Boosting Confidence in Carbon Markets: 3 Strategies for 2024

A series of investigations in 2023 unveiled exaggerated impact claims by carbon credit developers and project design flaws, leading to a loss of trust in voluntary carbon markets. Meanwhile, efforts to restore integrity to the sector failed to provide clear guidance for companies on using carbon credits alongside supply chain decarbonization.

As a result, project developers reduced their ambitions and the market slowed down.

This leaves carbon buyers with a decision to make: Dive in, fix what’s broken, root out the shady providers and leverage the power of carbon markets to reduce net greenhouse gas emissions; or walk away from the complexities and uncertainties that plagued the sector throughout 2023.

Going into 2024, signs are emerging that carbon markets can still become effective mechanisms for coordinating global climate action. Governments, carbon registries and standards bodies have promised greater collaboration. Recent studies have shown that companies using carbon credits are decarbonizing their own supply chains faster than those that don’t, challenging the widely held belief that carbon markets are “permission to pollute.”

Here are three trends to look for in 2024 that have the potential to restore confidence in carbon markets and set the stage for them to deliver on their climate promises:

Moving toward universal standards

Some of the most promising carbon market announcements at COP28 were agreements to rationalize and strengthen carbon markets. Six major registries, including Verra and Gold Standard, agreed to align on carbon accounting principles. Independent carbon market governance bodies, including the Science Based Targets initiative, Voluntary Carbon Markets Integrity Initiative, and CDP, agreed to produce a cohesive carbon project quality standard from development through retirement.

These initiatives should make the market easier to navigate, unlocking buyers to purchase and retire credits with confidence. But so far the details are thin. In 2024, these bodies must make good on their announcements by delivering clear and actionable standards.

More government oversight

Greater government scrutiny of voluntary markets could provide a bedrock of confidence in carbon credit integrity for both buyers and project developers. One way to get there is through closer coordination between voluntary and compliance carbon credit initiatives.

Three prominent examples are unfolding. Singapore’s carbon tax will permit purchase of credits from third party registries beginning in January. The United States Commodity Futures Trading Commission announced this month the coming of proposed guidance for voluntary carbon credit derivatives. And while discussions stalled at COP28 around Article 6 of the Paris Agreement, which will establish a global carbon market for both private and public sector participants, Gold Standard is working with early-mover countries already building the policy frameworks necessary for the nascent market to grow.

If they’re successful, efforts to integrate voluntary and regulated carbon credit action like these could stabilize demand. » … Read More