The global carbon credit market reached a clear turning point in 2025. Volumes declined. Prices rose. Buyer behavior shifted. Policy signals strengthened. At the same time, long-term commitments surged through record-breaking offtake deals.
These changes show a market moving away from scale at any cost. Instead, quality, integrity, and compliance eligibility now shape value. This article reviews the major trends that defined the carbon credit market in 2025 using various industry reports and explains what they mean for 2026 and beyond.
Why 2025 Marked a Turning Point for the Carbon Credit Market
For much of the past decade, growth in the voluntary carbon market was driven by volume. More credits were issued. More were retired. Prices stayed low. Quality concerns often came second.
That model no longer holds.
In 2025, total credit retirements fell to about 168 million tonnes, down 4.5% year on year, according to Sylvera report. New issuances also declined, reaching roughly 270 million tonnes, the lowest level since 2020. On the surface, this looks like a contracting market.
Yet market value moved in the opposite direction. Total spending on carbon credits rose to around $1.04 billion, up from about $980 million in 2024. The average price paid increased to roughly $6.10 per credit.
This shift matters. It shows that market growth is no longer tied to volume alone. Instead, it is driven by higher prices for credits seen as credible, durable, and compliant with future rules.
The reports point to two forces driving this change. First, buyers are paying more for higher-quality credits. Second, compliance-driven demand is starting to reshape the market. Together, these forces signal a transition toward a more structured and selective market.
Supply, Demand, Issuances, and Retirements: What Really Changed in 2025
The balance between supply and demand changed in important ways during 2025.
On the supply side, issuances declined across several major project types. Renewable energy credits saw the sharpest drop. These projects have long faced questions around additionality. Many buyers now see them as low impact. As a result, fewer new renewable credits entered the market.
Nature-based credits still dominate total volumes. Forestry and land-use projects remain the largest source of issued and retired credits. However, within this category, the mix is changing.
Buyers are moving away from older REDD+ projects and toward improved forest management, afforestation, reforestation, and agriculture-based projects. Allied Offsets data show the following mix:
On the demand side, retirements fell slightly, but this does not signal weakening interest. Corporate demand remained stable in terms of buyer count. What changed was how companies bought credits and what they were willing to pay.
Importantly, compliance use now accounts for about 23% of all retirements. Programs in California, Quebec, South Africa, and Chile contributed to this growth. This share is expected to rise as new compliance systems scale up.
Another key signal comes from inventory data. Credits rated BBB or higher have been in deficit since 2023. In 2025, this deficit continued for a third straight year. At the same time, lower-rated and unrated credits remained heavily oversupplied. Unrated credits alone added an estimated 88 million tonnes to inventory in 2025.
This split highlights a structural imbalance. The market does not lack the credits overall. It lacks the credits that buyers trust.
Nature, Tech, and Removals: The Credit Mix Evolves
The mix of credit types continued to rotate in 2025, reflecting buyer concerns about integrity and future eligibility.
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Nature-based credits
Nature-based credits still make up the majority of market activity. However, not all nature credits are treated equally.
Legacy REDD+ projects lost market share. High-profile integrity concerns reduced buyer confidence. Prices weakened for lower-rated REDD+ credits. In contrast, well-rated afforestation and reforestation (ARR) projects gained ground. Buyers showed a clear preference for projects with stronger monitoring, permanence, and land tenure controls.
Agriculture-based credits also expanded. These projects often offer measurable co-benefits for soil health and livelihoods. Buyers increasingly value these attributes.
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Technology-based avoidance credits
Credits from renewable energy projects continued to decline. Waste management, landfill gas, and industrial efficiency projects filled some of this gap. These projects often face lower additionality risks and clearer baselines.
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Carbon removal credits
Carbon removal credits remain a small share of current retirements. In 2025, durable removals accounted for well under 1 million tonnes of issuances and retirements.
Yet removals are central to the market’s future. This is most visible in the forward market. Most large offtake deals focus on durable carbon removal, such as direct air capture, biochar, BECCS, and enhanced mineralization.
The CDR-focused report highlights why. Net-zero targets increasingly require removals to address residual emissions. Avoidance credits alone are not enough. This structural demand explains why removals command much higher prices and long-term commitments.
Prices, Quality Premiums, and What Buyers Are Paying For
Headline prices only tell part of the story.
In 2025, the average spot price was around $6.10 per credit. But actual prices varied widely by project type, rating, and co-benefits.
Afforestation and reforestation credits traded anywhere from $2 to over $50. Half of the ARR credits fell between $5 and $25. REDD+ credits showed similar dispersion but at lower levels. Quality became the main driver of these differences. For the first time, ratings were clearly embedded in pricing.
ARR projects rated BBB or higher averaged about $26 per credit. Lower-rated ARR projects averaged closer to $14. Unrated projects traded even lower. A similar pattern appeared in REDD+ credits.
Co-benefits added another layer. Projects with strong biodiversity or community outcomes earned clear price premiums. Buyers were willing to pay more for credits that delivered visible social and environmental value beyond carbon.
In the forward market, prices looked very different. Offtake agreements signed in 2025 implied average prices of around $160 per credit. These prices reflect the high costs and limited supply of durable removals, not spot market conditions.
The result is a two-tier market. One tier is a fragmented spot market with wide price ranges. The other is a concentrated forward market built around high-integrity removals.
Investments and Movers: Who’s Driving the Market
Private investment in carbon removal companies between 2021 and 2025 reached approximately $3.6 billion, with direct air capture (DAC) attracting the largest share of capital over that period.
However, investment activity contracted in 2024 and continued into 2025, even as offtake deals expanded. This highlights a gap between commercial commitments and early‑stage funding scaling.
Major Corporate Buyers and Retirees
Corporate engagement shapes much of the 2025 retirement landscape. Several household names emerged as significant purchasers and retirees:
- Microsoft remained the single largest buyer of carbon removal credits, accounting for over 90% of removal volume in the first half of 2025.
- Energy and utility firms accounted for a sizable portion of total retirements, as indicated in broad market data on retiree sectors.
- While comprehensive ranked data for all major buyers in 2025 is not fully disclosed publicly, MSCI analysis of prior data indicates that energy companies, transport firms, and services sectors have historically been among the top retirees when disclosure is available.
Regional retirements also suggest significant corporate participation from Asia, Europe, and North America. This reflects global corporate climate commitments.
Offtake Spotlight: Forward Deals Speak Louder Than Volumes
Offtake agreements were one of the clearest signals of future market direction in 2025.
The total value of offtake deals announced during the year reached about $12.25 billion, up from roughly $4 billion in 2024. This is more than 12 times the value of credits retired in the spot market.
Yet the volumes involved remain modest. These deals are expected to deliver around 10 million credits per year through 2035. That is less than 10% of current annual retirements.
This gap matters. It shows that buyers are willing to commit large sums to secure limited volumes of high-quality supply. A small group of buyers dominates this space. Microsoft alone accounted for the vast majority of durable removal offtake volume in 2025.
These agreements serve two purposes. They secure future supply in a tight market. They also send strong price signals. If even a fraction of spot market demand shifts toward similar quality thresholds, total market value could grow significantly without higher volumes.
Integrity Meets Policy: Compliance and Ratings Reshape Value
Integrity concerns shaped much of the market’s evolution in 2025.
Buyers are no longer satisfied with claims alone. Ratings, improved methodologies, and third-party assessments now influence decisions. This shift is reinforced by policy.
Compliance and voluntary markets are converging. Credits that can meet compliance rules often command higher prices. This is especially true for credits eligible under CORSIA or aligned with ICVCM’s Core Carbon Principles.
In 2025, nearly half of all credits issued came from methodologies potentially eligible for CORSIA. This share continues to rise. At the same time, Article 6 moved from theory to practice. Twenty new bilateral deals were signed in 2025, bringing the total to over 100 agreements.
Moreover, corresponding adjustments emerged as a central issue. Credits with a corresponding adjustment are now clearly differentiated from those without. This distinction affects pricing, eligibility, and long-term demand. Some analysts expect corresponding adjustments to become a tradable element of the market.
Policy signals also strengthened corporate demand. Draft updates to the SBTi Net-Zero Standard clarified how credits can be used alongside emissions reductions. This reduced uncertainty for buyers planning long-term strategies.
The Outlook for 2026 and Beyond
The near-term outlook points to a tighter and more complex market.
In 2026, supply constraints for high-quality credits are likely to persist. New issuances are not rising fast enough to meet demand for BBB+ credits. Prices for trusted nature-based projects are likely to remain firm or increase.
Compliance demand will continue to grow. Modeling suggests compliance use could exceed voluntary demand as early as 2027, driven by CORSIA Phase 1 and expanding domestic systems. By the mid-2030s, domestic compliance markets could become the largest source of demand.
Carbon removal credits will remain scarce in the short term. Actual retirements will lag commitments. However, investment and offtakes signal strong long-term growth. As methodologies mature and costs fall, removals will play a larger role in both voluntary and compliance settings.
The carbon credit market in 2025 did not collapse. It restructured.
For the market as a whole, the direction is clear. Volume alone no longer defines maturity. Quality, integrity, and policy alignment do. Buyers became more selective and prices began to reflect integrity. Policy moved closer to implementation. Offtake deals revealed long-term expectations.
The carbon credit market of 2026 and beyond will likely be smaller in volume than past projections, but higher in value, more regulated, and more closely tied to real climate outcomes.
- FURTHER READING: Top Carbon Credit Companies to Watch in 2026
The post The Carbon Credit Market in 2025 is A Turning Point: What Comes Next for 2026 and Beyond? appeared first on Carbon Credits.
Most businesses that decide to act on their net-zero targets reach the same point of friction. Buying carbon credits has meant tracking down brokers, sitting through sales calls, and requesting a quote just to learn a price, sometimes with limited proof of what you are buying.
The earnings calls that quietly reframed climate from sustainability question to operating risk.
Three earnings calls in the last 18 months tell the story without any help from a press release.
Hershey, May 2024: cocoa price exposure compresses margin, and the company attributes part of the cost shock to West African weather. Olam, July 2024: coffee climate exposure quantified in the annual report. JBS, January 2025: supply chain climate disclosures expanded materially in response to investor pressure and regulatory expectation. None of these companies issued the announcement as climate news. They issued it as financial news. The climate-linked supply chain risk did not arrive with a sustainability framing; it arrived as a P&L line.
You are probably reading this article because you suspect the same thing is happening to your business. This piece walks through what is showing up on which earnings calls, how procurement and finance leaders are quantifying the exposure, and what serious corporates are doing about it before the regulator asks.
Where climate risk has already appeared in earnings
The pattern is consistent across resource-intensive sectors. A weather event compresses supply, the price spikes, the cost flows through the income statement, and the analyst on the call asks whether the event is anomalous or structural. Increasingly, the honest answer is the second one.
Cocoa is the cleanest example. The 2023 to 2024 West African harvest fell sharply on the back of erratic rainfall and disease. Cocoa futures more than tripled. Companies with concentrated West African sourcing absorbed the cost; companies with diversified sourcing absorbed less. The exposure was not climate as ESG topic. It was climate as cost of goods.
Coffee follows the same pattern. Brazilian and Vietnamese harvests have moved on weather more sharply across the last several seasons. Roasters with long-tenor supplier relationships and origin diversification have managed the volatility; roasters with spot-market exposure have not. Wheat, sugar, palm oil, beef: the same dynamic in different commodities, a pattern the IPCC AR6 Working Group II report projects will intensify across agricultural systems through mid-century.
What this means: climate risk is no longer a footnote in the 10-K. It is a line item the CFO has to explain on the call.
The three commodity exposures that hit margin first
For most companies with material Scope 3 exposure, three exposures dominate the near-term P&L risk.
- Concentrated single-origin sourcing in a climate-vulnerable region. If your tier-one supply for any material commodity sits in one geography, you have a concentration risk that climate amplifies. Diversification across origins is the obvious hedge, but it takes years to build and requires relationships you cannot acquire by tender.
- Supplier financial fragility under climate stress. Smallholder farmers, who supply a large share of the global cocoa, coffee, and palm oil market, do not carry the balance sheets to absorb yield shocks. When yields collapse, they exit. When they exit, your supply base shrinks, and the surviving suppliers raise prices. The risk is structural, not cyclical.
- Logistics and storage exposure to extreme weather. Hurricane disruptions to Gulf shipping, drought-driven Panama Canal restrictions, flooding in European inland waterways: each of these has moved input costs in the last three years, a pattern documented in Munich Re’s natural catastrophe data. The exposure shows up as a one-quarter event in the financial press but accumulates over time on the cost line.
TCFD and ISSB disclosure changes
The disclosure architecture has now caught up with the risk. The Task Force on Climate-related Financial Disclosures, whose recommendations are now embedded in the ISSB’s IFRS S2 climate standard, requires companies to disclose climate-related risks across physical and transition categories, with quantification where possible.
For physical risk specifically (the climate-linked supply chain risk you are reading about), the disclosure must address both acute exposures (extreme weather events) and chronic exposures (gradual changes in temperature, precipitation, and growing seasons). The disclosure must address the time horizon over which the risk is material, the parts of the value chain exposed, and the financial impact under different scenarios.
The CSRD imposes similar requirements under European law, with double materiality (both financial and impact materiality) embedded in the assessment. The practical effect: your auditors and your investor relations team now need a defensible answer to the climate-linked supply chain risk question, and the answer needs to be quantified.
What procurement and finance can do now
Three actions matter near-term.
Map your exposure. Most companies do not have a clear view of which tier-one and tier-two suppliers sit in which climate-vulnerable geographies. Without the map, you cannot quantify the risk, and without the quantification, you cannot disclose it credibly. The map is the foundation, and World Resources Institute climate risk research provides useful public tooling to start.
Diversify and deepen, in that order. Diversification across origins reduces concentration risk, but the deeper move is to invest in the resilience of the suppliers you already have. Regenerative practices, agroforestry, soil health interventions: these reduce yield volatility under climate stress and protect your input cost trajectory.
Embed the climate spend inside procurement, not outside it. Treating climate risk as a sustainability cost line subordinates it to the ESG budget. Treating it as a procurement and resilience investment puts it in the budget that matters, which is the cost-of-goods budget that the CFO defends quarterly.
Nature-based supply chain investments are the asset class designed for exactly this purpose. They sit inside the value chain, they reduce climate-linked supply risk, they generate verifiable Scope 3 reductions, and they produce the documentation an auditor and a regulator can both test.
If you are quantifying climate-linked supply chain risk in advance of the next earnings cycle or the next disclosure period, the carbon and sustainability experts at Carbon Credit Capital can help you map your exposure and structure a Dual-Value Model response that addresses reduction, resilience, and disclosure-readiness in a single program. Schedule a consultation.
More and more small and medium-sized businesses are hearing the same question from their larger customers: What is your carbon footprint? That question now travels down entire supply chains, and it arrives next to tender requirements, certification criteria, and rising customer expectations.
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