MSCI Hints That Carbon Markets May Thaw As 2030 Approaches

The global carbon credit market, valued at approximately US$1.4bn in 2024, has been a little stagnant in recent years.

Carbon credits have, at times, been touted as the most convenient way for businesses to decarbonise their operations, but for one reason or another, the market has not taken off as was initially expected.

However, US-based investment firm MSCI believes that this might soon change.

In a report published at the beginning of 2025, MSCI suggested that we can expect the 'frozen' carbon market to thaw within the next five years.

With increasing corporate climate commitments and evolving market mechanisms, MSCI believes the sector could experience something of a resurgence by 2030.

However, the trajectory of this market is far from straightforward, with challenges in pricing, integrity and demand shaping its evolution. 

The current state of the carbon market

"Carbon credits have come a long way since their inception in the late 1980s. From early offset programs to today's dynamic voluntary markets, the path has been shaped by pivotal milestones like the Kyoto Protocol, the EU Emissions Trading Scheme, and the Paris Agreement," says Jeremy Davis, Executive Director at MSCI.

But despite its historic growth, the carbon credit market is on ice right now.

Retirements—the process of permanently using carbon credits to offset emissions—were flat for the third consecutive year in 2024, holding at 180 MtCO₂e.

This disappointing plateau follows a period of rapid growth in the years leading up to 2022. Back then, the price of carbon credits was far higher, but still the market is languishing.

This lack of momentum persisted despite some pretty notable efforts to bolster the market's credibility. More than 2,700 companies adopted new climate targets validated by the Science Based Targets initiative (SBTi) in 2024, a 65% increase from the previous year.

Nevertheless, negative publicity surrounding the quality of some carbon projects and a perceived lack of urgency among corporations with distant climate deadlines have contributed to tepid demand in the world of carbon credits.

Signs of life in the global carbon market

While the current market conditions are underwhelming, projections suggest a potential thaw. According to MSCI Carbon Markets, the market could be worth between US$7bn - US$35bn by 2030 and as much as US$250bn by 2050.

These estimates hinge on the successful implementation of existing corporate and governmental climate commitments. One key driver of this potential growth is the shift toward higher-quality credits, particularly removal credits, which directly extract carbon from the atmosphere.

Removal credits accounted for roughly a third of the market’s value in 2024, a marked increase from previous years. Nature-based solutions, such as reforestation, dominated this segment, but engineered solutions like direct air capture could become increasingly significant.

These technologies, though costly and nascent, offer high permanence and could command premium prices as the market matures.

"In recent years, a rapid rise in corporate commitments to net-zero and carbon neutrality has fuelled greater demand for innovative solutions in the carbon credit market," says Jeremy.

Additionally, the introduction of new regulatory frameworks, such as the Core Carbon Principles (CCPs) from the Integrity Council for the Voluntary Carbon Market, aims to standardise and enhance the credibility of carbon credits.

These measures, along with the formalisation of carbon credit trading under Article 6 of the Paris Agreement, could contribute to a stronger and more transparent market.

Why might demand increase in the carbon market?

Beyond corporate pledges, new sources of demand are beginning to materialise.

The aviation sector, for instance, is preparing for the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), with its first compliance phase set for 2027.

Such initiatives are expected to bring additional buyers into the market, adding to the momentum generated by voluntary corporate action.

However, the growth of the market is not guaranteed. The value of credits is likely to depend on their perceived quality, with removal credits and engineered solutions attracting higher prices.

In 2024, nature-based removal credits accounted for around US$500m of the total market value, reflecting a growing preference for projects with tangible environmental benefits.

The cost differential between high-quality and lower-quality credits, combined with increasing scrutiny from investors and stakeholders, could reshape market dynamics.

Then, once more companies are interested, we might start to see a snowballing effect. "As carbon markets grow in popularity more organisations are becoming carbon-curious," says Guy Turner, one of the authors of MSCI's report.

What are the long-term prospects for the carbon market?

MSCI predicts that, by 2050, removal credits could comprise two-thirds of the market’s value with engineered solutions like DAC also making important contributions.

These credits, leveraging technologies like direct air capture and biochar, could account for as much as US&42bn, despite their current high costs and limited deployment.

While such growth may appear ambitious, the financial impact on corporations is expected to be manageable.

At the upper estimate of US$250bn, the carbon credit market would represent less than 1.5% of global corporate profits in 2050.

This suggests that the costs of engaging with carbon markets could be integrated into broader sustainability strategies without overwhelming businesses.

The turning of the tide?

The carbon credit market is entering a critical period. With increasing regulatory oversight, rising demand from sectors like aviation, and a growing emphasis on high-quality credits, the conditions for growth appear to be forming.

However, challenges related to pricing, project integrity, and the alignment of corporate actions with long-term climate goals will need to be addressed to unlock the market’s full potential.

Needless to say, there is a great deal of optimism about the future of carbon credits within the ranks at MSCI. "Carbon markets can play a hugely important role in tackling climate change," explains Guy.

"They, in particular, allow governments and corporates to reduce emissions at a lower cost, and if we can do that, we can get better bang for our buck in taking emissions out of the atmosphere."

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