The emissions trading market involves trading of carbon credits issued for emission reduction projects. The market allows governments and companies to trade carbon emission quotas through a carbon market platform. Carbon credits are issued to companies or countries for emission reduction activities such as use of renewable energy or forestation projects. The credits can then be traded in the carbon market. The emissions trading has gained significant traction in recent years due to stringent environmental regulations and increasing commitments by governments worldwide to achieve carbon neutrality and net zero goals.
The global emissions trading market is estimated to be valued at US$ 385.69 Bn in 2024 and is expected to exhibit a CAGR of 6.8% over the forecast period 2024 to 2031.
Key players operating in the emissions trading market include Johnson & Johnson Services, Inc., 3M, Baxter, Coloplast A/S, Integra LifeSciences, Medtronic, Omeza, Cardinal Health, Bactiguard AB, Noventure, Essity, Schulke & Mayr GmbH, Smith & Nephew Plc., Convatec Group PLC, SANUWAVE and SANUWAVE Health, Inc., EO2 Concepts, Wound Care Advantage, LLC., Healthium Medtech Limited, Arch Therapeutics, Inc., Hydrofera, Sanara MedTech Inc., Axio Biosolutions Pvt Ltd., and Gentell, Inc.
Key Takeaways
Key players: Key players in the emissions trading market are focusing on expanding their carbon credit portfolio through projects in renewable energy, forestation, and carbon capture to cater to the increasing demand for carbon offsets.
Growing demand: Stringent emission norms and increasing commitments towards net zero goals are fueling the Emissions Trading Market Growth for carbon credits globally. Various industries are proactively participating in the emissions trading schemes to meet their emission reduction targets.
Technological advancements: Adoption of blockchain and digital ledger technologies has enhanced the traceability and transparency of carbon credits in the market. Emerging carbon accounting and reporting tools are also helping streamline the emissions trading process.
Market Trends
Decentralized carbon markets: Growing popularity of decentralized platforms and blockchain-based carbon markets is emerging as a key trend. Such platforms offer more direct trading options without intermediaries.
Nature-based solutions: Demand for carbon credits from forestation, reforestation, and other nature-based projects is growing sharply. Such projects offer low-cost emission reduction solutions to industries.
Market Opportunities
Voluntary carbon market: Strong growth is expected in the voluntary carbon markets driven by corporate net-zero commitments. Many companies are proactively purchasing voluntary carbon credits to offset emissions.
Asia and Africa projects: Significant opportunities exist for emissions trading in developing countries through afforestation projects and renewable energy development given their high abatement potential.
Impact of COVID-19 on Emissions Trading Market
The COVID-19 pandemic has impacted the growth of Emissions Trading Market significantly. Due to lockdowns enforced across countries to curb the spread of virus, the industrial and economic activities came to a halt. This led to a substantial decline in CO2 and other greenhouse gas emissions released into the atmosphere temporarily. As a result, the demand and trading of emissions allowances and credits dropped drastically during 2020 and 2021. However, with lifting of lockdowns and restart of industries as pandemic comes under control, the emissions levels are again on rise. This is increasing the need to trade emissions certificates to comply with carbon reduction targets of nations. The post-COVID scenario suggests that the Emissions Trading Market is expected to bounce back and recover losses incurred during pandemic times. The stringent government regulations around the world to limit emissions and transition to greener energies will drive the long term growth of this market. The companies operating in this sector need to device strategies to capture opportunistic demands while pandemic subsides and also prepare for sustainable growth envisioned in regulatory framework.
Europe accounts for concentrated value in Emissions Trading Market
Europe accounts for a major share in terms of value concentration of the global Emissions Trading Market. The region has the longest-running and largest cap-and-trade carbon market system, the European Union Emissions Trading System (EU ETS). It has been in operation since 2005 and covers around 40% of total EU emissions. Major European countries like Germany, United Kingdom, France etc are leading emitters and traders in this market. The strong regulatory push by European Commission towards carbon neutral goals through initiatives like European Green Deal and focus on renewable energy transition have further boosted emissions trading opportunities in Europe.
Asia Pacific is the fastest growing region in Emissions Trading Market
Asia Pacific region is poised to witness the fastest growth in the Emissions Trading Market over the forecast period. Rapid economic development and industrialization have led to increased carbon emissions in Asian countries. At the same time, governments are undertaking policy measures to reduce emissions intensity through cap-and-trade mechanisms. China established its national ETS in 2017 which is the world's biggest carbon market. Several other east Asian and southeast Asian nations are also in process of launching their emissions exchange platforms. The growing carbon footprint coupled with regulatory push makes Asia Pacific a lucrative market for emissions trading in coming years.
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