Voluntary Carbon Market (VCM)

Using Scientific Findings to Accelerate the Voluntary Carbon Market

Every week or two a new analysis is released related to REDD+ baselines and overcrediting in the sector, and market participants rally to debate the merits of the new approach and what it means. Today we have another opportunity for this discussion, with the release of extensive research led by scientists from UC Berkeley, funded by Carbon Market Watch. A week or so ago, the impetus was the final publication of a paper by West et al. 2023 concluding that inflated counterfactual baselines for many REDD+ projects result in issuance of more credits than are ‘real’, as well as an analysis by project broker Everland claiming the opposite. 

The recent piece from Haya et al. is a robust analysis of the challenges of carbon accounting in REDD+ projects, but unfortunately they’ve really missed the mark by concluding that carbon markets are ineffective as a climate solution. Of course there is a huge need for improvement in how we quantify the impacts of projects intended to protect tropical forests – but if we fail to leverage the market to protect existing carbon stocks we run the risk of losing tropical forests altogether, along with all of the other benefits they provide to society. 

Tropical nations won’t be able to protect their forests without the capital provided by the VCM. And while some companies do have the ability to make investments in climate action over and above meeting their emissions reduction targets, most business leaders won’t protect forests just because it makes them feel good. We need functioning markets to protect existing carbon stocks: we simply can’t afford to relegate this critical class of conservation to philanthropy.

In these discussions, it seems that we’ve reduced the conversation to a false dichotomy:

  1. REDD+ projects are overcredited, and as a result, no one should buy existing REDD+ credits (or perhaps, any REDD+ credits).
  2. REDD+ projects are having important impact, and as a result, no one should scrutinize REDD+ accounting at all.

Market participants, especially developers who have invested many years in on-the-ground work and relationship development, are understandably concerned about the market’s negative response to these analyses. Protecting threatened tropical ecosystems is critical to mitigating the worst impacts of climate change, and financing to protect these forests can provide life-changing benefits to communities, creating positive feedback to protect and replant forests. But just because an ecosystem is important and financing is having meaningful impacts on local communities does not mean that a project is having the precise climate impact that it claims.  We should scrutinize carbon accounting for existing projects, and at the same time we should invest in REDD+ projects, both current and future. Importantly, this does not mean abandoning market-based tools as leverage in tropical forest conservation.     

Rather than debating Everland vs. West et al, or even the merits of the voluntary carbon market writ large, let’s focus on how we can all - registries, developers, buyers, sellers - get more comfortable with the inevitable continual evolution of a market-based solution as part of global climate action. 

How do we get more comfortable with continual evolution?

1. First, understand that science demands continuous improvement. Stop penalizing carbon credit buyers after the fact for making retirements and associated claims using the best available information. We need to accept that our methods will improve, such that what is viewed as “good” today may not be state of the art tomorrow. We can’t just dump all the old credits every time the methods improve: that’s a sure way to dampen all enthusiasm for this important market. 

2. Develop sound approaches to handling the ‘overage’ of credits in the market. See, for example, the work we’re doing here at Rubicon Carbon through a risk-adjustment approach within our portfolios, as well as BeZero’s recent white paper on the same topic.

3. Expect the best available information to change, and stop waiting for the ‘right answer’. Consider how to structure investments and increase confidence in future purchasing with the application of dynamic baselining approaches. Most statistically-savvy players in this market, including all 4 ratings agencies and other transparency advocates, are employing dynamic baselines to better and more rigorously understand possibly counterfactual scenarios. We need market structures that allow buyers to confidently invest in projects where the realized outcomes are uncertain at the outset. 


4. Bring more scientists into the conversation. World-leading experts in remote sensing, forest biometrics, and geospatial statistics are sitting on the sidelines providing commentary rather than being included in carbon market conversations. Let’s build partnerships and strengthen academic and industry connections to ensure we’re working with the strongest team possible as we tackle the problem of quantifying carbon emissions reductions and removals.  


Ultimately, we need to ensure that we understand how projects are changing outcomes if we are to increase the confidence that the voluntary carbon market is having the meaningful impact we require. This does not mean retroactively finding fault in companies that made good-faith, industry-leading efforts to make themselves accountable for their emissions, or steering clear of investing in any tropical conservation carbon projects. Instead, this means measuring and monitoring project impact to the best of our abilities, confronting scientific evidence with an open mind, acknowledging and managing risk appropriately through portfolio diversification and risk adjustment, and evolving our approaches where necessary to drive the market forward.  Demonstrating a willingness to change, and to admit that past efforts fell short of claims, is critical to rebuilding trust in the market and particularly in the climate-critical work of protecting tropical forests. 




Key References

Haya, B. K., Alford-Jones, K., Anderegg, W. R. L., Beymer-Farris, B., Blanchard, L., Bomfim, B., Chin, D., Evans, S., Hogan, M., Holm, J. A., McAfee, K., So, I. S., West, T. A. P., & Withey, L. (2023, September 15). Quality assessment of REDD+ carbon credit projects. Berkeley Carbon Trading Project. https://gspp.berkeley.edu/research-and-impact/centers/cepp/projects/berkeley-carbontrading-project/REDD+

Thales A. P. West et al. Action needed to make carbon offsets from forest conservation work for climate change mitigation.Science381,873-877(2023).DOI:10.1126/science.ade3535


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