The total value of carbon credits traded in the market to help entities achieve their net zero goals can be worth $1 trillion as early as 2037, according to a recent report by BloombergNEF.

Verified emission reduction credits or carbon credits are traded in the voluntary carbon market (VCM), equivalent to 1 ton of carbon reduced or removed. Under its current structure, the VCM is “not built for success”, BloombergNEF said. But the research provider also noted that.

The VCM Growth (2021 – 2022)

Investments in VCM projects grew to $10 billion in 2022, up from $7 billion in 2021, a new report has found. Yet the market failed to grow last year as BNEF reported in its Long-Term Carbon Offsets Outlook. 

• Firms bought only 155 million carbon credits as offsets, down 4% from 2021. The major reason being is the fear of reputational risk from buying low-quality credits. 

But carbon credits supply jumped by 2%, with a total of 255 million carbon offsets generated globally. Remarkably, the supply of credits from “avoided deforestation” fell by a third from 2021 to 2022. 

There were accusations of greenwashing in buying carbon credits from nature-based projects that had questionable environmental impact. REDD+ projects, in particular, are still under criticism after analysis claiming they produce “ghost credits”.

In a different market analysis by AlliedOffsets, the lack of growth in the VCM is due to a slowdown in retirements of carbon credits. 2022 has seen slowing growth in retirements after last year’s explosion as seen in the chart below.