Carbon Credits Are Not the Problem. Bad Carbon Credits Are.

In early 2023, an investigation by The Guardian and other outlets found that a significant proportion of rainforest offset credits certified by Verra, the world’s largest carbon standard setter, did not represent real emissions reductions. The story prompted a crisis of confidence in the voluntary carbon market and led to the departure of Verra’s chief executive.

The response from many commentators was to conclude that carbon offsets were fundamentally broken and should not be used as a climate tool. That conclusion is too simple. It conflates a real problem with a particular type of credit with the instrument itself.

What a Good Credit Actually Requires

A credible carbon credit must satisfy several demanding conditions. Additionality means the emissions reduction would not have happened without the revenue from the credit. Permanence means the carbon stored remains stored. Measurability means the reduction can be quantified against a credible baseline. And there must be no double counting: the same tonne of carbon cannot be claimed by both the project developer and the host country.

The problem through much of the 2010s was that these conditions were enforced inconsistently, verification was often cursory, and financial incentives strongly favoured issuing credits over rigorous scrutiny. High-quality credits coexisted with low-quality ones, and buyers had limited ability to distinguish between them.

What Is Changing

The Integrity Council for the Voluntary Carbon Market published its Core Carbon Principles in 2023, establishing a clearer quality threshold. Several large buyers have committed to purchasing only credits meeting these principles. Satellite monitoring has improved verification of land-use claims significantly. Reputational damage from high-profile failures has made buyers more cautious and more willing to pay a premium for verified quality.

How to Use Carbon Credits Responsibly

For organisations considering carbon credits, the framework is straightforward. Reduce first: credits should not substitute for operational emissions reductions that are technically and economically feasible. Use credits for genuinely residual emissions. Prioritise credits with robust third-party verification and transparent methodologies. Be specific in communications about what the credit actually represents.

The voluntary carbon market will continue to play a role in climate finance for the foreseeable future, particularly for channelling private capital toward conservation in lower-income countries. Making it work better is more useful than abandoning it.