As governments set up environment pledges, most enterprises around the world are required to attain net zero emissions by 2050. The carbon credit market thus has the potential to explode. The total amount of carbon credits traded last year was over US$1 billion, pointed out by Brett Heath, Non-Executive Chairman of Carbon Neutral Royalty, a company that offers investors an opportunity to buy into the carbon offset market.
Carbon credits are expected to be a multi-trillion-dollar business in the next 10 to 20 years, and the market is likely to grow 100% per year for a number of years, according to Heath.
“Carbon credits are not a new asset class,” explained Heath. Carbon credits already have a history of two decades, but the widespread adoption is first seen, thank to governments which put pressure on public and private corporations to adopt and adhere to the carbon neutral mandates.
In terms of regulation for carbon credits market, Heath revealed that just a few third-party registration organizations implement the verification since the process is long and complicated which takes about three years to finish. At the moment, no worldwide regulatory authority oversees the market.
Heath also spoke about the huge opportunities in the carbon credit market because everyone has a carbon footprint. “This is a real asset class that is emerging. It will not go away since it affects everyone. Whether it's the cola you drink, the clothes you buy, or the beautiful restaurant you frequent, the costs will eventually be passed on to you,” he remarked.
He revealed that the voluntary costs for one carbon credit, which represents one tonne of carbon dioxide that has been taken out of the atmosphere, are in the US$11 to US$14 range. “But the voluntary market offers a considerably wider range of pricing options. Certain types of projects have traded for US$5 to US$7 per credit all the way up to US$30 per credit,” he stated.