The climate and carbon finance market facilitates investment in projects aimed at reducing greenhouse gas emissions or removing carbon from the atmosphere. Carbon credits are generated by projects that prevent the emission of carbon dioxide or other greenhouse gases into the air and can then be traded to organizations needing to offset their own emissions. Examples of offset projects include renewable energy development, energy efficiency upgrades, wastewater treatment plant enhancements, and forestry programs. The global climate and carbon finance market enables companies and governments to meet climate goals in a cost-effective manner.
The global climate and carbon finance market is estimated to be valued at US$ 459.58 Mn in 2023 and is expected to exhibit a CAGR of 3.6% over the forecast period 2023 to 2030, as highlighted in a new report published by Coherent Market Insights.
Rapid Growth in Greenhouse Gas Emission Offset Projects: One of the key drivers fueling the climate and carbon finance market size is the rapid growth in greenhouse gas emission offset projects across the world. As more companies and governments pledge to become carbon neutral and set science-based emission reduction targets, the demand for carbon credits to offset residual emissions is increasing dramatically. Various initiatives such as Article 6 of the Paris Agreement are also opening new opportunities for international cooperation on emission reduction projects between countries.
The climate and carbon finance market is segmented based on type into carbon offsets, renewable energy, emissions trading, and others. The carbon offsets segment dominated the market in 2023 with a share of over 30% as there is a high demand and economic incentive from many industries to offset their carbon footprints. Governments also encourage reducing carbon footprint through carbon offset programs which has further boosted the segment growth.
Political: Governments around the world are focusing on policies and regulations to reduce carbon emissions and meet climate targets set in Paris Agreement which is positively impacting the market. Some regions/countries have introduced carbon trading programs and carbon taxes.
Economic: Transition to low carbon economy requires huge investments which is driving the demand for climate finance from both public and private sources. Carbon pricing provides economic incentive for climate mitigation projects.
Social: Rising environmental consciousness among public and stakeholders is increasing pressure on organizations and governments to take climate actions. Social responsibility practices also promote investments in sustainable projects.
Technological: Advancements in renewable energy, carbon accounting, and monitoring technologies are supporting the development of innovative climate finance instruments and solutions. Blockchain technology application offers transparency.
The global climate and carbon finance market is expected to witness high growth over the forecast period of 2023 to 2030 supported by stringent government regulations and climate change initiatives worldwide. The global climate and carbon finance market is estimated to be valued at US$ 459.58 Mn in 2023 and is expected to exhibit a CAGR of 3.6% over the forecast period 2023 to 2030.
The North American region currently dominates the market owing to presence of major developed economies like the US actively participating in climate finance programs. The European region also holds a significant share and is expected to grow at a fast pace due to EU climate targets and initiatives such as EU Emissions Trading System. Countries like Germany and UK are leading contributors to climate finance in the region.
Key players operating in the climate and carbon finance market are International Paper Company, Georg Fischer Ltd, DuPont, BASF SE, and 3M Company. These players are focusing on funding projects related to renewable energy, energy efficiency, deforestation prevention and afforestation to meet their climate commitments.