Europe Compliance Carbon Credit Market Analysis

Europe Compliance Carbon Credit Market Analysis

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Increasing demand for carbon credits along with growing interest in sustainable finance and environmental, social, and governance (ESG) investing will drive the indystry growth. The demand has been further fueled by the tightening of emission reduction targets by the European Union and the introduction of more ambitious climate policies. In addition, emergence of innovative financial instruments and carbon trading platforms, making easier for businesses to participate in carbon trading activities and manage their carbon footprint more effectively, will further aid in proliferating the market growth.
 

Based on end use, the compliance carbon credit market includes forestry & land use, chemical process, carbon capture & storage, agriculture, energy efficiency, industrial, renewable energy, transportation, & waste management. The renewable energy sector is anticipated to grow at a CAGR of over 14% through 2032, attributed to its carbon sequestration potential, policy support, and technological advancements. Growing Demand for Renewable Energy Certificates (RECs) along with integration of carbon neutrality goals will augment the business scenario within the region.
 

In addition, the adoption of standardized carbon accounting protocols and reporting frameworks, such as the Greenhouse Gas Protocol and the Task Force on Climate-related Financial Disclosures (TCFD), is facilitating transparency and comparability in carbon emissions reporting, thereby adding to the market growth.
 

UK holds significant compliance carbon credit market share which is estimated to soar over USD 30 billion by 2032. The country’s Emissions Trading Scheme, implemented post-Brexit, promotes emission reductions by enabling companies to trade allowances within a set cap. In addition, strong climate policy, including commitment to achieve net-zero emissions by 2050, further support development of compliance carbon market in the country.
 

For instance, in December 2023, UK and EU announced establishing a robust infrastructure for CO2 transport and storage, reflecting importance of such systems in achieving net-zero targets. Additionally, its leadership in climate action, evident through hosting events including COP26 summit, contributes to its significant market share and influence within the broader European compliance carbon targets over the expected timeline.