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

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  • Nicolas Kreibich
  • Lukas Hermwille

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.

Suggested Citation

  • Nicolas Kreibich & Lukas Hermwille, 2021. "Caught in between: credibility and feasibility of the voluntary carbon market post-2020," Climate Policy, Taylor & Francis Journals, vol. 21(7), pages 939-957, August.
  • Handle: RePEc:taf:tcpoxx:v:21:y:2021:i:7:p:939-957
    DOI: 10.1080/14693062.2021.1948384
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    Cited by:

    1. Jens Abildtrup & Jette Bredahl Jacobsen & Suzanne Elizabeth Vedel & Udo Mantau & Robert Mavsar & Davide Pettenella & Irina Prokofieva & Florian Schubert & Anne Stenger & Elsa Varela & Enrico Vidale & , 2024. "Preferences for climate change policies: the role of co-benefits," Journal of Environmental Economics and Policy, Taylor & Francis Journals, vol. 13(1), pages 110-128, January.
    2. Haotong Jiang & Liuyang Yao & Xueru Bai & Hua Li, 2023. "Dynamic Analysis and Simulation of the Feasibility and Stability of Innovative Carbon Emission Reduction Projects Entering the Carbon-Trading Market," Sustainability, MDPI, vol. 15(8), pages 1-19, April.
    3. Gregory Trencher & Mathieu Blondeel & Jusen Asuka, 2023. "Do all roads lead to Paris?," Climatic Change, Springer, vol. 176(7), pages 1-33, July.
    4. Lei, Heng & Xue, Minggao & Ye, Jing, 2024. "The nexus between ReFi, carbon, fossil energy, and clean energy assets: Quantile time–frequency connectedness and portfolio implications," Energy Economics, Elsevier, vol. 132(C).
    5. Filewod, Ben & McCarney, Geoff, 2023. "Avoiding leakage from nature-based offsets by design," LSE Research Online Documents on Economics 117927, London School of Economics and Political Science, LSE Library.
    6. Elizabeth Canales & Jason S. Bergtold & Jeffery R. Williams, 2024. "Conservation intensification under risk: An assessment of adoption, additionality, and farmer preferences," American Journal of Agricultural Economics, John Wiley & Sons, vol. 106(1), pages 45-75, January.
    7. Hechelmann, Ron-Hendrik & Paris, Aaron & Buchenau, Nadja & Ebersold, Felix, 2023. "Decarbonisation strategies for manufacturing: A technical and economic comparison," Renewable and Sustainable Energy Reviews, Elsevier, vol. 188(C).
    8. Anthony P. Heynen & Prabhakaran Vanaraja Ambeth, 2023. "Sustainable Legacies of a Climate Positive Olympic Games: An Assessment of Carbon Offsets and Renewable Energy for Brisbane 2032," Sustainability, MDPI, vol. 15(2), pages 1-26, January.
    9. Chloe Dawson & Paul Dargusch & Genia Hill, 2022. "Assessing How Big Insurance Firms Report and Manage Carbon Emissions: A Case Study of Allianz," Sustainability, MDPI, vol. 14(4), pages 1-10, February.
    10. Filewod, Ben & McCarney, Geoff, 2023. "Avoiding leakage from nature-based offsets by design," LSE Research Online Documents on Economics 117928, London School of Economics and Political Science, LSE Library.
    11. Sung Jin Kang & Sun Lee & Seon Ju Lee, 2021. "Impacts of Environmental Agreements on Bilateral Trade of Climate Industry," Energies, MDPI, vol. 14(21), pages 1-17, November.

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