Wood Mackenzie forecasts trillion-dollar boom in carbon offsets and CCUS markets by 2050

Global carbon markets are poised for transformative growth. Two key strategic areas have emerged as critical components of global decarbonisation efforts: Carbon Capture, Utilisation and Storage (CCUS) and carbon offsets. Wood Mackenzie’s two long-term outlook reports forecast substantial market size growth, surpassing trillions of dollars in value by mid-century.

Wood Mackenzie's Carbon Markets and CCUS research teams predict that rising demand, policy evolution, strategic corporate deals, and technological advancements will fuel steep growth trajectories for both sectors.

"CCUS will likely become crucial for abating process emissions in hard-to-abate industries", said Hetal Gandhi, Lead – Global forecasts and APAC research at Wood Mackenzie. "Our analysis reveals global capture capacity expanding 28-fold to 2,061 Mtpa by 2050, with similar growth expected in storage. CCUS has established its space in key stakeholders' minds, leading to US$1.2 trillion of investment in point-source emissions alone."

Peter Albin, senior research analyst of Carbon Markets at Wood Mackenzie, added: "The carbon offsets market will mature, with improved standards driving demand for flexible mitigation options. We project the carbon offset market will exceed US$150 billion. The synergy between carbon offsets and CCUS will play an increasingly sizeable role in climate strategies."

Key findings from the reports include:

• Decarbonisation demand outpaces supply growth: Corporate sustainability pledges, tightening regulations and hard-to-abate sector needs will drive unprecedented demand for emissions reduction solutions. Energy producers and heavy industry lead this charge, exploring cutting-edge technologies to slash carbon footprints. As these sectors balance operational needs with environmental responsibilities, potential supply bottlenecks loom. This shift reshapes industry landscapes, with innovative strategies emerging to achieve deep emissions cuts.

"Our analysis reveals diverse CCUS adoption drivers and unique opportunities across various sectors", notes Gandhi. "Blue hydrogen leads growth until 2035, outcompeting green alternatives on cost. Energy security boosts upstream adoption, with pre-combustion's affordability supporting global gas demand. Young coal power and steel plants drive uptake in Asia Pacific despite high costs. Cement and refining invest in CCUS due to high process emissions and limited alternatives."

• Net zero targets drive dual decarbonisation strategies: Companies increasingly integrate carbon offsets and CCUS technologies to meet ambitious climate goals. This approach addresses carbon footprints comprehensively, with CCUS advancements scaling up future efforts. Carbon offsets provide flexibility and immediate practicality, particularly for hard-to-abate or unavoidable emissions.

"Long-term demand for carbon removal is essential for meeting net zero targets, but avoidance and reduction offsets will play a crucial role", notes Albin. "These offsets will compensate for scope 3 emissions as companies grapple with supply chain decarbonisation complexities."

• A dynamic ecosystem benefits both markets: Government policies, particularly incentives and compliance carbon pricing regimes, are catalysing synergy between CCUS and carbon offset markets. Emphasis on additionality, permanence and verifiability raises standards across sectors. Growing standardisation needs to bolster trust in authentic emission mitigation strategies. This evolution creates a cohesive framework for climate action, spanning technological and nature-based solutions.

"The carbon offset market will grow remarkably, with volumes expanding sixfold by 2050", said Michelle Uriarte-Ruiz, senior research analyst at Wood Mackenzie. "Carbon removal will make up over 40% of offsets by mid-century, signalling a pivotal shift in climate strategies. This blend of solutions forges a more resilient carbon value chain, potentially accelerating global decarbonisation efforts."

• Prices and investment poised for significant growth: The average carbon offset price will increase more than fivefold by 2050. CCUS investments will reach at least US$1.2 trillion, fuelled by point-source capacities and carbon removal value chain additions. These trends highlight rapid expansion and increasing interconnectedness of both markets. They reshape corporate sustainability strategies, offering businesses a comprehensive toolkit for addressing carbon footprints.

"Sustainable deep decarbonisation technologies rely on robust carbon markets to gain widespread adoption.", adds Albin. "Rising carbon offset prices will boost CCUS sector viability, reducing reliance on government support, driving rapid adoption post-2035."

"The carbon offset and CCUS markets are on the cusp of a transformative era", concludes Mhairidh Evans, Vice President, Global Head of CCUS research at Wood Mackenzie. "This growth, driven by net zero ambitions, offers immense opportunities for early movers. Success hinges on navigating policy uncertainties and infrastructure challenges. As these markets mature, they will become cornerstone elements of global climate strategies, reshaping the energy transition landscape."

Wood Mackenzie cautions that realising the full potential of these markets faces near-term hurdles. These include enhancing offset quality, defining clear use cases, securing government support, and scaling carbon removal technologies. Both sectors require rapid policy evolution. CCUS, in particular, will need continued government financial backing for at least the next decade. These challenges underscore the complexity of the evolving carbon management landscape and its implications for decarbonisation efforts.