The Emissions Trading Market is a cost-effective policy tool that incentivizes facilities to reduce emissions. Established in 2005, the Emissions Trading Market allows governments and companies to cost-effectively reduce greenhouse gas emissions. It works on the 'cap and trade' principle where a cap is placed on the total amount of a certain greenhouse gas that can be emitted. Companies or other groups are allocated emission allowances which they can sell to or purchase from one another as needed. The increasing focus of governments worldwide on controlling emissions through regulations like carbon taxes and emissions standards is driving the demand for emissions trading mechanisms.
The global Emissions Trading Market is estimated to be valued at US$ 385.69 Bn in 2024 and is expected to exhibit a CAGR of 6.8% over the forecast period from 2024 to 2031.
Countries worldwide have put in place carbon pricing initiatives that collectively cover about 20% of global greenhouse gas emissions. As more and more governments implement carbon pricing around the world, the emissions trading market is expected to witness significant growth.
Key Takeaways
Key players operating in the Emissions Trading Market are Johnson & Johnson Services, Inc., 3M, Baxter, Coloplast A/S, Integra LifeSciences, Medtronic, Omeza, Cardinal Health, Bactiguard AB, Noventure, Essity, Schulke & Mayr GmbH, Smith & Nephew Plc., Convatec Group PLC, SANUWAVE and SANUWAVE Health, Inc., EO2 Concepts, Wound Care Advantage, LLC., Healthium Medtech Limited, Arch Therapeutics, Inc., Hydrofera, Sanara MedTech Inc., Axio Biosolutions Pvt Ltd., and Gentell, Inc. These players are focusing on expanding their global footprint through acquisitions and partnerships.
The growing environmental concerns over climate change and rising carbon emissions have increased the worldwide demand for emissions trading and carbon offsets. Various industries ranging from energy and utilities to aviation and shipping are actively participating in emissions trading programs.
The Emissions Trading Market Demand is witnessing significant growth in developing regions of Asia Pacific and Latin America due to the implementation of new carbon pricing initiatives. Countries like China, South Korea and many others have either introduced or expanded their emissions trading schemes.
Market Drivers
Strict government regulations related to carbon emission standards are a key driver for the emissions trading market. The Paris Agreement and subsequent climate accords have led to nations setting ambitious emission reduction targets. This has increased the focus on deploying market-based mechanisms like emissions trading. As more companies and sectors get regulated under cap and trade programs, the demand for allowances and offsets is expected to substantially grow. In addition, the advancement of digital technologies is enabling more efficient administration of emissions trading schemes and boosting market transparency.
The ongoing geopolitical instability and tensions between nations are negatively impacting the growth of the emissions trading market. Restrictions on cross-border carbon credit transfers due to rising trade barriers or sanctions can hamper the flexibility of the market. However, the growing emphasis on decarbonization goals from governments worldwide is driving the need for robust emissions trading mechanisms. Regional emissions trading schemes are also getting interconnected to scale up carbon pricing coverage but the fragmented policy approaches across jurisdictions remain a challenge.
The emissions trading value is highly concentrated in developed economies of Europe and North America currently. The European Union Emissions Trading System (EU ETS) accounts for over 80% of the existing emissions trading market value due to its long-standing and mature carbon market. However, the Asia Pacific region is expected to emerge as the fastest growing market in the coming years led by the expansion of programs in China, Korea, and prospective national and sub-national schemes in other countries. The embrace of carbon pricing tools to meets stringent emissions targets makes the Asia Pacific a lucrative market for emissions trading.
Currently, Western Europe dominates the emissions trading market in terms of value owing to active participation in the EU ETS over a decade. Several European countries including Germany, France, the UK, Italy have robust carbon trading volumes within the EU scheme. On the other hand, countries like China, Japan and South Korea are primed to be the fastest growing regional markets due to developing national carbon markets and deepening of existing provincial pilot programs. The Asia Pacific offers significant headroom for market growth as emissions trading proliferates across the region's major economies to incentivize low carbon investments and combat climate change.
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