Carbon Credit Market Trends

Growth Drivers

• Supportive government policies: The impact of GHG emissions on the global environment is forcing regional governments to take immediate action. They are issuing projects and policies to support the sustainability targets. Strategies such as cap-and-trade systems and carbon taxes are pushing emissions causing organizations to follow reduction measures. Alongside this, such regulatory pressure is creating great investment opportunities for the carbon credit market. In October 2024, CARB commenced a notice, informing regulation updates for linked cap-and-trade systems. In the collaboration with Quebec government, CARB also gave an overview of future opportunities for stakeholders.

• Innovative solutions for sustainability: Technological advancement has always been a crucial part of development in the carbon credit market. Commercializing emission reduction has been enhanced by innovative solutions such as connecting platforms. For instance, in October 2024, CarbonClick and SCB Group teamed to launch an end-to-end platform for aviation companies. This tech suite incorporates carbon computing technologies including SAF to help achieve compliance targets. Hard-to-decarbonizing sectors including heavy metal, automobile manufacturing, and chemicals are also adopting such innovations to convert their footprint into revenue. This further drags more focus on the benefits of investing in this sector.

Challenges

• Concerns about project efficiency: Uncertainty in delivering promising environmental benefits of the projects may hinder the progress of the carbon credit market. This may lead to greenwashing, raising questions about the integrity of the portrayed credibility. This further fails to gain the trust of the actual impact of emission reduction. In addition, some projects such as wildfires and pests may reverse the CO2 into the atmosphere, making the purpose fail.

• Fluctuating prices: An imbalance in supply and demand may result in price volatility and instability. Regulatory changes and market speculation can deter long-term investments in projects due to pricing uncertainty. Certain types of credits may be difficult to liquefy, limiting transactions at a fair valuation. This may further reduce the efficiency and accessibility of this industry to many investors. In addition, it can create hurdles in the progress of emphasizing the sector.