Voluntary carbon market projections for 2030
The voluntary carbon offset market is a growing opportunity for businesses and individuals to offset their carbon emissions by purchasing credits from projects that reduce or remove carbon from the atmosphere. The market is demand-driven, as it is voluntary, and the complexity of corporate ESG strategies will determine the extent to which carbon offset credits are used as part of emission reduction options.
According to the Taskforce on Scaling Voluntary Carbon Markets (TSVCM), demand for carbon offset credits is expected to reach 1-2 GtCO2 by 2030. However, Trove Research sees demand at a lower 0.5-1.5 GtCO2, with the view that not all corporates will have 1.5-degree emission targets and be engaged in the carbon offset market. BNEF’s forecast is in-line with Trove, estimating that demand for credits from corporates to reach net-zero goals could reach 1 GtCO2 by 2030 and exceed 5 GtCO2 by 2050.
The pricing of carbon credits will largely depend on the type of projects being pursued. The low-cost options, such as avoiding deforestation and clean energy developments, are priced in the $10-15/ton range. Removal projects, such as reforestation and direct air capture, are at the high end of the price range, and the cost of these carbon offset credits could reach >$200/ton, according to BNEF. Realistic market prices would reflect corporates’ internal cost of carbon used for their business operations, which are likely to mirror prices in compliance markets.
Various scenarios for the size of voluntary carbon markets by 2030 have been projected, with the market size ranging from $10 billion at the low end (reflecting largely the status quo of the oversupply of low-quality credits) to more than $200 billion at the high end if it is removal credits only. An annual market size of $0-100 billion by 2030 is realistic at a carbon price of $50-100/ton with 1 GtCO2, which compares to current traded volumes of ~360 MtCO2 per annum.
Overall, the voluntary carbon offset market offers significant opportunities for businesses and individuals to reduce their carbon footprint and contribute to the fight against climate change. As demand for carbon offset credits increases, businesses can explore innovative solutions to reduce their carbon emissions and support carbon reduction and removal projects. The market’s growth potential and pricing will depend on the supply and demand dynamics, and businesses that proactively engage with carbon reduction strategies will be well-positioned to benefit from this growing market.