Carbon credits face critical test, projected to hit $238/Ton by 2050: BloombergNEF Report
2024 will be a year of challenges and opportunities for the carbon offset market, notes the BloombergNEF’s (BNEF’s) Long-Term Carbon Offsets Outlook 2024 report.
The market’s success could propel annual carbon credit purchases to billions, driving prices beyond $200 per ton and nurturing a market valued at over $1.1 trillion by 2050. On the other hand, a failure may lead to the market’s demise.
Kyle Harrison, Head of Sustainability Research at BNEF and the report’s lead author said in a release, “There is no shortage of governments and investors that are eager to monetize emission reductions through carbon credits and channel financing towards projects. But if buyers can’t trust the quality of the credits they’re buying and risk greenwashing accusations, then the market will never reach its potential. Credits will never be more than discretionary spend in this case.”
Also read: Wall Street is set to fuel a $1 trillion carbon market
The report notes that initiatives such as the Integrity Council on Voluntary Carbon Markets and the US Commodities Futures Trading Commission could help ensure that carbon credits are critical to corporate decarbonization strategies regardless of their prices. This could lead companies to purchase up to 1.4 billion credits annually in 2030 and 5.9 billion in 2050.
BNEF lists three pricing scenarios based on market structure and demand forecasts:
High-quality Scenario: Prices may surge to $238/ton by 2050, with a market worth $1.1 trillion annually.
Voluntary Market Scenario: Prices might stagnate at $14/ton by 2050, peaking at $34 billion annually.
Removal Scenario: Prices could reach to $172/ton by 2050, fostering a market exceeding $884 billion annually.
“The lack of progress at COP28 on Article 6 has been a wakeup call to the importance of the voluntary carbon market,” said Harrison. “The private sector has been hard at work to position carbon credits as a complement to a suite of other decarbonization options, including the compliance market. Their success may just be the difference between the private sector achieving or not achieving its net-zero goals.”
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