When will we realize the true cost of high quality and integrity in the Voluntary Carbon Market (VCM)?

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The bitterness of poor quality remains long after the sweetness of low price is forgotten

The Voluntary Carbon Market (VCM) has grown rapidly in recent years, driven by corporate intentions to offset residual carbon dioxide emissions. However, the market faces scrutiny regarding the quality and integrity of carbon credits available. While corporate buyers and investors talk about seeking high-quality credits, there is an ongoing debate about whether they are truly prepared to pay the premium these credits demand. This article explores the true cost of high-quality carbon credits, the regulatory developments shaping the market, and the persistent challenges of maintaining integrity in the VCM.

1. The case for high-quality carbon credits

According to recent reports from thought leaders in the carbon markets like Ecosystem Marketplace, there is a notable shift towards higher-priced, high-integrity carbon credits in the VCM. These credits often include additional certifications for environmental and social benefits “beyond carbon,” such as contributions to the UN Sustainable Development Goals (SDGs). Such credits command a significant price premium, demonstrating a growing buyer preference for credits that offer more substantial and verifiable impacts (Ecosystem Marketplace, 2023).

The Integrity Council for the Voluntary Carbon Market (ICVCM) has established the Core Carbon Principles (CCPs) to enhance market transparency and set a benchmark for what constitutes a high-quality carbon credit. These principles are designed to assure buyers that their investments genuinely contribute to climate action (ICVCM, 2023).

2. The positive reinforcement of regulatory developments

As the VCM matures, regulatory frameworks in major markets like the EU, UK and US are expected to evolve significantly. For instance, the UK Government has plans to consult on developing high-integrity VCMs, aiming to improve confidence in these markets and reduce reputational risks. Similar initiatives are underway in the EU, with directives like the Corporate Sustainability Reporting Directive (CSRD) pushing firms towards engaging in higher-quality carbon markets (KPMG, 2024). Also, the European Parliament adopted the provisional agreement on the Carbon Removals and Carbon Farming (CRCF) Certification Regulation, which created the first EU-wide voluntary framework for certifying carbon removals, carbon farming and carbon storage in products across Europe. By establishing EU quality criteria and laying down monitoring and reporting processes, the CRCF Regulation will facilitate investment in innovative carbon removal technologies, as well as sustainable carbon farming solutions, while on the demand-side the EU Green Claims Directive sets minimum requirements for the substantiation, communication and verification of explicit environmental claims.

These impending regulations are anticipated to bring clarity and enforce higher standards in carbon crediting, which could influence both market behaviours and the pricing of carbon credits, thus shaping the strategic approaches of corporate buyers and investors.

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3. The persistent challenges in a low-quality market

  • Quality dilution: despite the increasing demand for high-quality credits, the VCM is still plagued by challenges related to the variability and verification of carbon credit quality. Credits from methodologies and standards which lack scientific rigour and integrity are cheaper but often come with increased scrutiny regarding their actual environmental impact (Deloitte, 2023). This lack of uniform standards makes it difficult for buyers to distinguish between genuinely impactful credits and those that may not deliver on their promises. This complicates investment decisions and strategic planning for corporate buyers.


  • Opacity and fragmentation: different projects use different methodologies to measure their impact, and the absence of a standardized verification or due diligence process adds another layer of complexity for buyers trying to assess the real value of credits.


  • Risky value chains: this scenario is exacerbated by multiple intermediaries in the market, some of whom may offer “risk-free” credits from projects with questionable methodologies and significant potential for reputational damage.


  • Supply risks: the reliability of credit availability from projects developed adhering to questionable methodologies is uncertain. If a project is found to be non-compliant with emerging regulations or standards, or if it fails to deliver the promised emission reductions/removals, the supply of credits can suddenly drop, leaving buyers unable to meet their carbon offset goals.


  • Monoculture plantations: such as those extensively cultivating Eucalyptus, have become a significant source of carbon credits. These credits are appealing due to their lower cost, but they come with considerable environmental and social implications. The production of cheap credits from monoculture plantations can lead to biodiversity loss, soil degradation, and conflicts over land rights. This monoculture approach contrasts sharply with mixed-species plantations, which tend to support a more balanced ecosystem and offer greater long-term sustainability for carbon sequestration (Warner et. al., 2023).


  • REDD+ dilemma: West et. al., (2023) and Haya et. al., (2023) highlight significant issues in REDD+ projects, revealing that over 92% of these projects are over-credited. The studies identify flawed baselines and overly generous carbon accounting practices, which inflate emissions reduction estimates by 23% to 30%. Additionally, inadequate deductions for natural risks and leakage further undermine the credibility of the claimed emissions reductions. Haya et al. (2023) specifically reviewed projects using four of the most widely adopted REDD+ methodologies by Verra VCS: VM0006, VM0007, VM0009, and VM0015. Purchasing these credits and making climate claims based on them to meet net-zero emission goals constitutes greenwashing and is misleading.


  • Project governance risks: governments may change policies or regulations that affect how carbon credits are generated, verified, and traded unexpectedly. For example, the Indonesian government has revoked the licence of the Rimba Raya Conservation project, one of the world’s largest carbon offset initiatives, due to several regulatory violations. This action affects over 36’000 hectares in Central Kalimantan, Borneo, where the project has issued over 30 million credits since 2013. The violations include unauthorized transfer of the licence, operation beyond the permitted area, and failure to make necessary payments to the state. This decision casts uncertainty on the future of the project and highlights significant risks in the carbon market, such as regulatory changes and the reliability of project operators (The Straits Times, 2024).

4. The hope of uptrend market predictions

Experts predict that the demand for high-quality carbon credits will continue to rise, driven by both regulatory changes and a growing corporate commitment to genuine sustainability. The market is expected to see a shift towards more carbon dioxide removal projects, as they often provide more tangible benefits compared to simple emissions reduction. As transparency and standardization improve, we may see a more stable and reliable market for carbon credits, with clearer pricing signals and less risk of market manipulation (Deloitte, 2023).


The VCM is at a crucial juncture. The drive towards high-quality and high-integrity carbon credits is clear, but the market’s readiness to fully embrace and consistently pay for these credits is still developing. For the market to truly support global goals, both corporate buyers and the regulatory frameworks guiding them need to prioritize and invest in carbon projects that offer verifiable impact on climate, nature and society. The ongoing development of standards and the increasing scrutiny of credit quality are steps in the right direction, signalling a maturing market that may soon provide the transparency and integrity needed to make a substantial impact on global emissions (Bain & Company, 2023).

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