The global market for carbon removal credits is poised to reach $100 billion annually between 2030 and 2035, a significant leap from $2.7 billion last year, as per Oliver Wyman's latest analysis. The consultancy notes rising interest from corporate buyers as a key driver of this growth.
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Currently, $32 billion is allocated to carbon dioxide removal (CDR) projects, with $21 billion invested in engineered solutions and $11 billion in nature-based initiatives. Public funding accounts for $15 billion, while private investments contribute $17 billion.
Carbon credits allow companies to compensate for a specific amount of carbon, with one credit equal to one tonne of emissions. These credits are crucial for the energy transition and meeting the Paris Agreement’s climate target.
James Davis, partner at Oliver Wyman, highlighted the surge in CDR project investments but stressed that the current demand for carbon credits is insufficient to support ongoing investments or meet environmental goals.
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The report calls for overcoming market barriers, such as the absence of clear guidelines and universal quality standards for carbon removals. Without targeted interventions, the market may only realise 10% of its potential.
Countries like Saudi Arabia are boosting the market with initiatives like the Regional Voluntary Carbon Market Co, which raised $133 million in initial capital and sold 3.6 million carbon credits in 2023.
The consultancy also identified the need for clear policies and insurance solutions to manage risks in carbon removal projects. Sustainable investment funds are beginning to focus on the carbon market, further driving growth.
Read more: The Science Based Targets initiative and carbon offsetting: striking the right balance
The International Energy Forum echoed these sentiments, emphasising the pivotal role of carbon markets in achieving climate goals and facilitating the energy transition. Secretary-General Joseph McMonigle highlighted the potential for carbon markets to fund clean energy projects and reduce costs by connecting local carbon removal projects with international buyers.
Carbon markets, through cross-border trade, can align resources to meet global environmental, energy security, and affordability goals, bolstering both supply and demand for carbon credits.
At DGB Group, we are dedicated to advancing nature-forward initiatives with our nature-based solutions, which not only sequester carbon but also offer numerous environmental and socio-economic advantages. Our projects produce high-quality, verified carbon units, supporting companies in reaching their sustainability goals. By adopting a balanced and rigorous approach, we can collectively make a substantial impact on global environmental challenges.
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