Data story: key signals in the global carbon credit market

The global carbon credit market reached a combined value of approximately $949 billion in 2024, with compliance markets accounting for roughly $900 billion and the voluntary carbon market (VCM) contributing an estimated $1.1 billion in transaction value. Yet beneath these headline figures lies a market undergoing profound structural transformation: VCM credit retirements surged 30% year over year in the first half of 2025, the EU Emissions Trading System (EU ETS) allowance price averaged over EUR 65 per tonne through 2024, and new integrity frameworks from the Integrity Council for the Voluntary Carbon Market (ICVCM) began reshaping which credits buyers will accept. For founders, investors, and sustainability leaders, understanding the signals embedded in pricing, issuance, retirement, and quality data is essential to navigating a market that is simultaneously consolidating around higher standards and expanding into new sectors and geographies.

Why It Matters

Carbon credits represent one of the primary financial mechanisms through which organizations can address residual emissions they cannot yet abate directly. The World Bank estimates that carbon pricing instruments now cover approximately 23% of global greenhouse gas emissions, up from 5% a decade ago. This expansion matters because carbon markets create the price signal needed to redirect capital toward decarbonization at the scale and speed the Paris Agreement demands.

For companies subject to mandatory disclosure regimes such as the EU Corporate Sustainability Reporting Directive (CSRD) and California's SB 253, the quality and credibility of any carbon credits they purchase faces unprecedented scrutiny. Credits that fail to meet emerging integrity standards risk being reclassified as greenwashing liabilities rather than climate assets. Meanwhile, compliance markets are tightening caps and reducing free allocation, driving industrial emitters toward either direct abatement or higher quality offset procurement.

The convergence of compliance and voluntary markets also creates new opportunities. Article 6 of the Paris Agreement, operationalized at COP28 in 2023, enables cross-border carbon credit trading under nationally determined contributions. Early bilateral agreements between Switzerland and Thailand, Japan and multiple developing nations, and Singapore and Papua New Guinea signal a new era of regulated international carbon trading that could unlock billions of dollars in climate finance for the Global South.

Key Concepts

Compliance carbon markets are government-regulated systems where emitters must hold allowances (permits) equal to their emissions. The EU ETS, California Cap-and-Trade, and China's national ETS are the three largest by value. These markets set absolute emission caps that decline over time, creating scarcity that drives allowance prices upward.

Voluntary carbon markets allow organizations and individuals to purchase credits generated by emission reduction or removal projects outside regulatory mandates. Standards bodies such as Verra (Verified Carbon Standard), Gold Standard, and the American Carbon Registry establish methodologies, validate projects, and issue credits.

Carbon credit retirements occur when a buyer permanently cancels a credit against their emissions, removing it from circulation. Retirement rates serve as a proxy for actual demand because they indicate credits being used for climate claims rather than held speculatively.

Core Carbon Principles (CCPs) are the quality benchmark established by the ICVCM in 2024. Credits labeled CCP-eligible must demonstrate additionality, permanence, robust quantification, and no net harm. As of early 2026, ICVCM has approved assessment frameworks covering several major crediting methodologies, and CCP-labeled credits trade at a premium of 20 to 40% over unlabeled equivalents.

Corresponding adjustments under Article 6.2 of the Paris Agreement prevent double counting by requiring host countries to adjust their national emissions inventories when credits are transferred internationally. This mechanism is critical for ensuring environmental integrity as cross-border trading scales.

The Data

Global compliance carbon markets generated approximately $949 billion in total value in 2024, according to LSEG (formerly Refinitiv) carbon market data. The EU ETS alone accounted for roughly $800 billion in trading value, with an average allowance price of EUR 65 to EUR 70 per tonne. California's market maintained prices in the $35 to $40 per tonne range, while China's national ETS saw prices rise above CNY 100 (approximately $14) per tonne for the first time in 2024 before moderating.

The voluntary carbon market told a more nuanced story. After peaking near $2 billion in 2022, VCM transaction value contracted to approximately $723 million in 2023 amid integrity concerns and reputational risk. By 2024, the market stabilized around $1.1 billion, with Ecosystem Marketplace reporting renewed buyer confidence driven by the ICVCM's Core Carbon Principles and the Voluntary Carbon Markets Integrity Initiative (VCMI) claims guidance. Credit retirements reached 164 million tonnes of CO2 equivalent in 2024, a record that suggests underlying demand remains robust even as headline valuations fluctuate.

Issuance patterns shifted decisively. Nature-based credits (forestry and land use) still dominated by volume, but their share declined from 52% in 2022 to approximately 43% in 2024 as buyers rotated toward technology-based removals and renewable energy avoidance credits with stronger additionality profiles. Carbon removal credits, including biochar, enhanced rock weathering, and direct air capture, grew from under 1% of issuance in 2022 to roughly 3% in 2024 and are projected to reach 8 to 10% by 2027.

Trend Analysis

Three structural trends are reshaping carbon credit markets heading into 2026.

Quality bifurcation is accelerating. The introduction of CCP labels created a two-tier market. CCP-eligible credits from methodologies approved by the ICVCM trade at sustained premiums, while credits lacking this designation face discounts and reduced buyer interest. Sylvera, a carbon credit ratings agency, reported that the share of Verra-issued credits receiving an "A" or "AA" rating declined from 18% in 2023 to 14% in 2025, indicating that stricter evaluation criteria are filtering out lower-quality projects. Buyers increasingly rely on third-party ratings from Sylvera, BeZero Carbon, and Calyx Global to differentiate credits within registries.

Removal credits are commanding price premiums. Average voluntary market credit prices range from $5 to $15 per tonne for avoidance credits (such as cookstoves or renewable energy) but reach $100 to $600 per tonne for engineered removal solutions like direct air capture. Frontier, the advance market commitment backed by Stripe, Alphabet, Meta, and McKinsey, committed over $1 billion to permanent carbon removal purchases through 2030. This price dispersion reflects the market's growing recognition that avoidance and removal credits serve fundamentally different functions in corporate climate strategies.

Regulatory convergence is blurring the compliance and voluntary boundary. The EU's Carbon Border Adjustment Mechanism (CBAM), which entered its transitional phase in October 2023, requires importers to report embedded carbon in goods such as steel, cement, aluminum, and fertilizers. By 2026, importers will begin purchasing CBAM certificates aligned with EU ETS prices. Simultaneously, Singapore's carbon tax, which rose to SGD 25 per tonne in 2024, allows qualifying international credits to offset up to 5% of taxable emissions. These hybrid approaches are creating demand for credits that meet both voluntary quality standards and compliance-grade verification.

Regional Patterns

Europe remains the largest and most liquid carbon market globally. The EU ETS covers approximately 40% of the bloc's emissions and will expand to maritime shipping in 2024 and buildings and road transport (ETS2) by 2027. The Market Stability Reserve continues absorbing surplus allowances, maintaining upward price pressure. EU allowance prices are forecast to exceed EUR 100 per tonne before 2030 under current trajectory.

Asia-Pacific is the fastest-growing region. China's national ETS, covering roughly 5 billion tonnes of CO2 from the power sector, is the world's largest by emissions coverage. Expansion to cement, steel, and aluminum sectors is expected by 2026 to 2027. South Korea's K-ETS and Japan's GX-ETS (launched in 2023 as a voluntary trading scheme with plans for mandatory compliance by 2026) add regional depth. Indonesia's carbon trading regulation, finalized in 2024, positions the country as a major credit supplier from tropical forestry and peatland restoration.

Americas present a fragmented picture. California's cap-and-trade system, linked with Quebec, operates effectively but covers only 85% of state emissions. At the federal level, the United States lacks a national carbon price, though the Inflation Reduction Act's clean energy incentives provide implicit carbon pricing through tax credits. Brazil's regulated carbon market legislation, signed into law in late 2024, is expected to become operational by 2026 and could become one of the largest compliance markets in the Americas, covering industrial emitters above 10,000 tonnes of CO2 annually.

Africa remains underrepresented in carbon markets despite hosting significant credit supply potential. The Africa Carbon Markets Initiative (ACMI), launched at COP27, targets 300 million credits per year by 2030 and 1.5 billion by 2050. Kenya, Ghana, and Rwanda have established bilateral agreements under Article 6, though infrastructure for monitoring, reporting, and verification remains a bottleneck.

Sector-Specific KPI Benchmarks

KPI	Compliance Markets	Voluntary (Avoidance)	Voluntary (Removal)
Average price per tonne (2024-2025)	$14 to $70+ (varies by jurisdiction)	$5 to $15	$100 to $600
Annual volume traded	~12 billion tonnes CO2e (EU ETS)	~350 million tonnes issued (VCM total)	~10 million tonnes
Retirement rate (% of issuance retired)	95%+ (compliance obligation)	~47% (voluntary)	~85%
Year-over-year growth (value)	5 to 8%	15 to 20% (recovery from 2023 trough)	40 to 60%
Third-party rated share	N/A (government-regulated)	~35% of active credits	~70%
CCP-eligible share	N/A	~12% of outstanding credits	~25%

What the Data Suggests

The data points toward a market that is maturing through consolidation rather than collapse. The 2023 VCM contraction, widely interpreted as a crisis, now appears more accurately as a quality correction. Retirement volumes continued rising even as transaction values fell, indicating that serious corporate buyers maintained procurement while speculative and low-quality activity exited.

Price dispersion between credit types will likely widen further. As compliance markets tighten and buyers demand CCP-labeled credits, commodity-grade avoidance credits face continued downward pressure while high-integrity removal credits appreciate. This bifurcation rewards project developers who invest in rigorous monitoring, reporting, and verification (MRV) infrastructure and penalizes those relying on outdated methodologies.

The integration of digital MRV technologies, including satellite monitoring from Planet Labs, AI-driven verification from Pachama, and blockchain-based registries, is reducing transaction costs and increasing transparency. These technologies are essential for scaling credit supply while maintaining the quality standards that institutional buyers require.

For founders building in this space, the data suggests that value creation lies at the quality layer rather than the volume layer. Companies that help buyers identify, verify, and retire high-integrity credits, or that develop novel removal pathways with strong permanence guarantees, are positioned to capture disproportionate value as the market matures.

Key Players

Compliance Market Operators

• European Commission (EU ETS) - Operates the world's largest compliance carbon market by value, covering power generation, heavy industry, aviation, and maritime shipping across the EU and EEA.
• California Air Resources Board (CARB) - Administers California's cap-and-trade program linked with Quebec, with allowance prices consistently above $30 per tonne.
• China Ministry of Ecology and Environment - Oversees China's national ETS, the largest compliance market by emissions coverage at approximately 5 billion tonnes CO2.

Voluntary Market Standards and Registries

• Verra - Operates the Verified Carbon Standard (VCS), the largest voluntary credit registry with over 1,900 registered projects and more than 1 billion credits issued to date.
• Gold Standard - Founded by WWF, certifies credits with co-benefit requirements across health, livelihoods, and ecosystems, with over 200 million credits issued.
• Integrity Council for the Voluntary Carbon Market (ICVCM) - Sets the Core Carbon Principles benchmark and approves assessment frameworks for crediting methodologies.

Credit Rating and Intelligence Firms

• Sylvera - Provides AI-driven carbon credit ratings and analytics, covering thousands of projects across major registries. Raised $57 million in Series B funding in 2023.
• BeZero Carbon - Offers carbon credit ratings on an eight-point scale. Expanded coverage to over 800 projects and raised $50 million in Series B in 2023.
• Calyx Global - Independent credit rating agency backed by data from satellite imagery and on-the-ground assessments.

Carbon Removal Pioneers

• Climeworks - Swiss direct air capture company operating the Orca and Mammoth facilities in Iceland, with combined capacity exceeding 40,000 tonnes CO2 per year.
• Frontier - Advance market commitment co-founded by Stripe, Alphabet, Meta, Shopify, and McKinsey, with over $1 billion committed to permanent carbon removal procurement.
• Pachama - Uses satellite data, lidar, and machine learning to verify forest carbon projects, providing digital MRV for nature-based solutions.

Key Investors and Funders

• Breakthrough Energy Ventures - Bill Gates-backed fund investing in carbon removal and MRV technologies.
• World Bank Carbon Finance - Supports compliance market development in emerging economies and administers multiple carbon trust funds.
• Singapore Exchange (SGX) Climate Impact X - Joint venture carbon exchange facilitating standardized credit trading in Asia-Pacific.

Action Checklist

• Audit your organization's credit portfolio against ICVCM Core Carbon Principles and assess which holdings may lose value as CCP labeling becomes the market standard
• Establish a credit procurement strategy that differentiates between avoidance credits for near-term claims and removal credits for long-term net-zero alignment
• Monitor compliance market developments in your operating jurisdictions, including EU CBAM certificate pricing, national ETS expansions, and Article 6 bilateral agreements
• Integrate third-party credit ratings from providers such as Sylvera, BeZero Carbon, or Calyx Global into due diligence processes before purchasing credits
• Evaluate digital MRV solutions for any carbon projects you develop or invest in, prioritizing satellite monitoring and AI-driven verification to meet rising buyer expectations
• Track retirement rates rather than issuance volumes as your primary demand indicator, since retirements reflect actual corporate usage while issuance includes speculative inventory
• Assess exposure to regulatory risk by mapping where your supply chain intersects with jurisdictions implementing carbon pricing, border adjustments, or mandatory disclosure

FAQ

Q: What is the difference between compliance and voluntary carbon credits? A: Compliance credits (allowances) are issued by governments under regulated cap-and-trade systems and must be surrendered by covered entities to meet legal emission limits. Voluntary credits are generated by certified projects and purchased by organizations choosing to offset emissions beyond regulatory requirements. Compliance credits carry legal enforcement; voluntary credits rely on market standards and reputational incentives.

Q: Why did the voluntary carbon market contract in 2023? A: A series of investigative reports in early 2023 questioned the environmental integrity of major forestry offset projects, particularly those issued under Verra's REDD+ methodology. Corporate buyers paused procurement to reassess credit quality, and some publicly distanced themselves from offset claims. The ICVCM's Core Carbon Principles framework, finalized in 2024, was designed specifically to address these integrity concerns and rebuild market confidence.

Q: How are carbon credit prices expected to change through 2026? A: Compliance market prices are generally expected to rise as caps tighten. EU ETS prices are forecast to approach EUR 80 to EUR 100 by 2027 to 2028. Voluntary market prices will likely continue bifurcating: commodity avoidance credits may remain in the $5 to $15 range, while high-quality removal credits could exceed $200 to $400 per tonne as demand from corporate net-zero commitments grows faster than removal supply.

Q: What role does Article 6 of the Paris Agreement play? A: Article 6 enables countries to trade emission reductions internationally under agreed rules. Article 6.2 governs bilateral agreements with corresponding adjustments to prevent double counting. Article 6.4 establishes a centralized crediting mechanism (successor to the Clean Development Mechanism). These provisions allow developing countries to monetize climate action while enabling buyer countries and companies to access cost-effective abatement.

Sources

• London Stock Exchange Group (LSEG). (2025). "Carbon Market Year in Review 2024." https://www.lseg.com/en/data-analytics/carbon-markets
• Ecosystem Marketplace. (2024). "State of the Voluntary Carbon Markets 2024." https://www.ecosystemmarketplace.com/publications/state-of-the-voluntary-carbon-markets-2024/
• Integrity Council for the Voluntary Carbon Market (ICVCM). (2024). "Core Carbon Principles and Assessment Framework." https://icvcm.org/the-core-carbon-principles/
• World Bank. (2024). "State and Trends of Carbon Pricing 2024." https://openknowledge.worldbank.org/handle/10986/41535
• Sylvera. (2025). "Carbon Credit Quality Report 2025." https://www.sylvera.com/resources
• Voluntary Carbon Markets Integrity Initiative (VCMI). (2024). "Claims Code of Practice." https://vcmintegrity.org/vcmi-claims-code-of-practice/
• International Emissions Trading Association (IETA). (2025). "Greenhouse Gas Market Report 2025." https://www.ieta.org/resources/reports/
• Bloomberg New Energy Finance. (2025). "Carbon Offset Market Outlook." https://about.bnef.com/