$100B Carbon Market Could Drive $700B Annual Investments in Projects

A new report from a carbon rating company, BeZero Carbon, reveals that a $100 billion carbon market could protect 150 million hectares of land, equivalent to the size of Peru, and drive $700 billion annual investments in carbon projects.

The report, “$100bn for Planet and People,” highlights the potential environmental and economic benefits of a global carbon market of this scale. BeZero also estimates that such a market could support 12.4 million jobs in forestry, nearly 3 million in sustainable agriculture, 310,000 in renewables, and 50,000 in adjacent industries.

Tommy Ricketts, CEO and co-founder of BeZero Carbon, stated:

“A $100bn project-based carbon market would deliver immense benefits for the planet and people. It means companies spending billions on new technologies and land restoration, supporting more jobs than the oil and gas sector while reducing our global footprint.”

From Forests to Farmlands: Diverse Activities Generating Carbon Credits

Today, over 50 types of activities generate carbon credits, ranging from forestry and mangroves to methane capture and soil carbon sequestration. And the number is steadily increasing.

Each carbon credit represents one tonne of carbon dioxide or another greenhouse gas equivalent (CO2e) mitigated by a specific activity over a defined period.

This expanding array of carbon credit-generating activities highlights the versatile approaches available to combat climate change. It underscores the growing importance of the voluntary carbon market (VCM) in global emission reduction efforts.

The market has seen massive growth in 2021 but concerns over carbon credit integrity impacted the market. Issuances have dropped in two consecutive years as shown in the chart below.

SEE MORE: Why The Voluntary Carbon Market Took a Hit in 2023

Still, forecasts are positive for the VCM’s growth as the world strives to mitigate climate change and cut carbon emissions.

BloombergNEF projects that the global carbon market will surpass $100 billion by the mid-2030s. The analyst also estimated demand for credits to reach 2.5 billion annually at an average price of $40.

How a $100B Market Drives Emission Reductions

The report provided several relevant insights into what the $100 billion carbon credit market could offer. Here are some key findings that the entire sector should know.

A $100B carbon credit market in the mid-2030s could finance emissions removal projects delivering about 20% of the carbon removals needed for a 1.5-degree Celsius pathway, according to the Paris Agreement. Such a market would focus on projects like reforestation, Direct Air Capture (DAC), and Bioenergy with Carbon Capture and Storage (BECCS).
The market could drive $700 billion in annual investments into carbon projects, a ratio of 7:1. The revenue from carbon credits makes these projects viable, unlocking essential institutional capital, especially for technologies that need substantial upfront and operational investments like DAC. Without carbon credits, these projects would struggle to attract the necessary funding to reduce and remove carbon emissions effectively.
The report suggests that in a $100B market, retired carbon credits will reduce or remove around 1.2 billion tonnes of CO2e emissions annually. This represents a significant environmental impact, equivalent to about 3% of current global emissions. This is equal to Japan’s annual emissions and one-and-a-half times that of the entire global aviation industry.
The $100 billion carbon credit market could finance nature-based projects covering around 150 million hectares, equivalent to 30% of global forest loss since 2000 and larger than Peru. These projects, such as afforestation in Brazil, blue carbon in Indonesia, and soil carbon initiatives in the US, support endangered species, protect coastal areas, and improve soil health.

By preserving and rebuilding diverse ecosystems, carbon credits contribute significantly to global environmental sustainability and biodiversity.

Moreover, these credits, based on conservative risk adjustments, ensure genuine emissions reductions and removals. As such, this underscores their role in mitigating climate change by effectively offsetting substantial amounts of greenhouse gas from various sectors.

Clearing The Path to Expansion

But to achieve a $100 billion market, rapid expansion is needed, addressing recent issues with carbon credit projects and enhancing verification and certification services. The report calls for integrating voluntary carbon credits into compliance markets, clear regulatory definitions, and operationalizing international carbon markets under Article 6 of the Paris Agreement.

The Science Based Targets Initiative (SBTI) is considering allowing carbon credits for companies’ Scope 3 emissions, potentially impacting six gigatonnes of CO2e. If approved, this could value the global carbon market at $100 billion annually.

The report also urges corporates to adopt internal carbon prices and project developers to enhance high-quality project delivery.

While supporters believe this approach could boost investment in carbon removal projects, critics worry it may undermine the integrity of science-based targets and reduce pressure on companies to cut supply chain emissions.

The potential of a $100 billion carbon credit market extends far beyond just economic benefits. By protecting 150 million hectares of land and creating millions of jobs across various sectors, such a market could drive substantial environmental and social progress. Addressing verification and certification challenges, integrating carbon credits into compliance markets, and enhancing high-quality project delivery are crucial steps toward realizing this vision.

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