The carbon offset market includes offerings such as carbon offsetting and carbon compensation that provide solutions for effective carbon accounting and balancing the carbon footprint. Carbon offsetting is a system adopted by governments, industries, and individuals to balance their greenhouse gas emissions with emission removal projects. Projects undertaken for carbon offsetting include afforestation, renewable energy, energy efficiency, agricultural practices, and reduction of non-CO2 gases. Carbon offsets are measured in metric tons of carbon dioxide-equivalent (CO2e) and generate carbon credits that can be traded in the compliance or voluntary markets. Growing environmental awareness has boosted the voluntary adoption of carbon offsetting programs by organizations to balance their residual emissions and achieve carbon neutrality.
The global carbon offset market is estimated to be valued at US$ 477.85 Mn in 2024 and is expected to exhibit a CAGR of 8.6% over the forecast period 2024 to 2030, as highlighted in a new report published by Coherent Market Insights.
Market Dynamics:
The growth of carbon offset market is mainly driven by government regulations and incentives on carbon footprints and emissions. Many national and international agencies have implemented strict policies mandating monitoring and reporting of greenhouse gas emissions along with carbon pricing initiatives. For example, the European Union Emission Trading Scheme imposes a cap on carbon emissions from power generators, energy-intensive industries, and aviation. Such mandatory emission regulations are compelling organizations to cut emissions and offset residual emissions through the procurement of carbon credits. In addition, governments offer tax incentives for voluntary adoptions of carbon offsetting programs that is encouraging businesses to invest in offsetting activities and balance their carbon footprints.
SWOT Analysis
Strength: Carbon offset market is seeing increasing popularity as a solution to reduce carbon footprint. Many large companies are seting targets to become carbon neutral through offsetting and this is generating consistent demand. there is a wide range of carbon offset projects across renewable energy, forestry and methane capture that help lower emissions. Government policies in some countries also promote offsetting.
Weakness: There exists a lack of uniform carbon accounting standards which makes it difficult to accurately measure and verify emission reductions from offset projects. Also, offsetting allows continued carbon emitting activities rather than actual reduction at source. Reliance only on offsetting without direct emission cuts may not be a long term solution.
Opportunity: Growth in voluntary carbon markets driven by net zero commitments from companies. Expanding scope of international carbon trading schemes will increase opportunities. New offset categories like nature-based, carbon removal projects are opening up large addressable markets. Blockchain applications can help improve transparency and track carbon credits.
Threats: Stricter government regulations on carbon emissions may lower reliance on offsetting instead of direct cuts. Changing climate policies across regions pose regulatory risks. Emergence of low carbon technologies can lower emissions more cost effectively than offsets in some sectors. Competition from unregulated carbon credits lacking proper verification is a challenge.
Key Takeaways
The global Carbon Offset Market Demand is expected to witness high growth over the forecast period driven by stringent emission regulations and commitments from companies to become carbon neutral. The voluntary markets are growing faster than compliance based trading schemes as more firms aim for net zero.
Regional analysis: North America currently dominates carbon offset market share primarily due to presence of California cap-and-trade program and growth of voluntary retiring of carbon credits in Canada and US markets. Europe is another major regional market supported by EU Emission Trading System though post pandemic recovery remains uncertain. Asia Pacific region is witnessed fastest growth led by China, Japan and emerging voluntary markets in Southeast Asian countries.
Key players operating in the carbon offset market are AptarGroup, Weener Plastics Group, Bormioli Rocco Pharma, Pacific Packaging Components, PCC Exol, SHL Group, O.Berk Company, Winfield Laboratories, O.Berk, Comar, RPC Group, Alpha Packaging, Pretium Packaging, Silgan Holdings, Origin Pharma Packaging, Vidchem pty ltd, Mold-Rite Plastics, Berry Global, Amcor, Gerresheimer. The major players are focusing on expanding their carbon credit portfolio through investment in nature based projects and new offset categories like carbon removal. Partnerships along the value chain are also key strategies to scale up.
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