Our Take: Convergent Disagreement – When Carbon Market Advocates and Regulators Argue for the Same Future

A couple of weeks ago, I read the piece titled “Study Finds Carbon Offsets Failing to Deliver Real Climate Impact,” which was based on the article “Are Carbon Offsets Fixable?” In the abstract for the article, authors Romm, Lezak, and Alshamsi conclude that “most popular offset project types feature intractable quality problems,” and “We should focus on creating rules to find and fund the relatively few types of high-quality projects while employing alternative finance and strategies.”

As a participant in the voluntary carbon market (VCM) for over two decades, I agree that the authors flag real issues that need remedies and are in the process of receiving focused attention in an effort to enhance the integrity of the VCM. VCM projects must indeed demonstrate substantiated additionality, account for permanence, and avoid double-counting.

The recommendation that the world find “alternative finance and strategies” is the gateway to the divide between pro-market advocates and staunch combatants of market mechanisms. Critics of carbon markets do not reject private capital flowing to the Global South; they reject the market logic that, in their view, perpetuates extractive relationships and commodifies nature. Instead of expanding voluntary carbon markets or offset mechanisms, they are calling for a wholesale reorientation of climate finance toward direct public investment, reformed development finance institutions, and mandatory regulatory frameworks. Their vision emphasizes redistribution over trading, featuring large-scale grant-based finance, concessional lending, and debt restructuring that relieve fiscal pressure rather than create new forms of dependence.

This alternative framework places governments and communities, not markets, at the center of climate action. These advocates push for transformative investments in renewable energy, technology transfer, and just transition programs financed through public guarantees, restructured multilateral bank mandates, and regional cooperation mechanisms that retain capital in developing economies. In their view, integrity in climate finance is achieved not through credit ratings or carbon credit registries, but through transparency, community control, and development-aligned outcomes.

Ultimately, the divide is philosophical as much as it is financial. Market-oriented mechanisms aim to price and trade carbon. Development-oriented critics aim to rebuild the financial architecture itself. They envision a system where climate action is driven by regulation, state-led industrial policy, and participatory budgeting, where such an architecture channels capital toward transformation, not via a transaction landscape. Their challenge to carbon markets is not anti-investment but pro-justice, being a call to design finance that serves both the planet and the people most vulnerable to its warming. This final insight underscores our convergent disagreement. Anti-market actors call for the design of climate finance that serves both the planet and the people most vulnerable to its warming. Interestingly, that is precisely what advocates of the VCM (including myself) seek as well: a carbon finance system designed to serve both the planet and the people most vulnerable to its warming.

Two points to make on the authors’ conclusion, “most popular offset project types feature intractable quality problems.” One, intractable implies it is impossible to solve, which is not the case, as evidenced by the massive industry-wide undertaking to upgrade the market to VCM+. Two, the “popular” project types are those in the nature-based arena. They are not “popular,” but rather real pathways with significant potential to help us meet our climate goals at affordable levels. Critics posit that carbon markets commodify nature in ways that undervalue ecosystem complexity. Well, I am all for it…If the VCM helps conserve nature’s ecosystems, that gets first prize in my book, since nothing else seems to be doing the trick!

In peer reviewed research titled “Natural climate solutions” by Brennan W. Griscom et al. (2017), published in the Proceedings of the National Academy of Sciences (PNAS), it was found that nature-based solutions, such as restoring forests, conserving mangroves and peatlands, agroforestry, and sustainable land management, could collectively deliver over one-third of the global emissions reductions needed by 2030 to keep global warming below 2°C, and significantly contribute to the 1.5°C target. To label them as simply “popular” does not give them the appropriate dues.

As some of you know, I was born in Zimbabwe and raised in South Africa. I am a fan of the carbon markets because it is the one viable instrument we have to move vital capital from developed countries to emerging countries. Or, another way to say it, is that for the first time, emerging economies have something of global value to help sustain life on earth, vast carbon sinks that the developed nations will pay for.

Let’s take a look at a project on the ground to frame the impact of direct funding and carbon markets. For roughly two decades prior to the launch of the Mikoko Pamoja carbon project in 2013, the Gazi Bay and Makongeni communities in Kenya benefited from a steady flow of traditional aid through multilateral, bilateral, and NGO channels. Between the mid-1990s and 2015, these coastal villages received portions of large-scale World Bank programs, which included the $35 million Kenya Coastal Development Project and the $200 million Coastal Region Water Security and Climate Resilience initiative. Although village-level disbursements are difficult to trace, conservative estimates suggest that $2–4 million reached the Gazi Bay–Makongeni area over 20 years, funding infrastructure, water, and conservation projects. Yet, despite this sustained external support, poverty persisted, access to clean water and education remained limited, and mangrove degradation continued to threaten both livelihoods and ecosystems.

The arrival of carbon finance fundamentally altered this trajectory. Over just a decade (2013–2025), the Mikoko Pamoja project channeled approximately $119,000 (small perhaps to us, but critical to the community) in verified carbon revenues directly to the community, funding clean water for 3,500 people, school and sports improvements, and the protection of 117 hectares of mangroves that sequester 21,000 tonnes of CO₂. Mikoko Pamoja garnered support from the GEF, UNDP, WWF-Kenya, and long-standing research partnerships with Edinburgh Napier University and the Kenya Marine and Fisheries Research Institute.

The contrast is stark: a fraction of the financial input delivered far greater, measurable outcomes. The difference lies in design. Carbon finance embeds community ownership, transparent benefit-sharing, and clear economic incentives for conservation. Such elements were largely absent from earlier aid flows. This case underscores a pivotal lesson for us all…aligning local agency with global climate value creates more durable and cost-effective development outcomes than traditional top-down aid models ever achieved alone.

But let us turn to the argument from VCM critics that we need dramatically scaled public finance rather than market-based mechanisms. Two points here:

I’ve never met a VCM proponent who has disagreed that we need enhanced official development assistance (ODA), reforms to our Development Finance Institutions (DFIs), improved technology transfer and direct investment, and more widely adopted regulatory and policy-based approaches. Here is the thing, though, with the glacial pace of implementing those recommendations, we believe the VCM can play a vital transitional role, pricing the priceless, fighting climate change, and channeling needed capital to emerging countries.
The evidence unequivocally demonstrates that public finance alone is categorically insufficient to meet planetary climate targets, creating an unavoidable dependence on private capital, regardless of the critics’ preferred alternative mechanisms.

The quantitative reality of global climate finance reveals a staggering gap between ambition and capacity. Achieving the 1.5°C target requires approximately $5 trillion in annual investment through 2030, with developing countries alone needing $2.4 trillion each year. Yet current public climate finance amounts to only $253 billion annually, barely 5% of global requirements. Even under the most optimistic projections, public resources cannot close this gap. Official development assistance stands at roughly $200 billion per year and is politically constrained, while multilateral development banks might expand to $240 billion annually by 2030. Even if governments and public institutions could stretch to cover 30% of the need, which would be an unprecedented leap, this would still require $1.5 trillion per year or six times today’s levels. The arithmetic leaves no room for illusion, I’m afraid. To bridge the divide, private capital must supply at least 70% of the total, or $3.5 trillion annually, representing a fourteenfold increase over current private climate investment. While critics propose sophisticated mechanisms for channeling private capital, they rarely address how to generate the market-rate returns required to attract the private investors who must supply this 70% — without market-based solutions. None of these mechanisms generates revenue streams sufficient to secure the $3.5 trillion in private capital annually required. To attract this capital, a compelling value proposition is needed. High-integrity carbon markets provide one such value proposition along with scores of co-benefits.

It’s useful to reflect for a moment. Throughout modern history, several industries have demonstrated how persistence through clouds of skepticism pushed through the barriers to produce transformative global change. Initially dismissed as unrealistic, risky, or unnecessary, these sectors too had to overcome structural opposition, prove their economic and social value, and ultimately reshape entire systems. Their trajectories illustrate how innovation, coordination, and diligence, when aligned with clear purpose and market need, can generate extraordinary scale, liquidity, and societal impact.

Microfinance: Once derided as “impossible economics,” microfinance revolutionized global financial inclusion by proving that the poor are creditworthy and that small loans can generate large-scale empowerment. What began with Muhammad Yunus’s $27.00 experiment in rural Bangladesh now reaches more than 140 million borrowers worldwide, boasting repayment rates near 98% and fueling women’s entrepreneurship, financial access, and poverty reduction.
Renewable Energy: Initially dismissed as an “expensive fantasy,” the renewable energy sector overcame technical, political, and economic resistance to become the fastest-growing source of power globally. With solar, wind, and battery costs plummeting by up to 90% in two decades, renewables now provide the world’s cheapest electricity and anchor global decarbonization, innovation, and investment flows exceeding $380 billion in just the first half of 2025.
Digital Payments: Once viewed as an unnecessary alternative to cash, digital payment systems now underpin global commerce, processing trillions in annual transactions. Overcoming early criticism leveled at security, scalability, and privacy, they have expanded financial inclusion to millions, slashed transaction costs, and powered the rise of e-commerce and mobile economies, turning a niche technology into a universal financial infrastructure.

So, in conclusion, I would offer that pro-market and market critics are after the same thing: we occupy a spirit of positive convergent disagreement aligning on the need for the design of climate finance to serve both the planet and the people most vulnerable to its warming. Also, this is not an either/or, but ‘and’ where regulatory mechanisms and carbon markets both can and must aid in the fight against climate change, and nothing is ruled as intractable. And finally, constructive criticism is good if it serves to spur the needed improvements to the solution.

P.S. Romm, Lezak, and Alshamsi framed their paper with this title: “Are Carbon Offsets Fixable?”

Yes.