Caught in between: credibility and feasibility of the voluntary carbon market post-2020

Abstract

On the one hand, a large number of companies have committed to achieve net zero emissions and many of them foresee to offset some remaining emissions with carbon credits, suggesting a surge of future demand. Yet, the supply side of the voluntary carbon market is struggling to align its business model with the new legal architecture of the Paris Agreement. This article juxtaposes these two perspectives. It provides an overview of the plans of 482 major companies with some form of neutrality/net zero pledge and traces the struggle on the supply side of the voluntary carbon market to come up with a viable business model that ensures environmental integrity and contributes to achieving the objectives of the Paris Agreement. Our analysis finds that if carbon credits are used to offset remaining emissions against neutrality objectives, these credits need to be accounted against the host countries' Nationally Determined Contributions (NDCs) to ensure environmental integrity. Yet, operationalizing this approach is challenging and will require innovative solutions and political support. Key policy insights:. There is a growing mismatch between the faith placed in carbon credits by private sector companies and the continued quest for a common position of the main suppliers of the voluntary carbon market. . The voluntary carbon market has not yet found a way to align itself with the new legal architecture of the Paris Agreement in a credible and legitimate way. . Public policy support at the national and international level will be needed to operationalize a robust approach for the market's future activities.

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