Carbon credit demand plateaued in 2025 as buyers sorted by quality, compliance and durability

Rather than pursuing scale, buyers increasingly prioritized quality, compliance eligibility, durability and reputational survivability, reshaping demand across registries, project types and deal structures.

Retirements across Verra, Gold Standard, ACR, Climate Action Reserve (CAR), ART, Puro and Cercarbono totaled 169 million tonnes of CO2 equivalent (tCO2e) in 2025, slightly down from 174.5 million tCO2e a year earlier but broadly in line with the just under 170 million tCO2e retired annually across 2021-2023.

This shift was reflected at the registry level. Verra’s share of retirements fell below 60%, its lowest level since at least 2015, down from a peak of around 75% in 2021. The move reflected diversification away from reliance on a single registry rather than an exit from the voluntary market.

That diversification played out unevenly. Gold Standard recorded a record 21.64% share of retirements, marginally above its previous high in 2016. A sharp rise in retirements against domestic country taxes pushed Cercarbono’s share above 7%, highlighting the growing role of compliance-adjacent demand.

Retirements on ACR rose slightly to around 5.75% – below the 6.7% peak seen in 2023. The share of retirements on CAR increased to 5.55% – up from just over 2% in 2021 but still well below highs of over 15% seen in 2015.

On the issuance side, a similar pattern emerged. Verra-issued credits accounted for just 35% of issuance in 2025, down sharply from a peak of close to 80% in 2021. Delays in finalizing updated methodologies, persistently low prices and unresolved integrity concerns across certain project types constrained new supply, accelerating fragmentation across registries.

Gold Standard-issued credits accounted for over 27% of issuance, while ACR-issued credits totaled 17% of the market.

Shell remains biggest user as buyer strategies diverge

Shell remained the largest retirer of credits in 2025, using 9.75 million tCO2e, down from more than 14 million tCO2e in 2024. The company retired credits from 57 projects, with around 52% coming from REDD+ projects and 15% from cookstoves.

Meanwhile, Eni emerged as the second-largest buyer, with retirements reaching 6.44 million tCO2e, up by more than 80% year on year. Unlike Shell, Eni’s buying was highly concentrated, drawing credits from just eight projects. The bulk came from REDD+, including 2.85 million tCO2e of vintage 2021 credits from Mai N’Dombe (VCS 934), accounting for more than 98% of issued credits from that project-vintage pair.

The concentration of retirements among the top 10 companies eased in 2025. These buyers accounted for 27.36 million tCO2e of retirements, down from 31.75 million tCO2e in 2024, signaling a broader, though still selective, buyer base.

Compliance demand provided a stabilizing floor

Demand into compliance programs strengthened in 2025, providing what market participants described as “sticky demand” for eligible carbon credits.

Demand is expected to increase further in coming years, driven by higher tax levels, the potential for greater credit usage and the continued expansion of these programs.

Carbon credit retirements against the Colombia, Chile and South Africa carbon taxes rose to more than 16.2 million tCO2e in 2025, up from just 9 million tCO2e a year earlier.

In South Africa, companies were able to use eligible credits to cover up to 10% of combustion emissions and 5% of process and fugitive emissions in 2025. These thresholds will rise by a further 5% from 2026.

Ratchet mechanisms across carbon taxes, including Chile’s planned increase from $5 to $35 per tCO2e by 2030, further underpinned longer-term compliance-linked demand.

CORSIA and cookstoves: defensive repositioning, not expansion

Movement was also seen in other compliance markets, with new supply entering the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). Two cookstove projects received Phase 1 eligibility tags late in the year, adding to credits from the Guyana ART TREES (ART 102) project.

Total eligible supply remained limited at just over 17.5 million tCO2e, though further volumes are expected in 2026 through host-country authorizations or insurance-based pathways.

Increased and diversified supply weighed on prices in late 2025. CORSIA spot prices fell from a high of $23.20 per tCO2e in October to $21.10 by year end, with further declines seen in January.

Cookstove developers increasingly targeted either CORSIA eligibility or Core Carbon Principle (CCP) alignment to secure higher prices, as values for legacy cookstove credits fell below $3-4 per tCO2e following integrity concerns.

Developers able to target CORSIA sold eligible credits at prevailing spot prices or pursued conditional offtakes for delivery upon tagging, with some targeting $14-19 per tCO2e in the second half of the year. Other developers, who did not expect to secure host-country approvals or letters of authorization, instead focused on CCP alignment.

More stringent non-renewable biomass thresholds reduced issuance volumes and increased per-credit costs but enabled the first CCP-aligned cookstove credits to trade at around $15-18 per tCO2e in 2025, well above legacy prices.

ARR: weak spot activity, surging long-term offtakes

Afforestation, Reforestation and Revegetation (ARR) retirements fell to 5.52 million tCO2e in 2025, the lowest level since 2020, as buyers moved upstream to secure supply directly from developers.

Despite weaker spot activity, demand for future delivery surged. More than 31 million tCO2e of ARR multi-year offtake agreements were signed in 2025, many extending through 2050. Microsoft accounted for more than 95% of this volume.

As buyers moved upstream, scrutiny of project quality intensified. Pricing became increasingly correlated with third-party ratings.

Fastmarkets assessed credits rated BBB or higher by BeZero at a six-times premium to those rated C. The effect was most visible as unrated projects received formal assessments.

Credits from VCS 2512 Vichada fell below $12 per tCO2e after being rated “C”, compared with prior offers of $15-16. By contrast, trades for A-rated projects were reported at up to $45 per tCO2e.

This quality preference cut across project types. Demand for Katingan (VCS 1477) highlighted the same dynamic after the project was upgraded to an AA rating in February. Prices for its vintage 2020 credits more than doubled to $10-12 per tCO2e by year end.

REDD+ in 2025: a smaller, sharper market

Elsewhere in nature markets, buyer caution was most evident in REDD+. REDD+ did not recover in 2025, but it did not unravel either. Activity narrowed further, with demand concentrating around a small number of projects while liquidity elsewhere remained thin.

REDD+ demand remained dominated by integrity risk and governance action. Buyers were selective, often avoiding exposure that could not withstand scrutiny. Trading stayed subdued even during periods of elevated retirements.

Total REDD+ retirements fell to 35.07 million tCO2e from 45.59 million tCO2e a year earlier. More than 14 million tCO2e were retired in the first quarter before activity slowed materially. Late-year activity linked to book-closing faded quickly.

Much of the year’s activity reflected portfolio clean-up and legacy exposure drawdown rather than new buying.

Governance scrutiny intensified as Verra canceled more than 15 million credits at Kariba (VCS 902) and suspended issuances at Ecomapuá (VCS 1094). These actions largely confirmed risks already assumed in pricing and contract selection.

Buying became increasingly project-specific. Katingan anchored the market with 6.63 million tCO2e retired. A small group of other projects continued to attract interest, while elsewhere wide bid-offer gaps and distressed exits underscored weak price discovery.

Methodology reform progressed, but with limited near-term effect on demand. Delays under VM0048 and the gradual rollout of final baselines constrained new supply aligned with CCPs.

By year end, REDD+ demand had become conditional, defined by concentration, thin liquidity and persistent price bifurcation.

IFM: pricing clarified as buyers rotated toward removals

IFM followed a different trajectory. With fewer high-profile methodology disputes, market behavior was shaped primarily by supply, credit type and pricing dynamics.

Liquidity remained limited, but pricing clarified. Avoidance credits faced softening demand, while removals retained a premium. This led to developers pushing for higher prices for their removals credits to offset weaking avoidance pricing. ACR retirements reached 2.97 million tCO2e, broadly flat year on year.

Avoidance volumes rose while removals fell, yet removals retained pricing power, with spreads of $10-13 per tCO2e by the fourth quarter.

Supply expanded, particularly in the US, but was absorbed without forced repricing.

Primary transactions and long-term offtakes increasingly replaced spot trading, helping preserve pricing for higher-quality credits. Around 8.5 million tCO2e of long-term IFM removal offtake agreements were signed in 2025, led by US tech giants.

Demand was expressed through price and contract structure rather than volume. Retirements remained anchored by a relatively small group of institutional buyers, including Shell, Microsoft, JPMorgan, Netflix, PwC and Deloitte.

The key question heading into 2026 is whether rising removals issuance can be absorbed without eroding the premium that defined IFM pricing in 2025.

Looking ahead

By the end of 2025, carbon markets had not rebounded – they had reset. Volume alone no longer defined demand. Quality thresholds, compliance eligibility and durability determined where capital flowed.

The path to scale now depends on whether supply can meet stricter buyer expectations without triggering another confidence shock.

-Additional reporting by Veethika Jain in London.