# carbon economy Market Research Report - Global

**Generated on:** 2026-04-05 14:07:32.504904  
**Industry:** carbon economy  
**Geography:** Global  
**Details:** elaboration of all supply and demand opportunities in carbon credits under cap and trade, separating verticals and industries - including agriculture. compliance with SDG is to be considered. Scopes (especially 3) can be focused on. who consumes the credits (aligned with net-zero objectives)? where we could close the loop in agriculture where carbon credits can be created and also used for internal offsetting? how can interface between supply and demand be formed? what are the volumes? what are the regulatory and legal considerations? how does that relate to regions? separate regions (countries) main focus on the top players when we talk about carbon dense crops. we need a strategy for providing the carbon credits to their consumers in the regions. what would be the strategies, who would be the partners, what would be the steps to involve the cooperatives, corporations, NGOs, and so on. be very elaborative, and reply like a well experienced McKinsey professional consultant who has marketing, sales, product development and sustainability backgrounds.

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# The Carbon Economy Playbook: Navigating Cap-and-Trade, Agricultural Insetting, and Net-Zero Infrastructure

## Executive Summary

* **THE FLIGHT TO QUALITY WIDENS THE PRICE GAP:** While the global voluntary market faces an oversupply of nearly 1 billion tons of unretired legacy credits driving average prices down to $4-$6/tCO2e, premium, directly-sampled soil carbon and engineered removals command $25-$50/tCO2e. Æ’ **Decision/Action:** Corporate buyers must abandon volume-based procurement of cheap avoidance credits and transition portfolios to high-durability, ICVCM Core Carbon Principle (CCP)-approved removals to mitigate reputational risk.
* **AGRICULTURAL INSETTING OUTPERFORMS TRADITIONAL OFFSETTING:** Scope 3 emissions in agrifood supply chains are facing strict SBTi scrutiny, making traditional offsetting ineligible for corporate targets. Models like the "Net, Inset, Offset" approach used by Regen Farmers Mutual allow companies to finance supplier transitions and claim the reductions directly. Æ’ **Decision/Action:** Agrifood corporations should pivot from buying external offsets to funding closed-loop cooperative insetting programs, securing Scope 3 reductions while co-benefiting their own supply chain resilience.
* **FARMER ROI REMAINS NEGATIVE WITHOUT UPFRONT FINANCING:** Economic modeling of a 36-month soil carbon pilot shows that at $20/tCO2e and a 60% revenue share, farmers face a negative NPV (losing $8-$16/ha/yr) due to $30/ha/yr MRV and implementation costs. Æ’ **Decision/Action:** Anchor buyers must restructure contracts to include upfront transition financing (e.g., $10-$20/ha/yr) and subsidize digital MRV costs, rather than relying solely on ex-post credit revenue shares.
* **COMPLIANCE AND VOLUNTARY MARKETS ARE CONVERGING:** Major cap-and-trade systems are embedding voluntary credits into compliance frameworks, such as California's WCI allowing 4-6% offset usage (with Direct Environmental Benefit mandates) and China's ETS allowing 5% CCER usage. Æ’ **Decision/Action:** Project developers must design agricultural and industrial projects to meet dual eligibility criteria (e.g., CARB protocols or CCER standards) to access the highly liquid, price-supported compliance demand pools.
* **GREENWASHING LITIGATION REDEFINES CORPORATE CLAIMS:** The EU Green Claims Directive and recent litigation (e.g., JBS's "Net Zero by 2040" lawsuit, Shell's ASA ruling) are effectively outlawing generic "carbon neutral" claims based on cheap offsets. Æ’ **Decision/Action:** Legal and marketing teams must shift external messaging from "carbon neutrality" to "Beyond Value Chain Mitigation (BVCM)" or "contribution claims," backed by transparent, third-party rated (e.g., BeZero, Sylvera) credit portfolios.
* **ARTICLE 6 INTRODUCES NEW SOVEREIGN RISKS:** The operationalization of Article 6.2 and 6.4 means international credits now require host-country Letters of Authorization (LoAs) and Corresponding Adjustments (CAs) to avoid double counting against Nationally Determined Contributions (NDCs). Æ’ **Decision/Action:** Buyers procuring credits from the Global South must mandate CA clauses in Emission Reduction Purchase Agreements (ERPAs) to ensure credits are legally recognized for international compliance (like CORSIA) or strict corporate claims.

## 1. Global Carbon Market Dynamics & The Cap-and-Trade Landscape

Compliance markets are tightening caps and expanding sector coverage, while the voluntary market undergoes a painful but necessary transition toward high-integrity removals.

### 1.1. Compliance Market Expansion: EU ETS, China, and WCI trajectories

| Scheme | Cap Trajectory & Sector Coverage | 2024 Price | Offset Usage Limits |
| :--- | :--- | :--- | :--- |
| **EU ETS** | Cap reduced by 62% by 2030 (vs 2005). Covers power, industry, aviation, and maritime (since 2024). ETS2 (2027) covers buildings and road transport. [1] [2] [3] | €64.74 (auction) / €65.23 (secondary) [1] | Use of offset credits is not allowed in Phase 4. [4] |
| **China National ETS** | Transitioning from intensity-based to absolute caps by 2027. Expanded to steel, cement, and aluminum in 2024. [5] [6] | CNY 95.96 (USD 13.33) [5] | Up to 5% of verified emissions using CCERs. [5] [7] |
| **California Cap-and-Trade** | Covers transport, buildings, industry, and power. [2] | ~$41.40 (Tier 1 Reserve) [8] | 4% (2021-2025), 6% (2026-2030). 50% must provide Direct Environmental Benefits (DEBS) to CA. [9] [10] [11] |
| **Korea ETS (K-ETS)** | Cap of 567.1 MtCO2e (2024). Covers power, industry, buildings, waste, transport, aviation, maritime. [12] | KRW 10,355 (USD 7.60) [12] | Domestic and international offset credits allowed with quantitative limits. [12] |

The expansion of compliance markets is driving significant demand, with carbon pricing mobilizing over $100 billion for public budgets in 2024 [13].

### 1.2. The Voluntary Carbon Market (VCM) Price Bifurcation

The voluntary carbon market is experiencing a significant price bifurcation. While the global pool of unretired credits reached almost 1 billion tons in 2024 [13], premium credits command much higher prices. For example, premium soil carbon credits from high-quality, directly sampled projects command $25-$50 per credit [14]. In contrast, the average asking price in 2024 was around $4-$6 per ton [15]. This reflects a flight to quality, where buyers are willing to pay a premium for credits with robust verification and permanence guarantees.

### 1.3. Convergence of Compliance and Voluntary Infrastructure

Compliance and voluntary markets are increasingly converging. For instance, Japan's GX-ETS allows companies to use carbon credits for 10% of compliance, integrating domestic (J-Credits) and international (JCM) credit systems [16]. Similarly, CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation) allows airlines to use eligible voluntary credits to meet their offsetting obligations [17]. This convergence creates structured demand for high-quality voluntary credits.

## 2. Agriculture's Strategic Role: Closing the Loop via Insetting

Agrifood companies must transition from buying external offsets to financing closed-loop, cooperative-led insetting programs to address Scope 3 emissions and ensure farmer profitability.

### 2.1. The "Net, Inset, Offset" Cooperative Model

Cooperatives play a crucial role in aggregating farmers and facilitating carbon projects. The Casino Food Co-op in Australia is working with 20 farmer members to baseline soil carbon levels, aiming to utilize the sequestered carbon to assist the red meat industry in becoming carbon neutral by 2030 [18]. Regen Farmers Mutual uses an "80/10/10" model, where 80c of every dollar earned goes to the farmer, 10c to the supporting farmer group, and 10c to RFM for transaction costs [18]. They encourage a "Net, Inset, Offset" approach, where farmers first utilize credits to reach net zero, then explore insetting within their supply chain, before selling offsets [18].

### 2.2. Overcoming the Negative Farmer ROI Trap

| Scenario | Sequestration Rate (tCO2e/ha/yr) | Gross Credit Revenue ($/ha/yr) | Farmer Cashflow ($/ha/yr) | Buyer Cost per tCO2e ($) |
| :--- | :--- | :--- | :--- | :--- |
| Low | 0.3 | $6.00 | -$16.40 | $45.33 |
| Medium | 0.6 | $12.00 | -$12.80 | $28.67 |
| High | 1.0 | $20.00 | -$8.00 | $22.00 |

*Assumptions: $20/tCO2e credit price, 60% farmer revenue share, $30/ha/yr implementation/MRV cost, $10/ha/yr upfront buyer incentive.*

The economic modeling demonstrates that farmers face a negative ROI across all scenarios due to high implementation and MRV costs. Anchor buyers must provide significant upfront financing to make these projects viable for farmers.

### 2.3. Digital MRV (dMRV) and the Tech Stack

Robust MRV is essential for credible agricultural carbon credits. Leading protocols combine direct soil sampling, remote sensing, and biogeochemical modeling [19]. For example, Indigo Ag uses a hybrid measure and model approach, connecting to farm machinery and inferring management events from satellite data [20]. Direct soil sampling is the gold standard but is expensive, costing $15-$30 per acre [14]. Modeling approaches are more cost-effective but have uncertainty ranges of ±20-40% [14].

### 2.4. SDG Co-Benefits and Carbon-Dense Crop Hotspots

Agricultural carbon projects offer significant SDG co-benefits. For instance, the AgriCapture Soil Enrichment project in the US Mid-South (rice methane and regenerative agriculture) aligns with SDG 2 (Zero Hunger), SDG 13 (Climate Action), SDG 6 (Clean Water and Sanitation), and SDG 15 (Life on Land) [21]. In Brazil, agroforestry farmers reported that trees cooled the air, reduced storm damage, and improved food security [22].

## 3. Demand-Side Dynamics & Corporate Net-Zero Strategies

Driven by SBTi standards, corporate demand is shifting from generic offsetting to strict Scope 3 supply chain interventions and Beyond Value Chain Mitigation (BVCM).

### 3.1. SBTi's Net-Zero Standard and the Scope 3 Imperative

The SBTi Corporate Net-Zero Standard requires companies to set near-term targets to roughly halve emissions before 2030 and long-term targets to cut emissions by more than 90% before 2050 [23]. Carbon credits cannot be counted as emission reductions toward these targets [24]. They may only be used to neutralize residual emissions (the final 10%) or to finance additional climate mitigation beyond their science-based targets (BVCM) [24] [23].

### 3.2. Buyer Segmentation: Tech Giants vs. Heavy Industry

| Buyer Type | Procurement Strategy | Example |
| :--- | :--- | :--- |
| Tech Giants | Focus on high-durability removals (DAC, BECCS, Biochar) via forward contracts/ERPAs. | Microsoft signed agreements to remove 45 million metric tonnes of CO2 in FY2025 [25]. |
| Heavy Industry | Focus on compliance obligations and supply chain insetting. | Shell retired 20 million tonnes of carbon offsets in 2023 [26]. |

Tech companies are driving demand for permanent removals, while heavy industry focuses on compliance and insetting.

### 3.3. The Rise of Internal Carbon Pricing

Companies are increasingly using internal carbon pricing to guide investment decisions and fund decarbonization efforts. For example, Microsoft and SwissRe use funds from internal carbon fees to invest in heat pumps, emissions accounting software, and carbon removals [27].

## 4. Market Infrastructure: The Trust Ecosystem

A fragmented market is being consolidated by meta-registries, independent rating agencies, and digital exchanges that prioritize transparency and interoperability.

### 4.1. Registries and the ICVCM Core Carbon Principles (CCPs)

| Registry | CCP-Approved Methodologies | Compliance Eligibility |
| :--- | :--- | :--- |
| Verra (VCS) | Landfill Gas, ODS, Fugitive Emissions [28] | CORSIA [17] |
| Gold Standard | Landfill Gas, ODS, Fugitive Emissions [28] | CORSIA [29] |
| ACR | Landfill Gas, ODS, Fugitive Emissions [28] | California Cap-and-Trade, CORSIA [30] |
| CAR | Landfill Gas, ODS, Fugitive Emissions [28] | California Cap-and-Trade [31] |

The ICVCM's CCPs are becoming a critical benchmark for credit quality, with approved methodologies commanding price premiums.

### 4.2. Exchanges and Liquidity Hubs

Exchanges provide crucial infrastructure for price discovery and liquidity. ICE operates the largest environmental derivatives market, trading a record 20.9 million contracts in 2025 [32]. Xpansiv's CBL is the largest spot exchange for ESG commodities, hosting around 90% of all voluntary carbon credit transactions worldwide [33]. AirCarbon Exchange (ACX) is a digital exchange that has transacted over 21 MtCO2e [34].

### 4.3. The Critical Role of Independent Ratings Agencies

Independent rating agencies like Sylvera, BeZero, and Calyx Global assess the likelihood that a carbon credit achieves its stated emission reductions or removals [35] [36]. These ratings provide transparency and help buyers differentiate between high and low-quality credits, influencing pricing and procurement decisions.

### 4.4. Article 6 Infrastructure and Sovereign Accounting

Article 6 of the Paris Agreement establishes rules for international carbon markets. Article 6.2 allows countries to trade Internationally Transferred Mitigation Outcomes (ITMOs), requiring Letters of Authorization (LoAs) and Corresponding Adjustments (CAs) to prevent double counting [37] [28]. Article 6.4 establishes a UN-supervised crediting mechanism (PACM) [28].

## 5. Legal, Regulatory, and Reputational Risks

Aggressive regulatory crackdowns on greenwashing require companies to fundamentally restructure their environmental claims and supply chain contracts.

### 5.1. The EU Green Claims Directive and Marketing Law

The EU's Empowering Consumers for the Green Transition (ECGT) Directive prohibits vague environmental claims (e.g., "eco-friendly", "climate neutral") unless supported by recognized certification or robust evidence [38]. It also prohibits claiming that a product has a neutral or positive environmental impact based on greenhouse gas offsetting [38].

### 5.2. Precedent-Setting Climate Litigation

Recent litigation highlights the risks of misleading claims. In France, a court ruled that TotalEnergies' "carbon neutrality by 2050" campaign was misleading because its continued investment in fossil fuels contradicted that trajectory [39]. In the UK, the ASA ruled against Shell for failing to include balancing information about its significant ongoing contribution to emissions in ads promoting green initiatives [40].

### 5.3. Contractual Risk Allocation in ERPAs

Carbon contracts must carefully allocate risks, including reversal risks and market conditions. Some contracts allow buyers to terminate based on "market conditions" in their "sole discretion," leaving farmers vulnerable [41]. Contracts often require farmers to forfeit future payments or be liable for losses if they default or cause a reversal of sequestered carbon [41].

## 6. Strategic Playbook & Implementation Roadmap

A phased, 36-month blueprint for launching a compliant, closed-loop agricultural carbon insetting program.

### 6.1. Partner Selection Matrix

| Partner Type | Key Capabilities | Selection Criteria |
| :--- | :--- | :--- |
| Project Developer/Aggregator | Farmer engagement, methodology expertise, aggregation. | Track record, transparent revenue sharing, local presence. |
| dMRV Provider | Remote sensing, AI modeling, soil sampling integration. | Accuracy, cost-effectiveness, interoperability with registries. |
| Registry/Standard | Methodology approval, credit issuance, tracking. | ICVCM CCP alignment, compliance market eligibility. |

### 6.2. 36-Month Pilot Milestones and Term Sheet Structuring

* **Months 1-6 (Origination & Baseline):** Identify partner cooperatives, establish baselines using dMRV, and execute contracts with upfront transition financing.
* **Months 7-12 (Implementation):** Farmers implement practices (e.g., cover crops, reduced tillage). Ongoing monitoring via remote sensing.
* **Months 13-24 (Verification & Issuance):** Conduct ex-post verification audits. Issue credits on a recognized registry.
* **Months 25-36 (Retirement & Claims):** Anchor buyer retires credits internally against Scope 3 targets (insetting) or uses them for BVCM claims, ensuring compliance with SBTi and green claims regulations.

## References

1. *EU Emissions Trading System (EU ETS) | International Carbon Action Partnership*. https://icapcarbonaction.com/en/ets/eu-emissions-trading-system-eu-ets
2. *EU ETS emissions cap - Climate Action - European Commission*. https://climate.ec.europa.eu/eu-action/carbon-markets/eu-emissions-trading-system-eu-ets/eu-ets-emissions-cap_en
3. *EU Emissions Trading System (ETS2) and Social Climate Fund: Mechanisms, challenges and conditions for a fair decarbonisation in buildings | Publications | European Environment Agency (EEA)*. https://www.eea.europa.eu/en/analysis/publications/emissions-reductions-from-buildings-in-europe-how-the-ets2-will-help-this-sector-meet-its-climate-targets
4. *Compare ETS | International Carbon Action Partnership*. https://icapcarbonaction.com/en/compare/43
5. *China National ETS | International Carbon Action Partnership*. https://icapcarbonaction.com/en/ets/china-national-ets
6. *China issues landmark guidelines to transition to absolute cap and expand scope in National ETS | International Carbon Action Partnership*. https://icapcarbonaction.com/en/news/china-issues-landmark-guidelines-transition-absolute-cap-and-expand-scope-national-ets
7. *China releases 2024–2025 allowance allocation plan for industrial sectors in National ETS | International Carbon Action Partnership*. https://icapcarbonaction.com/en/news/china-releases-2024-2025-allowance-allocation-plan-industrial-sectors-national-ets
8. *Cap-and-Trade Regulation (Unofficial Electronic Version)*. https://ww2.arb.ca.gov/sites/default/files/2021-02/ct_reg_unofficial.pdf
9. *USA - California Cap-and-Trade Program | International Carbon Action Partnership*. https://icapcarbonaction.com/en/ets/usa-california-cap-and-trade-program
10. *Compliance Offset Program | California Air Resources Board*. https://ww2.arb.ca.gov/our-work/programs/compliance-offset-program/about
11. * Complying with California’s Cap-and-Trade Program: CCOs *. https://stxgroup.com/strive/latest-news/complying-california-ccos/
12. *Korea Emissions Trading System (K-ETS) | International Carbon Action Partnership*. https://icapcarbonaction.com/en/ets/korea-emissions-trading-system-k-ets
13. *State and Trends of Carbon Pricing 2025 *. https://www.worldbank.org/en/publication/state-and-trends-of-carbon-pricing
14. *Soil Carbon Credits: Complete 2025 Guide For Farmers & Buyers*. https://solartechonline.com/blog/soil-carbon-credits-guide
15. *Live Carbon Prices Today*. https://carboncredits.com/carbon-prices-today/
16. *2026 Could Redefine Voluntary and Compliance Carbon ...*. https://carboncredits.com/2026-could-redefine-voluntary-and-compliance-carbon-market-convergence-with-japan-leading-the-way/
17. *The VCS Under CORSIA*. https://verra.org/programs/verified-carbon-standard/vcs-under-corsia/
18. *4. Case studies - Farming Together*. https://farmingtogether.com.au/4-case-studies/
19. *The Corporate Buyer's Guide to Regenerative Agriculture Carbon Credits*. https://www.senken.io/academy/regenerative-agriculture
20. *Solutions and insights for agricultural monitoring, reporting, and verification (MRV) from three consecutive issuances of soil carbon credits - ScienceDirect*. https://www.sciencedirect.com/science/article/pii/S0301479724022709
21. *Corporate demand is driving a boom in farmland carbon credits*. https://trellis.net/article/indigo-agreena-holganix-soil-carbon-credits/
22. *Brazil’s agroforestry farmers report many benefits, but challenges remain*. https://news.mongabay.com/2022/03/brazils-agroforestry-farmers-report-many-benefits-but-challenges-remain/
23. *
	The Corporate Net-Zero Standard - Science Based Targets Initiative
*. https://sciencebasedtargets.org/net-zero
24. *SBTi Corporate Net-Zero Standard*. https://files.sciencebasedtargets.org/production/files/Net-Zero-Standard.pdf
25. *How Microsoft is working to scale carbon dioxide removal*. https://news.microsoft.com/source/features/sustainability/from-farms-to-oceans-how-microsoft-is-working-to-scale-carbon-dioxide-removal/
26. *Shell Retired 20 Million Carbon Offsets in 2023, Weakens ...*. https://carboncredits.com/shell-retired-20-million-carbon-offsets-in-2023-weakens-2030-climate-goal/
27. *Microsoft and SwissRe use some of highest internal carbon fees*. https://trellis.net/article/microsoft-swissre-internal-carbon-price/
28. *Article 6 Paris Agreement Explained for Corporate Carbon Strategy*. https://www.senken.io/academy/article-6
29. *Gold Standard approved to supply credits for CORSIA Second Phase (2027–2029)   | GS*. https://www.goldstandard.org/news/gold-standard-approved-to-supply-credits-for-corsia-2nd-phase
30. *ACR Approved by ICAO Council for 2024-2026 Compliance Period - ACR*. https://acrcarbon.org/news/acr-approved-by-icao-council-for-2024-2026-compliance-period/
31. *Compliance Offset Protocols | California Air Resources Board*. https://ww2.arb.ca.gov/our-work/programs/compliance-offset-program/compliance-offset-protocols
32. *
	Intercontinental Exchange - ICE’s Environmental Market Trading Reaches Record Highs in 2025
*. https://ir.theice.com/press/news-details/2026/ICEs-Environmental-Market-Trading-Reaches-Record-Highs-in-2025/default.aspx
33. *The Top 4 Carbon Exchanges for 2024*. https://carboncredits.com/the-top-4-carbon-exchanges-for-2023/
34. *The Top Carbon Credit Exchanges Driving Climate ...*. https://carboncredits.com/the-top-carbon-credit-exchanges-driving-climate-markets-in-2026-and-beyond/
35. *Fetched web page*. https://sylvera.com/
36. *The Carbon Ratings Agency | BeZero Carbon*. https://bezerocarbon.com/
37. *Article 6 Authorizations & Corresponding Adjustments: 10 FAQs*. https://www.sylvera.com/blog/article-6-authorizations-corresponding-adjustments-faq
38. *Green Claims: Regulatory and Litigation Focus Intensifies in the EU and UK | Steptoe*. https://www.steptoe.com/en/news-publications/green-claims-regulatory-and-litigation-focus-intensifies-in-the-eu-and-uk.html
39. *Climate Litigation Updates (November 17, 2025) | Sabin Center for Climate Change Law*. https://climate.law.columbia.edu/news/climate-litigation-updates-november-17-2025
40. *ASA Ruling on Shell UK Ltd*. https://www.asa.org.uk/rulings/shell-uk-ltd-g24-1248246-shell-uk-ltd.html
41. *Fetched web page*. http://www.flaginc.org/wp-content/uploads/2025/03/Farmers-Guide-to-Carbon-Markets-February-2025.pdf