitments: As companies approach their self-imposed 2030 climate targets, the gap between achievable internal emission reductions and their goals may lead to increased reliance on carbon credits.
Preference for High-Quality Credits: There is a growing corporate inclination toward high-quality credits, particularly those associated with carbon removal projects, which typically command higher prices.
Policy Developments: Initiatives like the Carbon Offsetting and Reduction Scheme for Internal Aviation (CORSIA) and the finalization of rules for carbon credit trading under the Paris Agreement are expected to stimulate demand.
By 2050, removal credits could constitute approximately two-thirds of the market's value, with engineered removal solutions, such as direct air capture and biochar projects playing a significant role. Despite their current high costs and limited scale, these technologies are valued for their permanence and integrity, pottenitally leading to a market worth up to $42 billion by mid-century.
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