The evolution of the voluntary carbon credit market

Tech and software giants Google, Meta, Microsoft and Salesforce have teamed up to make an advanced market commitment to contract up to 20 million tons of nature-based carbon removal credits by 2030, the companies announced on May 22, 2024.

To facilitate this decarbonization pledge, the group launched the Symbiosis Coalition to identify and invest in carbon projects which have a focus on nature restoration. The coalition said projects would include those that combine data and research to better measure the climate impact of restoration and “equitably engage” the Indigenous and local communities.

Members who join the coalition will have the opportunity to buy carbon removal credits that count toward their decarbonization goals through a joint request for proposal focused on afforestation, reforestation and other revegetation initiatives, according to the release.

Symbiosis said it aims to break down the “complex and challenging” issues that often come with nature-based projects — such as high costs, low investor interest and dwindling public trust in the social and environmental impact of such initiatives. The coalition will look to address these issues by accelerating the signing of long-term offtake agreements for projects that integrate “conservative assumptions” on climate impact, build on the best available science and research, and involve and compensate Indigenous and local communities.

The four tech companies — who also serve as the coalition’s founding members — said in the release that though they are focused on slashing their own carbon footprint, they also “recognize the necessary role of a high integrity carbon market” and nature-based projects that help address climate risk.

A recent report by McKinsey & Company found that carbon dioxide removal will likely require $6 trillion to $16 trillion of “cumulative investment” to deliver net-zero emissions by 2050. The research also found that there is a $400 billion to $1.6 trillion gap between current estimated investment and what would be needed by 2030 to put carbon removal on track to meet mid-century net-zero targets.

The group said Symbiosis will help fill these gaps through a “willingness to pay the real cost” needed to develop and scale high-quality nature-based projects. The coalition also said it would prioritize projects that “demonstrate financial transparency” and “greater biodiversity benefit.” Symbiosis said it will look to partner with “like-minded investors,” nonprofits, project developers and standard setters to raise the bar on nature restoration initiatives and facilitate an increase in such projects.

Symbiosis builds on decarbonization initiatives and carbon removal commitments already put in place by Google, Meta, Microsoft and Salesforce — all of whom have committed to a net-zero emissions target.

The Science Based Targets initiative, which validates whether global organizations’ climate targets are aligned with leading climate science, released an analysis of carbon credits’ effectiveness on July 30, 2024, which found “various types of carbon credits are ineffective in delivering their intended mitigation outcome.”

The analysis was one of four pieces of research SBTi released the same day, which also included data submitted to the organization for analysis. Also among the releases was a discussion paper on how corporations should approach setting targets for scope 3 emissions reductions. 

As companies and organizations increasingly look to deal with scope 3 emissions, or emissions generated by entities not owned or operated by the reporting organization, SBTi said in the analysis there is evidence that there could be “clear risks” to corporations using carbon credits to offset their carbon footprint.

SBTi’s releases are all part of the organization’s ongoing updates to its Corporate Net-Zero standard, a draft of which is expected to be released for public consultation toward the end of Q4 in 2024, according to an email release sent to ESG Dive. 

SBTi called for organizations to submit evidence on the effectiveness of carbon credits in 2023, and its recent analysis found that using carbon credits for the purpose of offsetting emissions poses “potential unintended effects of hindering the net-zero transformation and/or reducing climate finance.” These include credits deemed to have a lower risk of bias. Given these findings, the scope 3 paper maintains SBTi’s standards on carbon credits not being counted as progress towards science-based targets.

“The traditional practice of offsetting, which involves purchasing carbon credits as a substitute for abating value chain emissions, is not accepted under SBTi standards due to potential risks,” SBTi’s scope 3 paper said. However, the organization explored options for corporations to use carbon credits that are still consistent with a net-zero pathway.

The paper includes five examples for companies, including using commodity certificates — or “instruments that certify and convey sustainability information about the production process of different commodities,” according to the carbon credit analysis — for activities taking place within the value chain. 

The organization also said that commodity certificates with “low or no” supply chain traceability could be an “interim solution” for scenarios where sourcing activities or commodities that have “unfeasible” global climate goals” or barriers to higher traceability. In this case, the group said this use case could be limited to “high-quality, high-impact certificates from sources that can demonstrably lead to net-zero aligned market transformation” with claims that fit the level of traceability available.

An analysis of the effectiveness of such Environmental Attribute Certificates was not released on July 30, but SBTi said further evidence papers for energy certificates and commodity certificates would be published at a later date.

The scope 3 paper also said carbon credits could potentially be used to count as supply chain emission reductions, when they represent abated emissions from activities that can be traced to a company’s value chain or to neutralize “residual emissions.” Finally, the paper lays out a scenario where carbon credits could be used to mitigate beyond the value chain emissions. 

SBTi said the purchase and retirement of high quality credits addressing emissions beyond a company’s value chain can help companies “contribute to the broader societal shift towards net-zero” by incentivizing them “to abate emissions within the value chain while also taking responsibility for emissions not yet addressed.”

SBTi’s carbon credit analysis noted such approaches “may represent preferable models for accelerating net-zero transformation and increasing climate finance in that those efforts are beyond a company’s efforts to reduce its own emissions.”

An additional statement was released on a commissioned literature review of carbon credits’ climate impact, but the review found only five research papers that met its inclusion criteria. As such the organization and Evidensia, the firm hired to conduct the literary analysis, concluded that “a negligible amount of scientific evidence assessed” was useful and further investigation would need to be done. 

The reports camea few months after SBTi initially signaled an openness to expanding corporate use of carbon credits for scope 3 emissions abatement, before a staff revolt led to the organization walking back that statement. 

The staff alleged that expanding the use of carbon credits would allow for greater corporate greenwashing, and a coalition of more than 80 organizations recently argued that allowing corporations to use the credits as a tool to meet emissions reductions targets is “likely to slow down global emission reductions.” 

SBTi’s recent evidence analysis corroborates this concern, according to Europe’s Beyond Fossil Fuels campaign. 

“Today’s findings align with numerous studies showing that carbon offsets are an ineffective tool for cutting emissions,” Jill McArdle, international corporate campaigner at Beyond Fossil Fuels, said in a July 30 statement. “The SBTi should retract its plan to allow offsets in corporate climate targets, or it risks becoming a tool [for greenwashing.]”

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By Arbor Day Carbon

At Arbor Day Carbon, we’ve helped to plant and nurture trees around the world for the last five decades. Through this experience, we’ve learned that before we can hope to see something bloom, we must first consider the roots. The roots fill the needs of the tree, actively seeking water and nutrients so the tree may grow. Similarly, we believe that forestry carbon credit projects are at their best when they are rooted in careful consideration of the communities and ecosystems in which they serve. Like healthy roots, forestry carbon credit projects can be designed to fill the needs of people, wildlife and the climate.

How forestry carbon credit projects can enhance environmental, economic and social value has typically been referred to as “co-benefits.” The term indicates that in addition to a project’s primary goal of sequestering carbon, it can also yield a range of positive outcomes beyond carbon. It’s a unique offering of nature-based solutions. Few engineered carbon removal solutions have the ability to simultaneously create clean water, provide life-changing income opportunities, produce food, foster habitat for endangered wildlife species and establish value chains.

Yet despite the power of co-benefits, some have perceived them as simply adjacent to the focus of the project. In some cases, they are not incorporated in the initial design but rather accounted for later in the implementation process. Framing co-benefits as an afterthought creates missed opportunities within these projects. That’s why some people in the voluntary carbon market sector are now beginning to refer to co-benefits as “core benefits.”

This isn’t just a shift in language. It’s a shift in mindset. “Core benefits” indicates the essentiality of factors like biodiversity and community when designing and implementing forestry carbon credit projects. It reinforces the need to integrate foundational, community-centered outcomes into the design of projects from day one. Core benefits, as a phrase, subverts the instinct to optimize carbon credit projects solely for sequestration — or financial gain — alone.

Of course, scientific integrity is first and foremost the primary marker of a high-quality carbon credit project. But focusing on the community and biodiversity benefits of carbon projects does not disrupt or diminish scientific integrity. In fact, we believe that building forestry carbon credit projects around core benefits can ultimately make them more successful and durable.

For example, GreenTrees is the largest verified reforestation carbon credit program in the United States and is deliberately built around core benefits. The Arbor Day Foundation began a partnership with GreenTrees in 2011 to help transform degraded farmland in the Mississippi Alluvial Valley and Virginia into thriving forests. The project’s reforested riparian buffers are estimated to store 3.4 billion liters of water and dramatically reduce agricultural runoff. It’s created richer habitats for wildlife as well, with the corridor serving as a vital ecosystem for 60% of North America’s migrating birds. Economically, GreenTrees has provided stability for more than 600 landowners and rural communities. Landowners are able to maintain ownership while earning sustainable income from carbon credits, recreation and eventually the option for selective timber harvests, with recent distributions averaging over $12,000 per participant. The project invests in local and seasonal jobs, offering competitive pay for nursery workers, planters and field technicians, and ensures that restoration work genuinely benefits the people involved.

The commitment to core benefits has created long-term local support for the project and made way for incredible gains for the climate. Since its inception, the project has planted over 60 million trees, restored more than 140,000 acres and removed over 7.8 million tons of CO2 from the atmosphere.

This work shows that when forestry carbon credit projects are designed with people, water, wildlife and climate at their center, the results aren’t just stronger forests, but also stronger communities and a more resilient planet. That’s why at Arbor Day Carbon, we prioritize building strong relationships with project developers who have teams on the ground in the areas where the project is meant to be implemented. It’s not enough to simply avoid harm. We want to ensure the project is actively adding value to the community, and empowering local leaders as stakeholders and stewards of the project.

Core benefits are just that: core. Not an add-on or afterthought. Using core benefits as a driving force in forestry carbon can root projects in the real and urgent needs of people and places around the world.

Transformative planting begins with intentionality. It ends with impact that endures, recovering our forestlands and keeping them as forests. 

The Integrity Council for the Voluntary Carbon Market will not allow carbon credits issued under current methodologies used to develop renewable energy projects to be certified with its Core Carbon Principles label, the organization announced Aug. 6, 2024.

The carbon market governing body said eight renewable energy methodologies were “insufficiently rigorous” in evaluating whether projects could have proceeded without carbon credit revenue incentives and failed to meet the label’s assessment framework requirements.

ICVCM, whose label seeks to set a global quality benchmark in the voluntary carbon market, said carbon credits issued under these existing methodologies make up 32% of the market and cover around 236 million unretired or unused credits. However, the organization approved only 27 million unretired credits — 3.6% of the market — to use its CCP label in its latest assessment.

The governing body said its CCP label is “designed to build trust in the voluntary carbon market,” guarantee credit comparability and allow the market to unlock its potential to curb increasing greenhouse gas emissions and provide private funding for climate solutions. The label also gives assurance that each credit is representative of a metric tonne of emissions that have been reduced or removed from the atmosphere, per the organization.

To qualify for the organization’s CCP label, carbon credits undergo a rigorous evaluation process based on ICVCM’s ten core principles. These principles are categorized under “governance,” “emissions impact,” and “sustainable development,” and include determinants such as transparency, permanence, robust quantification and contribution to a net-zero pathway.

The label helps buyers differentiate carbon credits that represent “real and verifiable climate impact” and support sustainable development goals, per ICVCM.

“We are taking the tough decisions necessary to build a high-integrity voluntary carbon market that can be scaled to meaningfully fund climate solutions and channel material amounts of finance to the Global South,” ICVCM Chair Annette Nazareth said in a release. “While companies’ first priority must always be to decarbonize their own value chains, carbon credits can be an important supplement, allowing them to go further and take responsibility for emissions they cannot yet cut.”

Other than buttoning up its standards for issuing high-integrity labels, the organization said it has approved a crediting methodology which is used in lower income countries with poor infrastructure for projects that detect and repair methane leaks in the gas industry. The methodology covers around 19 million unused carbon credits from projects in Bangladesh, making up 2.6% of the market. The organization also rejected a methodology for projects in the magnesium industry targeting the reduction of sulfur hexafluoride as it did not meet its assessment requirements. Carbon credits using this methodology represent a relatively small figure, according to ICVCM.

The update comes as the voluntary carbon market is facing heightened scrutiny over its effectiveness in reducing carbon emissions.

In July 2024, a group of over 80 organizations focused on environmental and social issues argued that allowing entities to meet climate commitments through carbon credits is “likely to slow down global emission reductions.” The organizations expressed concern over the growing push to utilize carbon credits to offset emissions and said this reliance reduces the scale of funding and urgency needed to develop systems that hold emission-intensive sectors accountable and assist regions disproportionately impacted by climate change, such as the Global South.

Shortly after, the Science Based Targets initiative released a report corroborating those concerns and found there are “clear risks” to using carbon credits to offset emissions.

The Commodity Futures Trading Commission published its final guidance for listing carbon credits on voluntary markets in the Federal Register on October 15, 2024, aiming to shore up the integrity of such credits.

The CFTC approved the guidance the previous month, which provides standards for project developers, crediting programs and third-party verifiers to ensure voluntary carbon credits — as opposed to those in regulated cap-and-trade programs — are not subject to manipulation and have their contract terms monitored.

“The process by which [voluntary carbon credits] are issued deserves careful consideration, as that process informs VCC quality and, by extension, the overall integrity and effective functioning of voluntary carbon markets,” the CFTC’s guidance said. 

The final guidance is the culmination of yearslong work by CFTC on the topic and is an outgrowth of work the commission has done regulating environmental commodities for “decades,” including mandatory emissions program products since 2005. 

The agency began working towards this update by gathering voluntary carbon market stakeholders for a June 2022 summit to discuss issues, before releasing a request for information to the public the same month. The agency reconvened stakeholders again in July 2023 to discuss public and private sector carbon credit initiatives and developing trends, before issuing proposed guidance in December 2023, which received public support from Congressional Democrats in August 2024.

The guidance is the product of “strong public-private partnership” and is designed “to support transparency, liquidity and market integrity in the VCC derivatives markets as well as ultimately drive standardization and efficient capital allocation to scale the underlying cash market for high integrity [credits].” CFTC Chair Rostin Behnam said in a September 2024 statement.

“The CFTC’s unique mission focused on risk mitigation and price discovery puts us on the front lines of the now global nexus between financial markets and decarbonization efforts,” Behnam said.

A need for transparency

The guidance is part of a broader concerted effort to increase the scrutiny on and reliability of carbon credits, with the commission undertaking the guidance in part due to the fact that standardization and accountability mechanisms are still in development. 

“Challenges with respect to accurately ascertaining [voluntary carbon credit] quality, and associated pricing challenges, can erode confidence in voluntary carbon markets,” the guidance said. “Opaque or inadequate calculation methodologies or protocols, which can obscure or mischaracterize the carbon impact of a mitigation project or activity, can undermine both the integrity and purpose of voluntary carbon markets.”

The Commission said markets listing carbon credits should design their contracts with provisions focused on ensuring quality standards, the credits’ delivery points and facilities and inspection provisions.

To ensure that carbon credits follow quality standards, CFTC said the markets should: 

• Provide publicly available data for transparency; 
• Have procedures to assess or test for additionality;
• Account for the risk of credit cancellation; and
• Conservatively quantify greenhouse gas emissions reductions or removals for robust quantification.

When managing delivery of contracted carbon credits, CFTC said the markets should consider whether the crediting program has a governance framework in place that supports its independence, transparency and accountability. To assess that governance framework, the commission recommends looking at the crediting organization’s decision-making process, public and stakeholder engagement policies and risk management procedures.

Additionally, the agency said markets should consider the trackability of such credits — to ensure credits are monitored through issuance, transfer and retirement — and make sure there are procedures in place to prevent double-counting.

The guidance — which includes the agency’s response to public comments — also laid out a framework to ensure carbon credits satisfy CFTC product submission standards and monitoring the terms of contracted credits related to the “underlying commodity market.”

CFTC’s guidance comes as corporations are looking for reassurance that carbon credits used in concert with operational emissions reductions or to offset emissions correspond with measurable emissions removed from the atmosphere. Experts have harped on the necessity for the increased transparency of carbon credits to make sure contracted credits are up to snuff.

In July 2024, a coalition of 80 environmental and social organizations said that corporations that utilize carbon credits to offset emissions could undermine emissions reductions progress. That concern was supported by a Science Based Targets initiative study released later that month that found “clear risks” to using carbon credits to offset emissions.

The Biden-Harris Administration released a list of principles for how corporations should responsibly participate in the voluntary carbon market in May 2024, which said there is still an open question of how to ensure credits “genuinely drive additional decarbonization” rather than shift emissions in the balance sheet.

“Put simply, stakeholders must be certain that one credit truly represents one tonne of carbon dioxide (or its equivalent) reduced or removed from the atmosphere, beyond what would have otherwise occurred,” the administration’s May statement said.

Global insurance giant Marsh will explore a new market and insure purchased carbon credits to help companies protect themselves against potential fraudulent credits as the voluntary carbon market expands. 

Marsh, a subsidiary of the world’s largest insurance broker by revenue, unveiled the product on Nov. 4, 2024, as a partnership with carbon credit insurer We2Sure. Marsh’s product will also give clients access to We2Sure’s carbon credit certification.

The product will help de-risk carbon credit investments for businesses, as well as support the integrity and growth of the wider carbon market, according to Rupert Poland, Marsh’s digital asset leader for the United Kingdom.

Marsh’s carbon credit insurance facility will focus on safeguarding companies in the United States, UK and European Union against potentially fraudulent carbon credit certificates. The company, a Marsh McLennan subsidiary, said the voluntary carbon market is “increasingly being targeted by fraudsters” who are selling carbon credit certificates for projects that do not exist.

The voluntary carbon market has been a focus for participants, companies and governments who are looking to shore up the integrity of the market and make sure that carbon credit purchases correspond to measurable carbon dioxide emissions pulled from the atmosphere.

“Businesses are increasingly using carbon credits as a core element of their strategy to meet net zero targets, and this leaves them exposed to fraudsters seeking to take advantage of this growing market,” Poland said in the release. “The lack of standardization and transparency in the market makes it difficult for businesses to assess the legitimacy of the carbon credits they are buying.”

Marsh’s product will insure against counterfeit certificates, theft and certificates for non-existent projects. The insurance facility will be backed by global insurers Sompo, Brit and Talbot.

We2Sure’s carbon certificate validation technology – the Carbon Actuator – is able to recognize any duplicate or counterfeit carbon credit certificates. The company also uses satellites and artificial intelligence to monitor and assess projects in real-time. The real-time monitoring allows We2Sure to identify any projects that don’t meet predetermined standards or reflect the credits issued.

“Our data-backed verification process addresses the critical issue of authenticity in carbon credit certificates, substantially reducing reputational risks for buyers,” Simon Wigzell, We2Sure’s head of business development and underwriting said. “This transformative solution establishes a robust integrity standard, effectively converting intangible carbon credits into tangible assets, thereby enabling corporations to invest with greater confidence.”

While Marsh looks to safeguard against potential fraudulent credits, the Biden administration has looked to shore up the voluntary carbon market.

In May 2024, the White House released a set of principles for responsibly engaging with the voluntary marketplace, and the Commodity Futures Trading Commission followed up with its final guidance for listing carbon credits on voluntary markets in October 2024. 

A group of 30 voluntary carbon market stakeholders — including businesses, nonprofits and public sector organizations — have joined forces to launch an initiative to boost carbon markets and harmonize data for carbon credits and projects.

The Carbon Data Open Protocol, launched March 18, 2025, aims to “create the processes and definitions for greater standardization, transparency and fungibility to improve integrity and dramatically scale carbon markets,” according to a press release.

The initiative is spearheaded by four co-chairs: the Global Carbon Market Utility, a financial services organization dedicated to building carbon market infrastructure; Sylvera, a carbon data provider; RMI, a nonprofit focused on sustainability and decarbonization solutions; and S&P Global Commodity Insights, a subsidiary of Standard and Poor’s that provides ratings, analytics and benchmarks on energy transition markets and energy commodities.

CDOP will build on various industry and market-wide carbon market initiatives, and complement the work being done by several climate-focused organizations and platforms, according to the release. This will include work done by the Climate Action Data Trust; the Integrity Council for the Voluntary Carbon Market; and the World Bank’s Carbon Market Infrastructure Working Group, among others. The new protocol will also “maximize alignment” with frameworks that fall under Article 6 of the Paris Agreement — an objective CDOP’s co-chairs called crucial.

That article of the climate treaty sets guidelines for how countries can collaborate to achieve their climate targets. Article 6 was approved at COP26 in Glasgow, Scotland, with the aim of boosting international cooperation and sustainable development, as well as helping unlock financial support for developing countries, per the 2021 update to the global climate accord.

Climate negotiators commenced COP29 in 2024 by approving Article 6.4, also known as the Paris Agreement Crediting Mechanism. Article 6.4 identifies and supports verifiable emission reduction projects and helps draw funding needed for implementation. The mechanism also encourages cooperation among countries and companies interested in utilizing such projects to reduce their carbon footprint, according to the Paris Agreement.

CDOP is an important step toward harmonizing voluntary carbon markets and related data, as market stakeholders generally lack an “accepted and commonly used protocol for project and credit data,” according to the release. This lack of homogenous standards, hence, impedes collaboration and data-sharing efforts and hinders the market’s full potential of driving impactful climate action, the group said.

The four-chair committee aims to work with other stakeholders across the voluntary carbon sector over the course of 2025 to establish a set of principles that will propose definitions and rules that “standardize data describing carbon crediting projects and carbon credits across markets, geographies, and activity types.” The group also plans to “put forward a governance framework for maintaining and updating the protocol,” per the March 18 release.

The first iteration of CDOP’s framework is expected to be unveiled in 2025 at New York Climate Week.

Microsoft and carbon management firm Carbon Direct unveiled standards April 1, 2025, to boost the development of marine carbon dioxide removal projects and the purchase of related carbon credits.

The science-based criteria will help scale ocean-based decarbonization solutions and “address key principles such as environmental integrity, monitoring, durability, and social impact,” the tech giant and carbon management firm said in a joint release.

The standards will also offer guidance on how marine carbon removal can be measured, monitored, reported and verified. Both companies said they will continue to update the guidance annually as part of their endeavor to support high-integrity carbon removal solutions.

Marine carbon dioxide removal involves any ocean-based process or technology that is devised to remove carbon dioxide from the atmosphere and store it for long periods of time in the ocean, per the U.S. Environmental Protection Agency. Such processes include adding alkaline materials into the ocean to expand the amount of carbon that can be stored in the water, as well as altering the ocean’s chemistry by adding iron or other nutrients to spur the growth of marine algae like phytoplankton, which help to rapidly absorb carbon dioxide from the water. 

Recent research indicates that marine carbon dioxide removal can potentially remove multiple gigatons of carbon in future decades and also leverage the ocean’s capacity — as it covers 70% of the Earth’s surface — to act as a natural carbon sequestration space. 

“With rapid technological progress and increased investment, marine carbon dioxide removal has the potential to deliver durable, large-scale [carbon dioxide] removal — potentially billions of tonnes per year in the coming decades,” Microsoft Senior Director of Energy Markets Brian Marrs said in the April 1 release. “By establishing rigorous new [marine carbon dioxide removal] criteria, we aim to help project developers build high-integrity solutions that maximize both environmental and social benefits.”

The criteria will also establish guidance on preventing leakage, enhancing community engagement and setting baselines for marine carbon dioxide removal projects.

This isn’t the first time Microsoft has leaned on ocean-based carbon removal. The company aims to become carbon negative by 2030 by reducing carbon emissions, increasing its use of carbon-free electricity and using such carbon removals, according to the company’s latest environmental sustainability report. 

In 2024, the tech giant signed a deal with ocean-based carbon removal company Ebb Carbon, where Ebb will capture and store up to 350,000 tonnes of carbon dioxide for the tech giant over the next decade. Microsoft contracted the initial removal of 1,333 tonnes of carbon dioxide in October 2024, with options to purchase an additional 350,000 tonnes over the next 10 years.