The opinions expressed here by Trellis expert contributors are their own, not those of Trellis.
Imagine a roulette wheel where only 20 percent of the spaces are black and 80 percent are red. Everyone is gathered around watching as you place your chips on black — but the chances the ball lands on red are quite high. If you were a chief sustainability officer, that’s how buying credits from today’s voluntary carbon market would feel. The roulette wheel is heavily biased towards low-quality, reputationally-risky credits.
Those of us in the carbon market industry often wonder why demand is so weak. Carbon credits are one tool that can help a company decarbonize. But many businesses are afraid to use them in the wake of numerous exposees about low-quality credits. Stories, such as The Great Cash-for-Carbon Hustle or John Oliver’s segment on carbon offsets, were the height of carbon market skepticism a few years ago. But we still haven’t managed to overcome the naysayers.
Why not? Because there’s an inconvenient truth: The overall quality of the market continues to be poor due to “legacy” credits issued by projects using older methodologies that have long fallen from grace that weigh the market down.
Lackluster legacy
Currently, there are over a billion credits looking for buyers. Over 60 percent of these are known to have deep flaws, like large-scale renewable energy projects that questionably need carbon finance, or forest protection projects that are vastly overstating their emission reduction claims. These two project types alone comprise over half a gigaton of credits of questionable quality — that’s more than the annual emissions from Brazil.
Quality problems in an unregulated market aren’t new. However, typical mechanisms to manage quality in such markets, such as building a reputation through positive branding, don’t work well for credence goods — products or services where quality is hard for consumers to detect. Furthermore, contractual mechanisms such as refunds and warranties aren’t generally offered by producers of carbon credits.
A few market watchers have offered other options, such as encouraging philanthropies to “mop up” and cancel bad credits, but no one has stepped up to do so. This would also create a perverse incentive, as buying such credits would financially reward actors that produced poor quality credits, sending the wrong market signal.
Quality control efforts
The Integrity Council for Voluntary Carbon Credits (ICVCM) is meant to serve as a quasi-regulator of voluntary carbon markets. Its coveted ‘core carbon principles’ label is meant to set a standard for quality across the market. However, despite its efforts over the past three years, we don’t see the market significantly improving. This could be due to commitments made for multi-year purchases or simply because companies continue to bottom-feed. Transactions of ICVCM rejected credits continue apace — last year nearly 90 million credits (over 50%) were retired that were clearly rejected by the council.
Supply side efforts
It’s said that transparency is the best disinfectant. And this market needs a deep cleaning.
Currently, there’s growing transparency on the supply side. The ICVCM has identified a set of carbon methodologies whereby, if a credit is generated under an approved methodology, it can receive a ‘core carbon principles’ label. This increases the “20 percent hit rate” to around 65 percent. Carbon credit ratings can increase that hit rate to 80 or 90 percent because rating agencies investigate credits at a more granular, project-by-project level. All of these tools are publicly available, so buyers should be able to identify higher quality credits.
However, the demand side of the equation remains less clear cut. Of the approximately 160 million tonnes retired in 2025, 54 percent weren’t transparent – meaning the credits were used and retired by someone, but weren’t made public on the credit registry. Companies may be afraid of repercussions if they make the credits transparent, or perhaps their broker may not be logging their name into the registry There are some efforts to shine a light on credit usage. For example, California requires companies that operate in the state to disclose the credits they purchase. But this does not create universal transparency, given that such rules are rare.
Moving toward transparency
So here are three steps that would create the transparency we need in order to make carbon markets a reliable source of high-quality greenhouse gas mitigation:
Tighter rules: The ICVCM could require carbon registries to identify the entity retiring credits and the purpose of that retirement.
Carbon registry transparency: Even without ICVCM requirements, registries could require this information to be public and transparent. A few newer registries already do so, such as Isometric and the Open Carbon Protocol.
Company transparency: Organizations can make clear the credits they’re using and for what purpose. “Greenhushing” may seem safer, but contributes to prolonging the problem.
These simple recommendations create a virtuous cycle: rules or registries require transparency and/or companies do so voluntarily, followed by accountability from social pressure, the media, civil society or others. This would drive carbon project developers to generate higher quality to meet the demand.
In an unregulated space, transparency creates powerful incentives to do the right thing – in this case, avoiding the purchase, retirement and use of poor quality “legacy” credits to bring back credibility to the voluntary carbon market. In other words, let’s flip the roulette board to be full of winning spaces.
Donna Lee
Donna Lee has worked on climate change for over two decades. Along with being a co-founder of carbon credit ratings platform Calyx Global, she has served on the Science Based Targets initiative (SBTi) Technical Advisory Group and the Integrity Council for Voluntary Carbon Credits (ICVCM) Expert Panel. Previously, Donna was at the U.S. State Department where, among other duties, she served as a climate change negotiator for the U.S. Thereafter, she served as an advisor to governments, philanthropies and companies seeking to take climate action. Donna has a B.S. in Electrical Engineering and a Masters in Education from UCLA and a Masters in International Policy from Stanford University.
