Climate and Carbon Finance Market to Hit 2.7 Trillion at 29.3% CAGR by 2030
The Climate Finance Surge: How the Market Touched $355.44 Billion and What's Next
The fight against climate change has a powerful weapon: finance. A comprehensive report by Coherent Market Insights delves deep into the world of climate and carbon finance, projecting substantial market growth over the next decade.
The global climate and carbon finance market, having touched a staggering valuation of US$ 355.44 billion in 2022, now promises a galloping Compound Annual Growth Rate (CAGR) of 29.3% until 2030. But what drives this market, and why should the world take notice?
Deciphering Climate and Carbon Finance
While both terms sound similar, there's a distinct difference. Climate finance encompasses local, national, or international funds supporting initiatives against climate change. Carbon finance, on the other hand, pertains to the financial gains from selling carbon credits. Both, however, are subcategories of the broader environmental (green) finance sector.
In essence, while climate finance targets emission reductions and strengthening greenhouse gas sinks, carbon finance seeks financial returns through earned carbon credits. Both approaches collectively aim to slash greenhouse gas emissions, ensure sustainable development, and counter climate change.
Market Dynamics: The Push & Pull
The rise in carbon pricing stands out as a pivotal trend fueling this market. For instance, CO2 pricing seeks to combat climate change by curbing fossil fuel usage. As nations strategize around these methods, Japan, the fifth-largest carbon emitter globally, unveiled an ambitious plan. This Asian powerhouse aims to slash its emissions by 46% from 2013 levels by 2030, up from its earlier goal of 26%.
Several drivers underline the market's growth, with surging carbon emissions being paramount. The International Energy Agency reports a 0.9% uptick in global carbon dioxide emissions in 2022, emphasizing the urgency to address this issue. Initiatives like India's Carbon Credit Trading Scheme 2023, the US's Net-Zero Government Initiative, and Intellecap's National Carbon Finance Platform stand testament to governments and organizations striving to curtail emissions.
However, the path isn't without challenges. The volatility of climate policies, especially in developing nations, can obstruct long-term planning in the climate and carbon finance market.
Segments on the Rise
Market Type: The Voluntary Market segment is poised for dominance, thanks to global interest in climate and carbon financing.
Project Type: With a surge in renewable energy adoption, Renewable Energy Projects lead the way.
Buyer Type: Governments, armed with carbon-neutral targets, will likely be the primary buyers.
Carbon Mechanism: The Carbon Pricing (Carbon Tax or Fee) mechanism, given its rising adoption, stands out in this category.
Sector Focus: The Energy and Utilities sector, with its push towards renewables, holds prominence.
Transaction Type: Spot Market, fueled by the global demand for carbon credits, emerges as a key segment.
Market Participants: With escalating carbon emissions, Carbon Project Developers are bound to lead.
From a regional perspective, Asia Pacific appears as the dominant player, courtesy of increasing carbon emissions, robust government initiatives, and a high demand for carbon offsets.
Who's Who in the Market
Key industry players shaping this market include Climate Finance Partners, Carbon Credit Capital, ClimateCare, South Pole Group, and several others.