Voluntary Carbon Market Estimated to Experience a Hike in Growth by 2035
The voluntary carbon market (VCM) is a rapidly growing sector aimed at enabling businesses, organizations, and individuals to voluntarily offset their carbon emissions by purchasing carbon credits generated through various climate projects. Unlike compliance markets driven by government regulations, the VCM operates on a non-mandatory basis, providing flexibility and accessibility for entities seeking to reduce their environmental impact beyond legal requirements.
Market Growth Projections
The Voluntary Carbon Market was valued at approximately USD 1.1 billion in 2024 and is projected to grow to USD 1.6 billion in 2025. Over the next decade, the market is expected to expand significantly, reaching an estimated USD 47.5 billion by 2035, representing a compound annual growth rate (CAGR) of 40% during the forecast period. This robust growth is driven by increasing awareness of climate change, rising demand for sustainable practices, and heightened pressure on companies to reduce their carbon footprints. Notably, the market peaked at over USD 2 billion in revenues from voluntary carbon credit trading in 2021, underscoring its rapid expansion[1].
Drivers of Growth
Key factors fueling the VCM include:
- Corporate commitments to net-zero emissions targets, with major companies like Microsoft and Amazon investing in carbon credits to offset residual emissions.
- The market’s role as both an environmental tool and economic catalyst, fostering innovation and creating new business opportunities.
- Increased adoption of environmental, social, and governance (ESG) goals by businesses.
- Supportive climate policies that encourage transparency, standardization, and credibility in carbon credit transactions.
- The ability for entities unable to immediately reduce emissions to invest in emission reductions elsewhere through carbon credits.
Market Segmentation
The VCM is segmented across multiple dimensions:
- By Project Type: Renewable energy projects currently hold the largest market share (over 30%), but forestry and land use projects are expected to experience substantial growth. Forestry projects contribute significantly by enhancing carbon absorption through forest conservation, afforestation, and reforestation, while also addressing biodiversity loss and climate change mitigation.
- By Type of Transaction: The market is divided into carbon removal, carbon reduction, and mixed transactions. Mixed transactions currently dominate with over 45% market share, a trend expected to continue. However, carbon removal transactions are anticipated to grow faster due to rising awareness about greenwashing and evolving legislative guidelines.
- By Application Area: The industrial sector leads in market share, driven by industries implementing net-zero strategies. The energy sector is projected to grow at a higher CAGR compared to other sectors, reflecting its critical role in emissions reduction.
- By End User: Private companies represent the largest end-user segment, accounting for nearly 45% of the market share. This segment is expected to maintain dominance and grow at an annualized rate of approximately 40% through 2035, reflecting increased corporate adoption of voluntary carbon credits to meet sustainability goals.
- By Geography: North America currently holds the largest market share (over 30%), but Europe is projected to capture the majority share in the coming decade. The Asia-Pacific region is expected to exhibit the fastest growth, with a CAGR of 42%, driven by increasing climate action and market participation in countries such as China, India, and Australia.
Challenges in the Voluntary Carbon Market
Despite its growth, the VCM faces several challenges:
- Lack of transparency in carbon credit pricing and insufficient detailed project information.
- Difficulties in evaluating the efficacy and integrity of carbon projects, particularly regarding their impact on biodiversity and local communities.
- Public criticism and legal actions related to greenwashing claims, which can deter stakeholder participation even when projects are credible.
Key Players in the Industry
The competitive landscape includes a mix of small, mid-sized, large, and very large project developers. Approximately 90% of these developers focus on nature-based solutions such as afforestation, reforestation, blue carbon, forest conservation, and agricultural land protection. Prominent companies profiled in the market include 3Degrees, Climate Impact Partners, ClimateSeed, Cool Effect, Earthly, Ecologi Impact Funds, EKI Energy Services, First Climate, Green Wedge, Greenfleet, natureOffice, Solaxy Group, South Pole, and The Carbon Collective Company.
Recent Developments
Recent initiatives underscore the market’s dynamism:
- In November 2024, EKI Energy Services partnered with India’s National Dairy Development Board to generate carbon credits through manure management programs.
- The Regional Voluntary Carbon Market Company launched a carbon market exchange platform to scale supply and demand of high-quality credits.
- Puro.Earth issued India’s first carbon dioxide removal credits for industrial biochar.
- Gold Standard expanded its portfolio of carbon removal methodologies to enhance CO2 removal capacity.
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