The carbon credit market is a voluntary market in which traders buy and sell emissions reductions that are not required by regulation. A carbon credit represents ownership of one metric ton of carbon dioxide equivalents (CO2e) that has been reduced in the form of avoided deforestation or other emissions reduction projects. The primary goal of the carbon market is to reduce greenhouse gas emissions to combat climate change. The carbon market is supported by a range of policies, including emissions trading schemes, carbon taxes, and regulations that require companies to offset their own emissions.

The demand for carbon credit market has risen after the 2015 Paris Agreement to achieve net zero carbon emissions, which has spurred the growth of the sector. In addition, many companies and state government bodies have taken up carbon neutral commitments to support the initiative. This is expected to drive the market expansion further in the future.

Several major players are operating in the global carbon credit market. These include The Carbon Trust, Climate Impact Partners, South Pole, 3Degrees, VERRA, ClimeCo LLC, CarbonClear, EcoAct, Sterling Planet Inc, and WGL Holdings Inc. These players are focusing on various strategic assets, such as innovative system range, merger & acquisition, and robust R&D activities, to strengthen their position in the market.

In terms of project type, the carbon credit market is segmented into avoidance/reduction projects and removal/sequestration projects. The market for avoidance/reduction projects is likely to dominate the global market. This is primarily due to the growing concern of the end-use industries about the effect of carbon emissions on the environment. The demand for carbon credits from these sectors is likely to increase as the governments of the nations are promoting their industries towards the use of renewable energy sources such as hydro and wind.

For example, Microsoft recently announced a partnership with BTG Pactual Timberland Investment Group to purchase 8 million carbon credits from its forests in Brazil and other locations around the world. This is part of the company's commitment to reach carbon neutrality by 2050.

The demand for carbon credits is also increasing from individuals who wish to support sustainable projects. Individuals can purchase credits to offset their own air travel or other activities that produce large emissions. These transactions are generally done through online platforms, such as the ones offered by airlines and other companies. The reforestation and afforestation segments are growing rapidly in the carbon credit market, as these initiatives efficiently capture CO2 while delivering benefits such as biodiversity preservation and ecosystem restoration. The segment is anticipated to showcase a 14% CAGR up to 2032.