Insight Focus
The value of trades dropped 29% year-on-year in 2024, while volumes fell 25%. Corporate retirement of credits was broadly stable. Increasing focus on carbon removal credits promises higher prices.
Voluntary Carbon Market Value Continues Fall
A major annual report on the state of the voluntary carbon market (VCM) has found that the value of all VCM transactions in 2024 fell by more than 25% compared to a year earlier, extending a decline that began in 2022.
Source: Forest Trends Annual Report
Research group Forest Trends’ State of the Voluntary Carbon Market 2025 report calculated that the aggregate value of trades last year reached USD 535 million, a drop of 29% from 2023. Forest Trends said the annual transaction value was the lowest since 2018, and a massive 75% down from the record USD 2.1 billion traded in 2021.
Trade in VCM credits last year also fell to its lowest since 2017. A total of 84 million VCM credits were traded in 2024, compared to 112 million in 2023, and more than 83% fewer than were exchanged in 2021.
Source: Forest Trends Annual Report
The survey found the average price of all transactions carried out last year fell by 5.5%, with average prices by project type ranging from USD 29.72/tonne for “blue carbon” credits (up 257% from 2023) to USD 6.03/tonne for avoided deforestation credits (-23%).
It wasn’t all bad news, however. Total retirement of carbon credits in 2024 held broadly steady at 180 million tonnes of CO2 equivalent, compared to 188 million the year before, while the number of new projects registered by the 10 leading VCM standards organisations reached 616 last year, compared to 694 in 2023.
Source: Forest Trends Annual Report
With the carbon markets seeing an emerging emphasis on projects that remove carbon from the atmosphere – rather than simply reducing emissions or avoiding them – through afforestation or reforestation or biochar production for example, there is a growing focus on these methods as a likely source of higher-value credits going forward.
Corporate Reluctance and Media Criticism Create Challenges
The overall weakness in the VCM market activity stemmed partly from a slowly building reluctance among corporates to take on stringent environmental commitments amid a clouded macroeconomic outlook but also from political opposition in some quarters to the climate agenda.
The war in Ukraine and its impacts on energy prices in many parts of the world has also focused minds on cost, and decarbonisation is still seen in many places as a “nice to have” but not mandatory, especially amid economic turmoil.
The VCM has also struggled with public perception. Media reports criticised some carbon credit projects circulating in 2022, focusing on inaccurate measurements, over-reporting of reductions and even corruption.
These criticisms continued for two years, forcing standards organisations like Verra – who set methodologies to calculate the carbon reductions that are turned into tradable credits – to update their standards and retire some older methodologies.
The emergence of quasi-regulatory bodies, such as the Integrity Council for the VCM and the VCM Integrity initiative, has helped sharpen the market’s focus on ensuring that emission reductions are accurately measured and reported, and that the projects which generate these reductions adhere to stricter codes of conduct.
UN-Backed Credits Challenge VCM
The sharp drop across most metrics in 2024 also reflected continuing uncertainty over the future direction of the VCM, which is watching the emergence of a new marketplace governed by the UN.
This UN-run Paris Agreement Crediting Mechanism (PACM) is establishing a parallel system to approve carbon-reducing projects around the world and issue credits that will be eligible for use by corporates and governments seeking to meet their self-imposed decarbonisation targets.
There is a strand of thought that believes the UN’s PACM, with its formal regulatory structure and government-level involvement, will be increasingly seen as the premium source of carbon reductions, and that the VCM will be seen as a pipeline for carbon credits outside the realm of formal UN commitments.
Indeed, the first of the new UN-compliant credits are expected to be issued before the end of the year, and the wider market will be keenly watching for the first transactions of these credits to assess the price differential against the VCM.
