The logic of voluntary carbon credits has always been simple: Companies finance projects to avoid the release of carbon dioxide or remove it from the atmosphere, thereby offsetting the climate impact of their own emissions. Over time, this can help decarbonize hard-to-abate industries.
In practice, however, the voluntary carbon market has long suffered from a lack of transparency and verification. On close inspection, many projects turned out to be worthless, or even counterproductive, which raised concerns about “greenwashing.”
Recently, global leaders have started looking at carbon credits more favorably, for three big reasons. There is a growing realization that the world cannot achieve its climate goals without them. Carbon credits can help unlock climate finance and investment for developing countries, and thus deliver economic and social benefits that go well beyond reducing emissions. And now, we have the data, models, and technology to strengthen carbon-market integrity and provide the clarity that companies and investors demand.
As political and business leaders prepare for the United Nations COP29 climate summit in Azerbaijan, it is worth examining the potential of carbon credits in greater detail.
