Markets for carbon credits serve as a policy instrument to stimulate public or private investment in projects aimed at reducing or removing greenhouse gas emissions from the atmosphere. As with any policy instrument, the effectiveness of carbon markets in combatting climate change depends on effective implementation and the appropriate use of underlying credits. National carbon markets require different parameter settings than international carbon markets. Article 6 of the Paris Agreement anchors carbon markets as a mechanism for international cooperation to raise climate ambition and promote sustainable development. Additionally, so-called voluntary carbon markets (VCM) operate in an unregulated environment. VCMs offer an opportunity for private and public actors to channel finance towards emission reductions elsewhere in exchange for certificates. These certificates are often used to claim to offset or neutralise their own climate footprint.
The boundaries among nationally regulated markets, internationally regulated markets, and voluntary systems are becoming increasingly blurred. For example, ICAO’s Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) accepts carbon credits from both unregulated private programmes and those overseen by the UN.
Offsetting, using carbon credits, is central to many companies’ carbon-neutral or net-zero claims. However, our research has shown that using carbon credits for offsetting typically lacks integrity. Offsetting can delay or avoid urgent decarbonisation efforts while enabling companies to present a misleading image to consumers, regulators and shareholders.
Our carbon market work focuses on:
- Integration of carbon market instruments within national climate policy
- High integrity implementation of Article 6 in line with the objectives of the Paris Agreement
- Quantitative and qualitative assessment of Clean Development Mechanism under the Kyoto Protocol
- Credible use cases of voluntary carbon markets (VCM) with integrity
- Expert engagement with various initiatives to enhance the integrity of carbon credits and associated claims
- Impact and reform needs for CORSIA to address international aviation’s climate impact
- Methods for evaluating net-zero or climate neutrality claims of governments and companies
- Alternative approaches to address corporate or individual climate responsibility
