Bank of America: Carbon offset market may need to grow fiftyfold to meet 2050 net-zero emissions goals

Catherine Clifford@IN/CATCLIFFORD

PUBLISHED MON, SEP 27 2021

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The carbon offset market may need to grow by as much as 50 times if companies are going to meet 2050 net-zero greenhouse gas emissions goals, a research note from Bank of America said.

Offsets issued in 2020 were equivalent to 210 million metric tons of carbon dioxide emissions, which is 0.4% of total global emissions, the note said.

Achieving net-zero energy emissions by 2050 will demand approximately 7.6 gigatons of carbon dioxide offsets or removal, it said.


Smoke rises from a coal-fired power plant in Obilic, near Pristina, Kosovo, November 18, 2019.
Ognen Teofilovski | Reuters

The carbon offset market may need to grow by as much as 50 times if companies are going to meet 2050 net-zero greenhouse gas emissions goals, according to a new research note from Bank of America Global Research.

Net-zero, also known as carbon neutrality, is achieved when an entity removes as much carbon dioxide and other greenhouse gases from the atmosphere as it releases into it, according to the World Resources Institute, a nonprofit global research organization. Removal methods include restoring forests — because trees remove carbon dioxide from the air during photosynthesis — or more technical means, such as direct carbon capture technology.

The market for carbon offsets is “still relatively small,” Bank of America said in its research note, which was released to clients Friday and more broadly Monday. Offsets issued in 2020 were equivalent to 210 million metric tons of carbon dioxide emissions either removed or avoided, which is equivalent to 0.4% of total global emissions, BofA said.

Governments around the world have set goals of becoming net zero between 2050 and 2060.

Achieving net-zero emissions by 2050 will demand approximately 7.6 gigatons of carbon dioxide offsets or removal, BofA said. That would be as much as a fiftyfold increase in the offset market, it said. The low end of the growth in demand for carbon offsets would be at least quadrupling, the bank said.

Nations are not likely to meet their 2050 goals, BofA said. “Current policies remain insufficient to adequately incentivize the changes necessary to reach these lofty goals, whether through carbon pricing or other means.”

Many companies are voluntarily setting their own emissions targets, and those stated goals will increase demand for carbon offsets, the note said.

Carbon offsets cost between $2 and $20 per metric ton of emissions removed, admittedly a broad range, and “offer a relatively cheap way to decarbonize,” BofA said.

There are four primary registries for carbon offsets: Verified Carbon Standard, or Verra; The Gold Standard, the American Carbon Registry and the Climate Action Reserve. The market started about 25 years ago with the American Carbon Registry, then called the Environmental Resources Trust, the BofA note said.

Early in the carbon offset markets, projects included chemical processing and industrial and manufacturing projects. Now forestry, land use and renewable energy projects are about 80% of carbon offset projects, the note said. This “may be due to growing interest in nature based solutions,” it said, and to falling prices of renewable energy, such as wind and solar