Carbon Credits Market Size, Share, Growth Analysis, By Type(Regulatory and Voluntary), By System(Cap-and-trade and Baseline-and-credit), By End-use(Aviation, Energy) - Industry Forecast 2024-2031

Drivers

Rise in Demand for Carbon Credits

• The forecasted surge in demand for carbon credits holds considerable weight, yet McKinsey's analysis suggests a potential equilibrium by 2030, wherein the anticipated demand aligns with the projected annual supply of carbon credits, estimated at 8 to 12 GtCO2 per year. This potential supply hinges on four primary categories: mitigating nature loss, encompassing efforts such as preventing deforestation; nature-based sequestration, such as reforestation initiatives; endeavors aimed at curtailing or diminishing emissions like methane from landfills; and the advancement of technology-driven methods to extract carbon dioxide directly from the atmosphere.

Restraints

Rapid Acceleration Required in Project Development

• Several obstacles pose challenges to fully harnessing and commercializing the projected potential supply of carbon credits. The rapid acceleration required in project development presents a formidable hurdle, demanding an unprecedented pace to effectively mobilize these initiatives. Additionally, the majority of the anticipated supply from avoided nature loss and nature-based sequestration is concentrated within a limited number of countries, potentially leading to logistical and geopolitical complexities. Each project carries inherent risks, and various types may struggle to secure financing due to prolonged periods between initial investment and eventual credit sales, hindering their viability.