Market Growth & the Role of Pricing
Despite still being a relatively opaque market, the growth we are already seeing in the market is expected to accelerate over the next decade and beyond. Estimates predict that voluntary offset volume will need to grow 15-fold by 2030 and 100-fold by 2050 in order to meet Paris Agreement ambitions.
A number of political entities (including the EU, the UK, the state of California and most recently China) have already enacted mandatory carbon markets, and others are not far behind. These regional markets are a key component of the Paris Agreement, which called for urgent and meaningful efforts to combat climate change. The agreement also set forth the ambitious target of limiting global heating to 2 degrees Celsius above preindustrial levels, with an aim to limit global heating to 1.5 degrees Celsius.
Carbon Offsets Issued By Private Standards (GtCO2e)
One of the most important considerations for companies utilizing voluntary carbon credits is pricing. The credits certainly aren’t free and the cost varies a great deal based on a number of contributing factors, including the cost of the credit, the Standard that certified it, the year the GHG was avoided or removed, the location of the project, and even the volume being transacted. This makes for a layered and complex market that can be intimidating for new market participants. The cost of a particular portfolio of credits can have an enormous impact on the size of a particular investment and an individual organization’s pathway to carbon neutrality.
