July 2025 Carbon Market Outlook: Volatility, Quality & Evolving Trends

As we enter the second half of 2025, the global carbon markets continue to evolve rapidly, shaped by tightening regulations, increasing scrutiny on credit quality, and growing demand from both corporate buyers and compliance-linked sectors. July brings a clear signal: the market is maturing, but not without growing pains.

Market Dynamics: Supply vs. Demand

One of the most significant developments in the first half of 2025 is the persistent imbalance between supply and demand. According to recent data, voluntary carbon credit retirements rose by ~7% compared to the same period last year, reflecting ongoing corporate decarbonization efforts. Simultaneously, issuances increased by approximately 39% in Q2, driven by new forestry, renewable, and carbon removal projects entering the market.

Despite the influx, many project developers and brokers report a tightening in specific categories, particularly removal-based and high-integrity nature-based credits, which are seeing increased buyer competition.

Integrity Over Volume: The Quality Shift

Carbon credit buyers are no longer chasing volume—they’re chasing verified impact. Sylvera's recent ratings data shows that 57% of retired credits in H1 2025 held at least a BB rating, up from 52% in 2024. Moreover, 37% of credits issued in Q2 may qualify for CORSIA’s Phase 1, signaling closer alignment between voluntary and compliance-grade standards.

This shift is driven by rising ESG reporting expectations, investor pressure, and enhanced scrutiny from regulators and watchdogs. Companies are now prioritizing transparency, permanence, and co-benefits when evaluating their portfolios.

Frameworks & Standards: New Infrastructure Takes Shape

2025 has also marked a turning point for carbon market governance. Key institutional frameworks are gaining momentum:

• The Carbon Data Open Protocol (CDOP) is working to create a universal data infrastructure that improves traceability and interoperability across registries.

• SBTi’s Net-Zero Standard 2.0 further limits the use of offsets to only neutralize residual emissions after aggressive decarbonization—redefining how corporates can credibly use carbon credits.

These developments suggest a growing convergence between voluntary and compliance mechanisms, with a renewed focus on data quality and alignment with national and international climate targets.

Compliance Markets: Rising in Parallel

While the Voluntary Carbon Market often takes the spotlight, compliance-driven mechanisms are gaining ground. For example, domestic carbon tax schemes and national cap-and-trade programs are expanding. Additionally, credits eligible under CORSIA and Article 6 mechanisms are seeing increased demand from aviation, shipping, and energy-intensive sectors.

This dual growth is blurring the lines between voluntary and regulatory markets, and creating new opportunities for project developers, especially those aligned with international standards like Verra, Gold Standard, and ART TREES.

What Does This Mean for Market Participants?

For buyers, project developers, and sustainability strategists, July’s carbon market landscape suggests three key actions:

• Focus on quality and compliance-readiness: Ratings and registries matter more than ever—invest in high-integrity credits with strong MRV (Monitoring, Reporting, and Verification) frameworks.

• Prepare for increased disclosure: ESG reporting standards are tightening, and carbon credit transactions are under deeper scrutiny by auditors and regulators.

• Engage early with emerging standards: CDOP, SBTi 2.0, and other frameworks are not just optional—they’re shaping the rules of future carbon financing.

Final Takeaways

July 2025’s carbon market outlook paints a picture of growing sophistication. As volatility remains, the real opportunity lies in understanding where the market is headed: toward transparency, quality, and deeper regulatory alignment.

Whether you’re a corporate buyer looking to meet net-zero targets, or a project developer navigating new issuance requirements, the time to adapt is now.