While demand for carbon credits was primarily voluntary for many years, they are now increasingly playing a role in mandatory climate systems.

Carbon credits are becoming a structural part of climate requirements. As a result, the carbon credit market is undergoing fundamental changes. Globally, we are seeing many developments that are having - or will have - a major impact on the carbon market.

Here are a few key factors to highlight:

▪️CORSIA is creating an international compliance market for carbon credits from the aviation sector. The second, mandatory phase will begin in 2027.

▪️Singapore allows companies to offset a portion of their carbon tax with approved international carbon credits.

▪️California already uses carbon credits within its cap-and-trade system.

▪️The United Kingdom is working on incorporating carbon removals into the UK ETS.

▪️China has relaunched its national market for project-based carbon credits (CCER). Approved credits can be used within the Chinese ETS, the world’s largest carbon market, which now covers approximately 8 billion metric tons of carbon per year.

▪️The European Commission has proposed integrating permanent carbon removals into the EU ETS.

▪️Starting in 2036, high-quality international carbon credits may contribute to achieving the European climate target for 2040.

Carbon credits are thus moving toward a market in which governments and compliance systems are becoming an increasingly significant source of demand. This, in turn, is changing their potential scale and value. With an estimated value of several billion dollars per year, the carbon market is still relatively small, but with the emergence of regulated demand, it could be on the verge of a significant growth spurt.