Our Take: Fixing the Voluntary Carbon Market - 7 Bold Moves for Real Change

Introduction

I was sitting on the patio after a day out with my wife, hunting down the perfect Xmas gift for her parents. I saw an alert for a post to our corporate Slack channel covering news relating to climate finance and markets. The headline flashed, “Phantom rice projects expose voluntary carbon market failings.” It was a critical article published by Dialogue Earth on December 19, 2024.[1] Another in the litany of articles that had assailed the voluntary carbon market (VCM) throughout 2024.

While we track them all, I hadn’t tallied up the number of articles that had lambasted the sector, but it must have run in the hundreds of critical and negative articles, reports, and analyses. Each piece echoes the persistent skepticism and scrutiny of the voluntary carbon market’s claims and effectiveness. The volume and prominence of this coverage were significant and shaped the public and policy debate around the market.

It pained me.

I have been involved in climate policy, impact finance, and carbon markets for two decades. When I first encountered the voluntary carbon market as a market mechanism, I was captivated. Finally, a method for moving flows of capital from the industrialized West to emerging countries. The same countries that cosseted the vital baskets of carbon sinks the planet depended on. Being born in Zimbabwe and raised in South Africa, this resonated deeply with me.

When the markets flourished in 2021/2022, as diehard loyalists, we exulted that finally the VCM would play its righteous role in combating climate change. When I took on the role of technical advisor to the Integrity Council for the Voluntary Carbon Market in the latter part of 2022, I felt comforted that the market was growing up and addressing issues needed to help it scale with the integrity it needed.

My ebullience was short-lived.

Beginning in 2023, the onslaught of negative articles and critical media coverage on the VCM surged, triggered by a series of high-profile scandals and investigative reports questioning the credibility, quality, and effectiveness of many carbon credit projects. The increased scrutiny led to a sharp decline in the market’s value and prompted several major corporations to withdraw from or reconsider their carbon offsetting strategies.

In a call just before Xmas with my colleague Jay, we pondered – what did the VCM need to truly deliver on its potential?

This essay covers our examination of the suite of issues, recommendations, and stakeholder efforts to reflect the holistic landscape of what we felt was needed for significant improvement to the VCM.

The Cacophony of Opinions

The first thing we did was gather all the leading voices—both positive and negative—into a data room. Excluding our own internal resources and literature, we secured a total of 51 reports. They included the World Bank’s “Roadmap for Carbon Markets (2023),”[2] Clear Blue Markets’ “Closing the Due Diligence Gap in the Voluntary Carbon Market (2024)” report,[3] IETA’s “Guidelines for High Integrity Use of Carbon Credits (2024),”[4] the opinions of the International Swaps and Derivatives Association in its “Legal Implications of Voluntary Carbon Credits (2021)” review,[5] and the International Chamber of Commerce’s dissertation on “The role of voluntary carbon markets in mobilising finance to accelerate climate action.”[6]

We then spent a solid month and a half reviewing each report and parsing out the recommendations for each into ‘buckets,’ in an effort to make sense of what stakeholders were saying. We also undertook the assessment of the bonds, derivatives, and commodities markets to identify characteristics of these major markets that could inform the VCM on scale, liquidity, and interoperability. We interviewed just under a dozen leading entities involved in the market to gain their feedback on critical pathways to improve the carbon market. And finally, we synthesized the host of feedback from participants of a signature carbon market convening early in 2025. This feedback was in the form of 148 strategic activities suggested to improve the overall functioning, integrity, and liquidity of the VCM.

Information Overload in Mid-February 2025

No one could accuse us of going light on this exposé. We had enough information and feedback to fill an arena. Now we had to make sense of it all. The goal was to distill the pertinent information into a manageable model or construct that could clearly communicate, coordinate, and rally effective effort to bring about a significantly upgraded voluntary carbon market. Our pursuit was a roadmap. One that could chart a path to mitigating 10 billion cumulative tons of carbon emissions by 2030.

We spent the next month diligently reviewing, sorting, condensing, highlighting, discarding, and organizing the information in an attempt to have it make sense to us.

Findings

I believe that we managed to capture the high-priority areas needed to catalyze the VCM at scale in a holistic and extremely comprehensive manner. In addition, we detailed the suite of strategic activities needed to support each priority area, the resource needs for each, and the key performance indicators to track against progress. There are seven pivotal priority areas that need immediate attention if we are to achieve the impact potential of an upgraded VCM. They are:

SCIENCE & INTEGRITY with the goal of delivering a science-driven market for credible decarbonization
SUPPLY with the goal of generating a high-integrity and diverse supply of mitigation credits
COMMUNICATIONS & COLLABORATION with the goal of restoring trust in carbon markets
INFRASTRUCTURE with the goal of building a solid infrastructure for scale
CARBON FINANCE with the goal of scaling finance for real climate mitigation
POLICY & REGULATION with the goal of driving enabling policies for market growth
DEMAND with the goal of scaling global demand with high integrity

Conclusion

While the expanse of effort needed can appear daunting across these seven priority areas and their corresponding strategic activities, the good news is that there are a number of positive initiatives underway, which we point to in our review. There is a cohort of motivated entities, each willing to play their part in a new VCM. Leveraging this leadership under these seven priority areas will ensure high-integrity outcomes under one unified vision with sufficient funding to support the rapid and urgent scaling of global carbon markets and abate the aspirational target of 10 billion tons of CO2e cumulatively by 2030. We’d also attain the key outcomes of achieving market averages for risk-adjusted returns of 6% to 15% and the mobilization of $100 billion in carbon finance per year.

What’s missing from this blueprint? A conductor. An improved VCM is a matter of kairos—seizing the perfect moment for maximum impact. We believe a conductor is needed as a steward to unify market actors, galvanize initiatives, set the cadence and priorities, ensure milestone achievements, moderate the messaging, and shape the flourishing of a new and improved VCM. We’re excited to play our part!

[1] https://dialogue.earth/en/climate/phantom-rice-projects-expose-voluntary-carbon-market-failings/

[2] https://thedocs.worldbank.org/en/doc/12facd8b391a1eafa5dd53e7ddc5eeb5-0020012023/original/COP28-World-Bank-Engagement-Roadmap-for-Carbon-Markets.pdf

[3] https://www.clearbluemarkets.com/news/closing-the-due-diligence-gap-in-the-voluntary-carbon-market

[4] https://www.ieta.org/wp-content/uploads/2024/04/IETA_VCM-Guidelines.WEB-2.pdf

[5] https://www.isda.org/a/38ngE/Legal-Implications-of-Voluntary-Carbon-Credits.pdf

[6] https://iccwbo.org/wp-content/uploads/sites/3/2024/11/2024-ICC-The-role-of-voluntary-carbon-markets-in-mobilising-finance-to-accelerate-climate-action-1.pdf