MSCI: Carbon Credits Reshape Scope 3 Strategies

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Carbon credits are packaged as convenient ways for companies to decarbonise their operations. To acquire them, companies must fund sustainable projects, such as reforestation, carbon sequestration or energy efficiency initiatives
MSCI report reveals carbon credit market thaw, signalling a pivotal shift in Scope 3 emissions management as companies adapt to evolving sustainability

The global carbon credit market, valued at approximately US$1.4bn in 2024, has experienced stagnation in recent years.

However, a new report from MSCI suggests a potential resurgence by 2030, with significant implications for companies' Scope 3 emissions management strategies.

The current state of the carbon market

Jeremy Davis, Executive Director at MSCI | Credit: Jeremy Davis

Jeremy Davis, Executive Director at MSCI, provides historical context:

"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 was shaped by pivotal milestones like the Kyoto Protocol, the EU Emissions Trading Scheme and the Paris Agreement."

Despite this evolution, the market has plateaued:

  • Retirements held steady at 180 MtCO₂e for the third consecutive year in 2024.
  • Negative publicity and a perceived lack of urgency among corporations have created tepid demand.
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Signs of life in the global carbon market

MSCI carbon markets projects potential growth:

  • Market value could reach US$7bn - US$35bn by 2030.
  • Potential expansion to US$250bn by 2050.

Key drivers include:

  • Shift towards higher-quality credits, particularly removal credits.
  • Introducing new regulatory frameworks, such as the Core Carbon Principles (CCPs).
  • Formalisation of carbon credit trading under Article 6 of the Paris Agreement.
Guy Turner, Global Head of Carbon Markets at MSCI and Co-Author of this report | Credit: MSCI

Emerging demand in the carbon market

New sources of demand are materialising, particularly relevant for Scope 3 emissions:

  • The aviation sector is preparing for CORSIA, with its first compliance phase set for 2027.
  • Increasing corporate climate commitments, with over 2,700 companies adopting SBTi-validated targets in 2024.

Guy Turner, an author of MSCI's report, notes:

"As carbon markets grow in popularity, more organisations are becoming carbon-curious."

Long-term Prospects for the Carbon Market

MSCI predicts significant shifts by 2050:

  • Removal credits could comprise two-thirds of the market's value.
  • Engineered solutions like direct air capture could contribute up to US$42bn.

The financial impact on corporations is expected to be manageable, representing less than 1.5% of global corporate profits in 2050.

Implications for Scope 3 emissions management

As the carbon credit market evolves, companies will need to reassess their Scope 3 emissions strategies:

  1. Supply chain engagement: Increased demand for high-quality credits may drive suppliers to invest in carbon reduction projects.
  2. Value chain collaboration: Companies may leverage carbon credits to incentivise Scope 3 emissions reductions across their value chains.
  3. Investment in removal technologies: As engineered solutions gain traction, companies might directly invest in these technologies to address hard-to-abate Scope 3 emissions.
Project Concho (located in Texas) is the world’s first Direct Air Capture hub powered entirely by wind energy | Credit: Skytree

Guy Turner highlights the potential impact:

"Carbon markets can play a hugely important role in tackling climate change. 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."

As the carbon credit market thaws, companies must stay informed and adapt their Scope 3 emissions strategies accordingly. The evolving landscape presents challenges and opportunities for businesses committed to comprehensive decarbonisation efforts.


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