What's Moving in 2025 in the Carbon Markets: 5 Key Takeaways for 2025 Strategies

At the end of Q1 2025, we hosted a session featuring a range of expert speakers who shared valuable perspectives on the current carbon market - and the implications for businesses and stakeholders. 

This write-up captures the essence of the discussions and the key takeaways for organizations looking to plan ahead and navigate the changing market dynamics.

Speakers:

Posie Holmes, Director of Carbon Markets, GE Aerospace

Jodi Manning, CEO, Cool Effect

Charlie Renzoni, VP Carbon Markets, Deep Sky

Annalise Downey, Head of Climate Consulting, Sylvera

Aaron Tam, Product Director - Market Data, Sylvera

Sean Barr, VP Sales - Americas, Sylvera

What does the data say?

An outline of some key carbon market trends data reflected on the key learnings following our recent State of Carbon Credits 2024 report.

We compared this to the key trends from our Q1 2025 Carbon Data Snapshot, to see any key moves in the early part of this year.

Supply & demand

As of Q1 2025, the pace of retirements of carbon credits are now outpacing credit issuances for the first time in recent history. 

This shift signifies a robust demand for carbon credits, which is nearly matching issuance levels that have fallen since 2021. 2025 is expected to see a continuation of this trend.

This raises pivotal questions for stakeholders: How can businesses prepare for a possible scarcity of quality credits, and what strategies will be necessary to secure high quality projects in light of tightness in supply? We unpick this more in our Q1 2024 Data Snapshot insights.

Project types

Renewables and REDD+ account for over 60% of volumes retired over the past seven years. Market responsiveness to various economic conditions and project integrity will dictate demand levels. Diversification across durable CDR project types could be pivotal in harnessing new opportunities for credit issuance.

Project quality & price

There is  an upward trajectory in average credit quality, with ratings shifting from a B-BB in 2020 to above BB by 2024. This evolution is reflected in buyer behavior; organizations are growing increasingly attuned to integrity risks, leading them to seek out projects rated by reputable agencies like Sylvera.

As the market matures, the relationship between project quality and pricing becomes pronounced. There is a price-quality correlation with a ~5 premium for each increased letter rating when looking at ARR projects. There’s still variability within a rating range, and premiums are driven by strong co-benefits.

This heightened awareness calls for transparency in pricing and project quality. It’s vital for organizations to understand how the quality of a credit impacts its price, with many prepared to pay a premium for credits that deliver co-benefits beyond mere carbon offsetting.
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Alongside the key data, some emerging trends were brought to light by our speakers:

Corporate Budgeting and Carbon Markets

Corporate budgets are typically set on a 12-month cycle, with strategies determined the year prior. This cycle includes allocations for decarbonization efforts, which are increasingly leading organizations to explore the carbon markets for compensating their remaining emissions. 

In terms of carbon credit pricing, buyers typically define a target price per tonne at the portfolio level and build supply across project types and price points to meet that per tonne target. 

However, buyers are concerned with the risk associated with carbon credits so due diligence processes are long and intensive. As companies invest time and resources to diligence project integrity and delivery risk, this can increase the cost of a carbon credit program. 

This often complex budgetary process sometimes requires buyers to balance immediate carbon procurement with long-term sustainable investments. And buyers often use leftover budget when they can to lock in future offtakes.

Where is demand heading?

In this context, CDR projects are gaining traction among buyers, often investing small to start out, or considering future offtake.

But there's also escalating demands for higher quality nature-based solutions. Companies are increasingly requesting options related to soil carbon, methane management, and other advanced removal technologies. 

This shift towards high-quality, impactful projects reflects a growing commitment by organizations to incorporate both environmental integrity and reputational value within their portfolios.

Importantly, the need to educate buyers about these options cannot be overstated. As companies develop strategies a year in advance, understanding and integrating this information into budget discussions is essential to influence future allocations.

The challenge of due diligence

Due diligence remains a heavy burden for corporate buyers. With documentation often hard to find and assess, the transparency of project allocations becomes essential to understanding where investments will be directed. 

Buyers need clarity on the financials behind each project, including how much of the investment goes directly to the project versus intermediaries.

There’s a notable trend here in the market: moving from spot buys to multi-year commitments and pre-issuance investment. This allows companies to lock in agreements with projects for several years, securing both price stability and alignment with their long-term sustainability goals.

By investing in reliable tools and platforms to streamline these processes, both buyers and projects can benefit, through time savings and reducing risk.

What makes a carbon credit ‘expensive’?

While some observers argue that the current prices for Direct Air Capture (DAC) credits are too high, industry experts focus on delivering projects that fulfill their promises and maintain reputational credibility.

For retirees who place a high value on long-term, durable removals, there’s an opportunity now to proactively shape how those cost structures fit into their portfolios. Of course this needs to be weighed against the potential that prices could come down as technology progresses, or go up as supply-demand curves become more restrictive.

Innovative technologies play a crucial role in facilitating this transition to effective carbon removal solutions. Buyers are increasingly expected to consider not only the potential impact of a project but also associated risks, including delivery reliability and operational stability. 

It’s essential for companies to develop a credible business case that encompasses these factors, ensuring long-term sustainability in their procurement strategies.

Industry-Specific Challenges 

In sectors like aviation, decarbonization necessitates a multi-faceted approach. The CORSIA regulation, which mandates the retirement of eligible carbon credits, adds an additional layer of complexity with its requirements set to escalate from 2028 onward.

Although CORSIA-eligible options are currently limited, this is soon to change. And understanding the diverse pool of eligible projects will be crucial as more options enter the market. However, significant differences in quality and integrity mean that thorough project due diligence remains essential for making informed purchasing decisions.

Companies must ask critical questions about each project: What benefits do they provide? What risks are involved? How do they align with corporate strategies? Easily accessing information to compare CORSIA-eligible credits can help facilitate better buyer decisions and ensure that organizational goals are met.

Key Takeaways for 2025 Strategies

In light of the shifting landscape, we provided key strategic insights for businesses aiming to position themselves effectively in the carbon market as it evolves:

1. Bring everyone in with market data.

Use market data to bring people into the tent and clearly show the “why” behind portfolio decisions and project procurement. With Sylvera, you can guide your carbon strategy using real-time retirement trends, pricing intelligence, and supply signals. 

Show non-carbon stakeholders what leading companies and peers are doing, how prices vary across regions and project types, and where supply is tightening. The market doesn’t have to feel fragmented anymore.

2. Lead with your principles, align to external frameworks. 

Start with a clear definition of the impact you want to achieve through carbon credits. Principles endure beyond annual procurement cycles. Aligning with frameworks like the ICVCM and VCMI helps structure your approach and derisk as new standards and regulations emerge.

Anchoring your approach in these principles not only supports investment decisions, but also signals credibility and intention to the market.

3. Start small and scale from a solid foundation 

The companies making bold moves in the carbon market today began with modest investments and multiple diligence cycles across project types and regions. Over time, they’ve built the internal capabilities to support rigorous due diligence and confident decision making.

A key part of scaling is learning to move faster without compromising quality. For example, we’re working with one company to cut their due diligence timeline from 12 months to just 3.

One of the most overlooked risks of delayed action is the time it takes to build those capabilities. 2030 isn’t the starting line—it’s the end of the first phase. By then, your organization should already know what internal processes are needed, and which external partners fit into that system.

4. Manage expectations using external providers. 

As the market landscape evolves, companies may find that they require additional expertise to navigate complexities effectively. Sylvera's insights can guide organizations in understanding how to work with external providers, ensuring they can scale operations without compromising on quality or accountability.

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Getting Ready for Change

Successful carbon market programs break down silos between sustainability, procurement, finance, and compliance teams, fostering collaboration to tackle the challenges present in this complex landscape.

Companies will need to plan strategically for offsets while balancing immediate and long-term expectations. And, as new buyers enter the market, there is a clear need for education on the complexities of carbon credits. Many of these newcomers prioritize understanding the market dynamics, eager to engage the C-suite in decision-making processes. 

Now is the time for companies to act, leverage new opportunities, and ensure they are well-equipped to meet the challenges that lie ahead. Sustainable carbon procurement strategies must be at the forefront of corporate agendas in the drive for transparency and meaningful carbon reductions.

To support this, the Sylvera platform provides market-leading insights around pricing and supply, as well as the leading tools to support due diligence and pre-issuance investment.

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Catch up on the full conversation

You can watch the recording of the ‘What’s Moving in 2025?’ here.