The carbon markets have experienced significant changes in 2024, with increasing regulatory oversight, shifting dynamics between voluntary and compliance markets, and technological advancements shaping market transparency. To gain insight into these developments, we spoke with:
- Charlie Renzoni, Vice President of Carbon Markets, Deep Sky.
- Andre Fernandez, Co-Founder & CEO, Invert Inc.
- Timothy Bushman, Director of Policy and Research, Carbon Removal Canada.
Their perspectives provide a comprehensive analysis of the trends that defined 2024 and what lies ahead for 2025.
Market Trends and Growth in 2024
Carbon Removal Moves Toward Market Maturity
Charlie Renzoni highlighted that the carbon removal sector has moved beyond its early-stage development, stating:
“In 2024, we have seen the continued shift to a mature value chain in the carbon removal market. This is defined by the establishment of dedicated project developers, technology companies adopting OEM business models, and the expansion of carbon removal equipment manufacturing capabilities.”
This evolution suggests that carbon removal is becoming more structured, with clearer roles for different stakeholders. The increasing involvement of specialized project developers and manufacturers points to a reduction in project risks and overall costs, which could accelerate the sector’s scalability.
The Growing Focus on Integrity Over Volume
Andre Fernandez emphasized a major shift in buyer preferences, noting:
“Buyers are increasingly prioritizing integrity over volume, with a clear shift toward projects higher in transparency, impact, and adherence to new standards such as the ICVCM’s CCPs.”
This shift reflects growing scrutiny over carbon credits, with companies demanding more verifiable and measurable emissions reductions. As a result, high-quality credits are commanding premium prices, driving record-high carbon pricing revenues. This trend is likely to continue as corporations seek more trustworthy offsets to meet ambitious climate targets.
Voluntary Carbon Market Growth Remains Slow
Timothy Bushman pointed out that while the voluntary carbon market saw modest growth in 2024, it remains below earlier projections:
“The total value of the voluntary carbon market rose slightly from 2023 levels but still remains well below some of the rosy projections for market growth by 2030 and beyond.”
This sluggish performance indicates that skepticism over carbon credit credibility still lingers. Buyers remain hesitant, likely due to past controversies over low-integrity credits. Without further improvements in verification mechanisms, the voluntary market may struggle to scale at the pace once predicted.
Regulatory and Policy Shifts in 2024
Article 6 and the Expansion of Compliance Markets
One of the most significant policy milestones of 2024 was the full operationalization of Article 6 of the Paris Agreement. Bushman explained its significance:
“After nearly a decade of negotiations, countries finally struck an agreement at COP29 in Baku to fully operationalize Article 6… It remains to be seen what effect this will have on mobilizing carbon credit trading activities across political jurisdictions.”
This agreement establishes a framework for cross-border carbon credit trading, which could harmonize standards and create a more liquid global market. However, the real impact will depend on how quickly countries adopt and implement the framework.
Andre Fernandez also pointed to increasing regulatory requirements, stating:
“2024 was a milestone year for moving the needle on hallmark carbon market policies… With an expected shortage of eligible credits under both schemes, scarcity could drive up the cost of compliance as demand outpaces supply.”
This suggests that as compliance obligations increase, companies may face rising costs unless they secure long-term carbon credit supplies.
Government Procurement Programs Driving Demand
Another regulatory development is the increasing role of governments in carbon markets. Bushman highlighted a key policy move:
“The Government of Canada announced that it will purchase CAD$10M worth of credits from carbon removal projects through its Low-carbon Fuel Procurement Program.”
This follows similar initiatives by the U.S. Department of Energy, which launched a carbon removal credit purchase program to stimulate demand. These government-backed initiatives serve as crucial demand bridges, but their effectiveness in sustaining long-term market growth remains uncertain.
Voluntary vs. Compliance Markets: Convergence and Integration
Blurring Boundaries Between Voluntary and Compliance Markets
Charlie Renzoni emphasized the increasing alignment of voluntary and compliance markets:
“Fungibility is an emerging hot topic… We anticipate that the lines between voluntary and compliance markets will begin to blur as we approach 2030.”
This trend indicates that voluntary credits may soon be required to meet stricter compliance standards. Companies participating in voluntary markets will need to ensure their credits align with international frameworks like CORSIA and country-level policies such as Canada’s Direct Air Capture protocol.
Fernandez echoed this view, predicting:
“In 2025, we also expect greater integration between voluntary and compliance mechanisms, stronger demand for high-integrity credits, and increased oversight on carbon project claims.”
As voluntary markets tighten their governance, businesses will need to reassess their carbon strategies, ensuring their credits meet evolving compliance demands.
Technology and Innovation: AI vs. Blockchain
AI Transforming Carbon Credit Monitoring
Fernandez sees AI as a game-changer for credit verification:
“AI is enhancing MRV (Monitoring, Reporting, and Verification) by improving satellite imagery analysis, sensor data interpretation, and project impact forecasting.”
This technology improves transparency by reducing over-crediting risks, a key concern in past carbon credit scandals. As AI adoption increases, companies will have access to more reliable data, strengthening confidence in carbon projects.
Skepticism Over Blockchain’s Role
However, not all technologies are seen as transformative. Bushman expressed doubts about blockchain’s role in carbon markets:
“I don’t see a huge role for blockchain in carbon markets. However, advances in AI will be central to improving our monitoring and measurement capabilities to help boost the integrity of carbon projects.”
Despite initial excitement around blockchain for improving transaction transparency, its adoption has been slow. AI, with its real-time monitoring capabilities, appears to be a more immediate solution for increasing market credibility.
Projections for 2025: Key Market Trends
Upward Pressure on Carbon Pricing
Fernandez expects carbon prices to continue rising:
“Compliance markets will likely see higher carbon prices, driven by tightening cap-and-trade systems and carbon tax adjustments (e.g., Canada’s rising federal carbon price).”
As governments strengthen emissions reduction targets, companies will likely face higher costs for compliance credits, making long-term credit procurement strategies essential.
Continued Market Integration and Oversight
Both Fernandez and Renzoni foresee “greater integration between voluntary and compliance mechanisms” in 2025, with stricter verification standards becoming the norm. This means that companies will need to prioritize compliance-ready credits, pushing out lower-quality offsets.
Challenges in Scaling Carbon Removal Supply
Bushman warned of ongoing challenges for carbon removal adoption:
“Demand creation for carbon removal will continue to be a major challenge, especially in the absence of widespread carbon removal inclusion in global compliance carbon markets.”
Unless costs decrease significantly, carbon removal projects may struggle to secure enough buyers to scale at the necessary pace.
Climate Insider Analysis
- High-Integrity Credits Take Center Stage: The demand for verifiable, high-quality credits is growing, with buyers increasingly rejecting lower-integrity offsets. This trend will likely continue in 2025.
- Regulatory Changes Will Drive Compliance Costs: Article 6, CORSIA, and national policies will increase demand for compliance-grade credits, potentially leading to a supply shortage.
- AI-Driven Verification is the Future: AI-powered monitoring and reporting tools are becoming essential for credibility. Blockchain, while promising, remains on the sidelines.
- Voluntary and Compliance Markets are Merging: Companies relying on voluntary offsets must adapt to stricter verification and reporting requirements as these markets converge.
- 2025 Outlook: Expect higher carbon prices, increased regulatory oversight, and persistent supply-side challenges for carbon removal. Companies must stay ahead by securing high-integrity credits and aligning with emerging compliance standards.
As the market matures, businesses will need to adapt to tightening regulations, increasing costs, and new technological requirements to remain competitive in the evolving carbon economy.
