Carbon credits, also known as carbon offsets, represent the reduction or avoidance of 1 ton of carbon dioxide or its equivalent in other greenhouse gases. They incentivise emission reductions and compliance with emission caps through a trading system. Industries can purchase carbon credits to partially or fully offset their own emissions. With rapid industrialisation and rising emissions globally, the need for affordable carbon credit options is growing.

The global carbon credit market is estimated to be valued at US$ 300 billion in 2023 and is expected to exhibit a CAGR of 3.0% over the forecast period 2023-2030, as highlighted in a new report published by Coherent Market Insights.

Market Opportunity:

The opportunity in reducing greenhouse gas emissions through the carbon credit mechanism is driving the Global Carbon Credit Market Size. As emissions regulations tighten around the world to curb climate change, industries are increasingly relying on carbon offsets to comply with their emission targets in a cost-effective manner. Various industries like oil & gas, cement, aviation etc. can invest in carbon reduction projects globally and use the resulting carbon credits to neutralize a portion of their own emissions. This provides a flexible strategy to lower the carbon footprint while continuing business operations. With more countries committing to net-zero targets, the carbon credit market is expected to grow steadily as industries aggressively adopt this compliance option to decarbonize in a financially viable way.

Porter's Analysis

Threat of new entrants: The threat of new entrants in the global carbon credit market is low as it requires high initial investments and there are well established players.

Bargaining power of buyers: The bargaining power of buyers is high in this market as there are many options available for buyers in terms of credits and suppliers.

Bargaining power of suppliers: The bargaining power of suppliers is moderate as there are many projects generating carbon credits however established players have an advantage.

Threat of new substitutes: There is no direct substitute for carbon credits currently.

Competitive rivalry: High due to presence of many global players.

SWOT Analysis

Strength: Carbon credits provide an opportunity to reduce carbon footprint and generate revenues. Projects generating credits help local communities and environments.

Weakness: Verification and additionality criteria make the process complex. Prices are vulnerable to policy changes.

Opportunity: Growing emphasis on sustainability and carbon neutrality by governments and companies is increasing demand. New markets are emerging for specialized credits.

Threats: Stringent regulations can reduce offset potential. Economic slowdowns lower emissions and impact credit demand.

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