The compliance and voluntary carbon markets grew at record pace over the past two years, according to a joint report by Shell and Boston Consulting Group (BCG).
The compliance market soared to an estimated value of about $850 billion in 2021, nearly 2.5 times the value in 2020 while the voluntary market value quadrupled to about $2 billion, the report showed. In 2022, use of carbon credits continued to grow, with nearly 166 million tonnes of retirements – a record number of retirements. By 2030, the value of the voluntary market is expected to be five times bigger.
“The voluntary carbon market: 2022 insights and trends” presents new projections from BCG on growth possibilities and draws on the views of more than 200 business sustainability leaders to identify trends in the market as it expands.
“The increase in value and volume, despite the current economic headwinds, is a sign of the growing importance of the voluntary carbon market,” said Nick Osborne, General Manager, Global Environmental Products, Shell. “We are seeing a concerted effort from businesses to build sustainable carbon credit strategies that they and their stakeholders have confidence in. We want to leverage that focus to help build a highly credible, scaled-up and transparent carbon market that supports a net-zero emissions future.”
The projections in the report demonstrate accelerating demand and a tightening of supply. Where previous projections had shown demand for credits starting to outstrip supply in 2024, data from 2021 shows this may happen even earlier for some classes of credits, thereby driving up demand particularly for nature-based credits.
Anders Porsborg-Smith, Managing Director and Partner, BCG, said: “As the market continues to grow at an accelerated pace, it will become increasingly important to grow with integrity through a high-grading of credit quality. Similarly, as the carbon market infrastructure becomes more complex with competing standards, compliance regulations, and Article 6 – it will be important to ensure this does not create uncertainty and inhibit long-term investment appetite in the carbon markets.”
From the survey and in-depth interviews carried out as part of the research, five key trends were identified amongst market participants:
- Buyers see carbon credit spending as non-discretionary and anticipate it growing
- Carbon credit purchasing strategies are increasingly being influenced by industry groups
- A reputable monitoring, reporting and verification (MRV) framework is the most important purchasing criterion
- 52% of companies expect removal credits to dominate their portfolio by 2030
- Participants have limited clarity on the impact of Article 6 of the Paris Agreement and corresponding adjustments
The report also discusses perspectives on avoidance and removal credits, as well as giving an update on corresponding adjustments.