Emissions Trading Market will exhibit highest growth owing to rising carbon emission levels from various industries
Emissions Trading Market will exhibit highest growth owing to rising carbon emission levels from various industries
Blog Article
The emissions trading market refers to a market-based approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants. An emissions trading scheme puts a limit or cap on the total amount of a specific pollutant that can be emitted. Entities that emit this pollutant are required to hold permits, which can be traded, for the emissions they produce. The emissions trading market allows flexibility for organizations in selecting the most cost-effective way to reduce emissions. The emissions trading market covers different types of carbon allowances including EU Emissions Trading System (EU ETS) allowances, certified emissions reductions (CERs), and regional greenhouse gas initiative (RGGI) allowances. Strict regulations around carbon emissions from industries to mitigate climate change will drive the demand for emissions trading in coming years.
The emissions trading market size was estimated to be valued at US$ 470.9 Mn in 2025 and is expected to reach US$ 1,554.1 Mn by 2032, exhibiting a compound annual growth rate (CAGR) of 18.6% from 2025 to 2032.
Key Takeaways
Key players - Key players operating in the emissions trading market are BP Plc., Royal Dutch Shell Plc., Total SE, Chevron Corporation, ExxonMobil Corporation, Engie SA, RWE AG, EON SE, Vattenfall AB, Gazprom, Mitsubishi UFJ Financial Group (MUFG), JPMorgan Chase & Co., Goldman Sachs Group, Inc. Citigroup Inc., and Barclays PLC. They provide various services including advisory on emissions compliance, carbon credit origination, registry operations, and supply of regulated offsets and allowances.
Growing demand - Emissions Trading Market Demand Implementation of stringent carbon emission norms by regulatory bodies worldwide to curb climate change is fueling the demand for emissions trading. Various industries are increasingly undertaking emissions reduction projects and investing in renewable energy to generate carbon credits for trading.
Technological advancement - Blockchain and AI technologies are enhancing the transparency and efficiency of emissions trading schemes. Real-time monitoring, reporting, and verification of carbon reduction projects is enabling timely settlement of carbon credits. This is strengthening the credibility of emissions trading markets.
Market Trends
Rise of voluntary carbon markets - Along with compliance carbon markets, growth in voluntary carbon markets is being witnessed where companies undertake carbon offsetting initiatives beyond regulatory requirements to achieve sustainability goals.
Linkage of emissions trading schemes - Regulators are exploring linking of regional emissions trading schemes such as linking the EU ETS with California Cap-and-Trade Program to expand market size and liquidity. This will aid in cost-effective compliance globally.
Market Opportunities
Emerging carbon pricing initiatives - Nations globally are implementing carbon pricing initiatives in the form of carbon taxes and emissions trading schemes, thereby opening up new regional markets.
Transition to net-zero - Aggressive net-zero targets by countries and companies will require transition to a low-carbon economy at an accelerated pace through adoption of clean technologies, which will boost trading of carbon credits.
Impact of COVID-19 on Emissions Trading Market
The COVID-19 pandemic has significantly impacted the emissions trading market globally. The lockdowns and restrictions imposed by various governments led to decline in industrial and economic activities across major countries. This reduced the overall carbon emissions as factories were shut and transportation was limited. As a result, the demand for emissions allowances and credits also witnessed a significant decline in 2020. However, with gradual lifting of lockdowns and restart of industries in 2021, the emissions levels and demand has started recovering. Still, the uncertainties around future waves and variants poses challenges.
The post-COVID recovery of this market will be influenced by pace of economic activities and support through government policies and investments. Continued focus on decarbonization commitments and stringent carbon reductions targets by countries offer opportunities. Adoption of green recovery packages can boost the emissions caps and credits demand. Successful development and distribution of vaccines also plays a crucial role to mitigate risks. Overall, faster containment of pandemic along with coordinated global efforts is critical for sustained growth of this market in forecast period.
Geographical regions with high market concentration in terms of valueinclude European countries like Germany, United Kingdom, France etc. Strong carbon pricing and established Emissions Trading Schemes in the European Union region has led to high volume of allowance trading. Another majorly concentrated region includes China, with implementation of nationwide carbon market since 2021.
The Asia Pacific region, excluding China and Japan is expected to be the fastest growing market for emissions trading during the forecast period. Presence of highly polluting industries and rapidly increasing energy demands from developing economies offers ample scope. Growing commitment towards climate change goals along with pilots of emissions trading programs will augment the regional growth. Carbon border adjustment mechanisms can further accelerate the development of carbon markets in these countries.
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Vaagisha brings over three years of expertise as a content editor in the market research domain. Originally a creative writer, she discovered her passion for editing, combining her flair for writing with a meticulous eye for detail. Her ability to craft and refine compelling content makes her an invaluable asset in delivering polished and engaging write-ups.
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