Why carbon credits are important for investors
Most carbon credit markets are voluntary. Individuals and companies purchase carbon credits as part of their environment, social, and governance (ESG) strategy. Future legislation could make carbon credits mandatory for heavy carbon-emitting industries. That might be necessary to drive investment in building carbon capture, utilization, and sequestration (CCUS) infrastructure so that companies can commercialize that technology.
Leading oil companies expect the carbon market to grow exponentially, with carbon credits potentially playing a key role. Oil giant ExxonMobil (XOM -0.12%) estimates there will be a $4 trillion market for capturing carbon dioxide and sequestering it underground by 2050. That's about 60% of the size of the global oil and gas market Exxon foresees three decades from now. Meanwhile, fellow oil producer Occidental Petroleum (OXY -0.81%) predicts the market will grow to between $3 trillion and $5 trillion. Occidental predicts it could eventually make as much money on carbon dioxide as it currently earns from producing oil and gas.
That's leading many companies, including Exxon and Occidental, to invest in CCUS projects in anticipation of a large future market for carbon credits and other financial incentives like tax credits.
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