According to Shell Plc, the value of the voluntary carbon market, which allows polluters to buy credits to offset emissions, is set to more than fivefold by 2030, after expanding at a record pace in the previous two years.
Shell said in a statement that the global voluntary market is expected to grow from an estimated value of $2 billion in 2021, citing a joint report released with Boston Consulting Group. According to the report, the compliance market will be worth approximately $850 billion in 2021, more than doubling its value from the previous year.
Compliance markets are where major emitters of greenhouse gases are required by law to purchase permits or credits, whereas voluntary markets are for independent entities to purchase for their own use.
“Despite the current economic headwinds, the increase in value and volume is a sign of the growing importance of the voluntary carbon market,” said Nick Osborne, general manager of Shell’s global environmental products, in a statement. “We are seeing a concerted effort from businesses to develop long-term carbon credit strategies that they and their stakeholders can rely on.”
The voluntary market has grown rapidly in recent years as countries set more ambitious climate targets, prompting corporate polluters such as Shell to purchase credits. Nonetheless, skepticism has grown about the market’s credibility and whether the credits have a meaningful impact on removing emissions from the atmosphere.
Shell is a provider of carbon credits, which it has used to offset the shipment of fossil fuels.
Because the markets are expected to grow at a rapid pace, ensuring integrity through high credit quality and compliance regulations is critical, according to Anders Porsborg-Smith, managing director at BCG.
According to the statement, demand for certain types of credits will begin to outstrip supply before 2024, much sooner than Shell and BCG previously predicted.