Emissions Trading Market Poised for Growth Due to Carbon Emission Reduction Initiatives
Emissions trading, also known as cap-and-trade, is a market-based approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants. Under an emissions trading scheme, a limit or cap is set on the total amount of a pollutant that can be emitted. The limit or cap is allocated or sold to firms in the form of emissions permits which represent the right to emit a specific amount. Firms are required to hold a number of permits (government issued carbon credits) equivalent to their emissions. Firms that need to increase their emission permits can buy permits from others that require fewer permits. This gives firms flexibility to effectively manage their emissions in the manner that makes the most economic sense. The global emissions trading market is being driven by stringent government regulations regarding emission caps along with carbon pricing initiatives to achieve greenhouse gas emission reduction targets and mitigate the adverse impacts of climate change.
The emissions trading market is estimated to be valued at US$ 385.69 Bn in 2024 and is expected to exhibit a CAGR of 6.8% over the forecast period from 2024 to 2031.
Key Takeaways
Key players operating in the emissions trading market are Johnson & Johnson Services, Inc., 3M, Baxter, Coloplast A/S, Integra LifeSciences, Medtronic, Omeza, Cardinal Health, Bactiguard AB, Noventure, Essity, Schulke & Mayr GmbH, Smith & Nephew Plc., Convatec Group PLC, SANUWAVE and SANUWAVE Health, Inc., EO2 Concepts, Wound Care Advantage, LLC., Healthium Medtech Limited, Arch Therapeutics, Inc., Hydrofera, Sanara MedTech Inc., Axio Biosolutions Pvt Ltd., and Gentell, Inc.
The key opportunities in the market include increase in carbon pricing initiatives globally as more countries and regions implement carbon taxes or emissions trading systems. Stringent regulatory policies being enacted in the European Union and China for emission reduction will further drive market revenues.
Advancements in technologies related to carbon capture utilization and storage (CCUS) and renewable energy sources are reducing dependence on fossil fuels thereby contributing to decreased greenhouse gas emissions. Investment in afforestation and reforestation programs for carbon offsetting is another growth area.
Market Drivers
Stringent government regulations and carbon emission reduction targets being set up by countries and international bodies like the Paris Agreement are a major Emissions Trading Market Growth driver. As per the Paris Agreement, countries have committed to limit global temperature rise this century well below 2 degrees Celsius above pre-industrial levels and pursue efforts to limit the temperature increase even further to 1.5 degrees Celsius. This is propelling adoption of emissions trading schemes and carbon pricing across the globe. Favorable government policies incentivizing clean energy transition and emission cuts through carbon credits trading will further fuel the demand over the forecast period.
Current Challenges in Emissions Trading Market
The emissions trading market is still in a nascent stage of development and faces several challenges. Limited participation from major emitting sectors is a key issue holding back the growth of the market. High compliance costs and complexity of trading mechanisms have deterred widespread adoption so far. Lack of a unified international framework also leads to fragmentation across regional programs. Verification and enforcement of emission cuts claimed remains difficult. This erodes credibility and discourages new entrants. Changing economic conditions and policy support over time pose uncertainty risks. Continued technology advances will also be needed to facilitate low-carbon transitions more cost-effectively.
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