Market outlook: Net-zero pledges spark soaring demand for carbon credits

DGB Group N.V. (“DGB” or “the Group”) (Euronext: DGB: NL0009169515), a leading carbon project developer and ecosystem restoration company, projects a continuation of strong demand for high-quality carbon credits in the rapidly evolving voluntary carbon market. As global net-zero pledges increase, DGB expects a continued shift towards high-quality removal credits from nature-based solutions.

Carbon credits allow organisations to reduce their emissions through offsets today while taking cost-effective action to reduce future emissions through sustainability in their business models. Carbon credits are thus an essential tool for businesses to achieve their decarbonisation goals. 

Trends

DGB is one of the fastest-growing project developers in the carbon marketplace and recognises the following trends in the market:

• Rising demand for carbon credits: The surging significance of carbon credits for attaining net-zero targets has led to an escalated demand, particularly for nature-based credits. Organisations such as JP Morgan, Microsoft, and Apple are investing substantially in high-quality carbon projects. This trend is reinforced by new guidance on carbon credit claims for net zero from the Voluntary Carbon Markets Integrity Initiative (“VCMI”), which enhances market transparency and could boost growth.
• Preference for AR credits over REDD+: By 2030, there is an expected shift towards high-quality, verifiable afforestation/reforestation (AR) credits. DGB acknowledges that both avoidance and removal credits are pivotal for achieving global climate goals. Still, it anticipates greater demand for AR removal credits due to their quality and verifiability, thus phasing out the reliance on REDD+.
• Adoption of Article 6 of the Paris Agreement: For project developers and buyers, it's becoming increasingly essential to consider Article 6 of the Paris Agreement. In fact, the implementation of Article 6.2 is now often seen as a prerequisite by buyers. Article 6.2 of the agreement facilitates countries to trade Internationally Transferred Mitigation Outcomes (ITMOs), which are essentially emission reductions and removals, through bilateral or multilateral agreements. This provision creates a more interconnected global carbon market, promoting more efficient and widespread emission reduction efforts.
• Enhanced regulation and monitoring: Organisations like the Science Based Targets initiative (SBTi) and the VCMI are progressively impacting the growth and shaping the trends of the market. The role of a credible Monitoring, Reporting, and Verification (MRV) framework is gaining importance in credit-purchase decisions to ensure the measurable impact of purchased credits.
• Growing emphasis on nature projects and tree planting: Nature-based solutions, including tree planting, are increasingly considered essential for corporate net-zero strategies. A prominent example is AstraZeneca's AZ Forest initiative, which commits to planting and maintaining 200 million trees worldwide by 2030.

Carbon price outlook

The outlook for the carbon market remains robust and promising, based on projections from various prominent institutions. The range of price estimates is wide, with the voluntary carbon market projected to grow to anywhere between $10 billion and $100 billion by 2030. This significant growth trend is primarily fueled by the rising number of companies setting net-zero targets and the surge in demand for carbon credits, which are central to offsetting carbon footprints.

EY, McKinsey, and BCG, alongside Morgan Stanley, all anticipate a multi-fold expansion, suggesting a market value ranging from $30 billion to $50 billion by 2030. The more optimistic outlooks from Goldman Sachs and Wood Mackenzie forecast a market size of $100 billion by 2030, indicating potential for exponential growth if the right conditions and commitments persist. A conservative projection comes from PwC, estimating the growth of up to $30 billion by the same year—still a 10-fold growth compared to today’s $3 billion market. The consensus across all price predictions is the rapid and substantial growth of the market, marking it as a promising long-term investment opportunity.

DGB likewise sees a positive outlook for the carbon credit market as demand for high-quality credits increases. DGB foresees a significant price increment towards 2030 due to a shortage of carbon credits from removal projects. DGB predicts that the volume of credits required globally will increase at least 20-fold by 2035, with prices rising to a central estimate of $80–$150 per tonne by 2035. It forecasts a verified emissions reduction–price rise of 9.5% to 15.0% per year towards 2035 and a 4.0% to 6.0% price increase from 2035 to 2050.

Conclusion

DGB underscores the monumental role of high-quality carbon credits in realising a sustainable future. Not only do they serve as an integral tool for achieving net-zero targets, they also stimulate economic growth, facilitate ecosystem restoration, and aid in biodiversity conservation. High-quality credits help to bridge the gap between current emissions and future reduction goals, enabling immediate, measurable impact.

‘We see the escalating demand, underscored by increasing corporate net-zero commitments and regulatory support, as a clear indicator of the sector's growth trajectory. Despite occasional price volatility, the significant investments by major corporations reflect confidence in the robustness and long-term sustainability of this market’, said Selwyn Duijvestijn, CEO of DGB. Duijvestijn added, ‘This burgeoning carbon market holds the promise of an unprecedented investment opportunity. DGB stands at the forefront of this rapidly evolving market. With the dual advantage of attractive returns and positive environmental impact, investing in the carbon credit market can be a game-changer in the world's quest for sustainability. There is a remarkable potential of high-quality carbon credits as an indispensable part of the decarbonisation toolkit.’

For further insights on DGB's performance during Q2 of 2023. please refer to DGB's quarterly update which was released today.

Contact details:

DGB GROUP NV
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Disclaimer

This press release does not contain an (invitation to make an) offer to buy or sell or otherwise acquire or subscribe to shares in DGB and is not an advice or recommendation to take or refrain from taking any action. This press release contains statements that could be construed as forward-looking statements, including about the financial position of DGB, the results it achieved and the business(es) it runs. Forward-looking statements are all statements that do not relate to historical facts. These statements are based on information currently available and forecasts and estimates made by DGB’s management. Although DGB believes that these statements are based on reasonable assumptions, it cannot guarantee that the ultimate results will not differ materially from those statements that could be construed as forward-looking statements. Factors that may lead to or contribute to differences in current expectations include, but are not limited to: developments in legislation, technology, tax, regulation, stock market price fluctuations, legal proceedings, regulatory investigations, competitive relationships and general economic conditions. These and other factors, risks and uncertainties that may affect any forward-looking statement or the actual results of DGB are discussed in the annual report. The forward-looking statements in this document speak only as of the date of this document. Subject to any legal obligation, DGB assumes no obligation or responsibility to update the forward-looking statements contained in this document, whether related to new information, future events or otherwise.