The carbon credit market, which consists of the voluntary and regulatory markets, has the potential to boom as the world approaches its 2050 goal of net zero carbon emissions. “The demand for voluntary carbon credits is estimated to grow 15 times by 2030, and to increase 100 times by 2050,” predicted Sunny Trinh, CEO of DevvESG, “We're getting close to a US$1 trillion market.”
The value of traded carbon credits in the regulatory market grew by 164% to a record US$850 billion last year, according to a report released by Refinitiv in January. Most of the growth came from the European Union’s Emissions Trading System, which accounted for 90% of the global value at US$755 billion.
The voluntary market, despite its small volume and value compared to the size of mandatory system, had a turnover of US$11 billion last November, with great potential for future growth.
Carbon credits will be used by any public corporation these days, according to Trinh. “Microsoft, Apple, and Google are all buying carbon credits. Since 2012, Google has begun buying them, and more corporations will follow suit,” he stated.
He went on to say, “Businesses only want to do business with companies that have good ESG scores and low carbon footprints. Institutional investors have already stated that they will only invest in stocks with positive carbon footprints when it comes to public enterprises.”
Since all the experts are suggesting that demand and pricing are going to climb dramatically over the next several years and continue to do so for quite a long time, Trinh predicted that the increased demand and higher prices for carbon credits might be fascinating for investors. Over the past year, the price of a voluntary carbon credit has risen from roughly US$7.50 to US$15, while the regulatory compliance market has doubled, too.
In addition, according to Trinh, industries that rely heavily on fossil fuels, such as the manufacturing industrial sector and the oil and gas industries, have most need for carbon credits, and the automobile sector, until it is completely electrified, also has great demand for carbon credits.
