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October 26, 2021

New report shows 52% of global GHG emissions could be covered by carbon markets by the end of this decade – up from 24% today

WASHINGTON, D.C. Markets to buy and sell carbon are expanding rapidly around the world, and they have the potential to address more than half of all greenhouse gas (GHG) emissions by 2030, a new report published Tuesday from the Institute of International Finance shows.

The report, Getting to Net Zero – The Vital Role of Global Carbon Markets, examines the growth of global carbon markets, and highlights implications for businesses, financial institutions and policymakers. The report shows that:

  • Projected expansion of both compliance (government-mandated) and voluntary carbon markets could see their GHG coverage more than double, from 24% of global emissions today, up to 52% of global emissions in 2030.
  • Compliance market coverage could expand from 21% today to 47% in 2030.
  • Voluntary market commitments could grow from covering 9% of corporate emissions today to 23% of emissions by 2030. 

“Carbon credits are an important tool that provide a pathway to decarbonize for entities in hard-to-abate sectors while they work to develop long-term solutions,” said Sonja Gibbs, Managing Director and Head of Sustainable Finance for the IIF. “As net-zero or carbon neutral commitments become the norm for the world’s largest companies, we predict that virtually every major business will interact with carbon markets in some way throughout the coming decade – and these markets have enormous potential to reduce the world’s emissions.”

In 2020, 1,565 companies had a net-zero emissions target in place, double the commitments from the previous year. As momentum for decarbonization grows, more businesses are expected to adopt carbon neutral or net-zero targets in the next decade.

While the current pace of expansion of carbon markets is promising, current policies are not yet sufficient for them to deliver on their full potential. Scaling carbon markets depends on progressing four common key factors in the coming decade: Clarity on international transfers, mature financial infrastructure, transparent high integrity credits, and expanded demand enabled by increasing climate ambition.

The report also finds that compliance markets and voluntary markets could play distinct but complementary roles in incentivizing emissions reductions and removals. Compliance markets provide a price signal such that the costs of GHG emissions must be factored into decision-making. Voluntary markets for carbon credits can help make net-zero commitments possible for all companies, especially in the hardest-to-abate sectors.

Corporations, investors, academics and environmental NGOs are coming together through initiatives like the Taskforce on Scaling Voluntary Carbon Markets to support the development of high-integrity voluntary markets. These efforts complement the work of governments and international organizations seeking to support best practice in compliance markets.

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About the Institute of International Finance (IIF)

The Institute of International Finance (IIF) is the global association of the financial industry, with more than 400 members from more than 70 countries. Its mission is to support the financial industry in the prudent management of risks; to develop sound industry practices; and to advocate for regulatory, financial and economic policies that are in the broad interests of its members and foster global financial stability and sustainable economic growth. IIF members include commercial and investment banks, asset managers, insurance companies, sovereign wealth funds, hedge funds, central banks and development banks. To learn more about IIF, please visit www.iif.com, follow IIF on Twitter, LinkedIn or YouTube, or check out IIF’s podcasts.