The state of carbon markets in 2024

In early 2024, Mongabay published a five-part series on the voluntary carbon market that drew on more than a year of reporting examining the overall landscape and individual projects on three continents. The trade in carbon credits is a contentious strategy that aims to limit climate change and deforestation, and some see it as a valuable tool. In contrast, others call it a distraction that causes more problems than it solves.

Criticism surged in 2023. Media reports and scientific analyses called into question not just whether the purchase of carbon credits translated into the avoidance of emissions that would have resulted from the destruction or degradation of forests. Investigations asked whether carbon credit projects were actively causing harm, particularly to forest-dependent communities and Indigenous peoples, whose stewardship is critical to the health of many ecosystems. Benefits appeared to flow disproportionately to entities between the projects on the ground and the buyers of credits, known as intermediaries.

As 2024 comes to an end, the voluntary market has continued to evolve, with several relevant decisions for its future taken at the U.N. climate conference, COP29, in Baku, Azerbaijan.

This year-end overview highlights the critical hurdles and a glimpse of the market’s future.

‘Term’-oil

To understand what’s going on with the carbon market, it’s important to know the terms, vocabulary and organizations involved. For starters, a carbon credit is different from a carbon offset. A carbon credit represents a metric ton of carbon dioxide or the equivalent of other climate-warming gases kept out of the atmosphere. If a company (or individual, or country) uses that credit to compensate for its emissions — perhaps on the way to a claim of reduced net emissions — it becomes an offset.

This exchange is similar to what was initially envisioned for internationally transferrable mitigation outcomes, or ITMOs, the aim of which was to allow forested countries to sell emissions removals or reductions to other countries looking to compensate for their carbon footprints. Article 6 of the 2015 Paris climate agreement supports this type of international exchange.

Different project types use varying strategies to remove or avoid carbon emissions. The most common type is REDD+, which is short for reducing emissions from forest degradation and deforestation in developing countries (the plus sign adds a focus on sustainable forest management).

Recently, there’s been move away from coupling carbon offset purchases with claims of carbon neutrality. The U.K.-based Voluntary Carbon Markets Integrity Initiative (VCMI), a prominent international NGO that advises companies interested in the voluntary carbon market, issued claims guidance in mid-2023 saying that credit purchases should be viewed as contributions to addressing climate change, not direct offsets. (Another organization, the similar-sounding Integrity Council for the Voluntary Carbon Market, or ICVCM, is a group focused on making sure the supply of carbon credits meets quality standards.) The Science Based Targets initiative (SBTi), a corporate body, requires companies to reduce emissions by 90% if they’re going to make net-zero claims under their standard using offsets.

Certification groups, such as Verra, a U.S.-based nonprofit, approve credits derived from projects adhering to their methodologies. These methodologies aim to ensure that projects have specific characteristics. The projects must prove additionality, demonstrating that the emissions savings would not have happened without the intervention of the carbon credit seller. Emissions removals or reductions should also be permanent, which certifiers typically define on the scale of decades.

Forest conservation projects rely on baseline predictions of the amount of deforestation or degradation that would have occurred without intervention. That baseline, representing a hypothetical or “counterfactual” scenario, is then compared to observed deforestation or degradation rates to estimate the value of a given project.

Examining the carbon market

Mongabay’s carbon credit series began with a look at the key arguments around carbon credits, offsets and the market, as well as the early days of the trade. Investigations by the media and scientists surfaced questions about even highly touted carbon credit projects. As a result, criticisms increased, leading to the assessment that 2023 would be “an inflection point” for carbon markets by a prominent proponent of carbon markets.

Recent probes into the carbon market also revealed that some forest-dwelling communities say they’ve been sidelined by the push to protect and restore forests in the quest for salable carbon credits. Mongabay surveyed these issues in part two of the series.

Some Indigenous groups express their support and say that, under the right conditions, the carbon trade could provide them with support for forest conservation. But others worry that an unregulated market doesn’t have adequate safeguards to protect peoples’ rights to land and territories, particularly with the influx of intermediaries into the equation.

Intermediaries operate in a sometimes opaque middle ground between projects and buyers, and they were the focus of part three of Mongabay’s series. The term encompasses many different roles that connect the conservation work on the ground designed to reduce emissions, with the buyers of the carbon credits that result. But the most notorious are known as “carbon cowboys,” who, in some cases, have been involved in spurious schemes to acquire the rights to carbon from massive swaths of forested land.

Underpinning the value of every carbon credit is a complicated set of calculations aimed at demonstrating that the work of restoration or protection has resulted in additional metric tons of carbon dioxide being sponged out of the atmosphere (or kept from being emitted in the first place). These approaches were the subject of part four of the series.

Part five looks at the future of the carbon trade. The value of carbon credits traded on the voluntary carbon market declined to $723 million in 2023 from a peak of around $2 billion in 2022.

Finding a way forward

The 2024 climate conference, COP29, held Nov. 11-24, in Baku, Azerbaijan, fell short of many observers’ hopes regarding taking concrete action on addressing climate change. Early on in the proceedings, a group of climate and world leaders released a letter to the U.N., arguing that the climate COPs were “no longer fit for purpose” and urging reform if the world is to cap global temperature rise at 1.5° Celsius (2.7° Fahrenheit) above pre-industrial levels, the target identified in the 2015 Paris climate accords.

Still, proponents of carbon markets came away with some hope, as delegates agreed on key supports from the Paris Agreement, nearly a decade after its inception. First, countries agreed on key details for the trade of ITMOs from one country to another under Article 6.2 of the Paris accords, such as how registries will function and the process for “transparent” technical reviews to ensure “environmental integrity.” Indonesia is expected to be among the first to begin selling credits to other countries.

Parties also agreed to a centralized carbon market as envisioned in Article 6.4. According to the United Nations Framework Convention on Climate Change (UNFCCC), the market requires reviews to protect human rights and the environment. The text stipulates that Indigenous peoples must agree to projects before they begin.

Operationalizing these articles is expected to ensure that the benefits from carbon crediting are shared, according to observers and the UNFCCC.

“In principle, now, that should enable greater flows of finance to local communities, Indigenous peoples to protect and restore their land,” Edward Davey, head of the World Resources Institute Europe’s U.K. office, said in a webinar hosted by the International Institute for Environment and Development (IIED).

This updated vision for the carbon market also includes capacity-building support for the world’s least-industrialized countries.

Skepticism around both Articles 6.2 and 6.4 remains. The Belgium-based think tank Carbon Market Watch lauded the move toward transparency on 6.2 in an analysis. However, Jonathan Crook, the group’s policy lead on global carbon markets, said the system remained “opaque.”

“Even worse, the last opportunity to strengthen the critically weak review process was largely missed,” Crook added. “Countries remain free to trade carbon credits that are of low quality, or even fail to comply with Article 6.2 rules, without any real oversight.”

Carbon Market Watch called the approval of rules around carbon crediting “controversial.” On the positive side, the think tank noted that setting baselines would now require a “downward adjustment” to ensure that projects don’t issue too great a volume of credits. And the decision calls for the “best available science” to guide carbon crediting.

However, according to the analysis, the decisions didn’t go far enough to ensure carbon credits represent a permanent tool to mitigate climate change.

In early 2025, the Article 6.4 supervisory body will take up work to further clarify rules around the carbon market. Carbon market policy expert Federica Dossi said the group would “have to take tough decisions” that improve the quality of carbon credits over what has existed until now.

“If they are not, they will have to compete in a low-trust, low-integrity market where prices are likely to be at rock bottom and interest will be low,” Dossi said.

Banner image: Prosper Sabongo, a Ph.D. student, measures the circumference of a Funtunia africana tree in a forest reserve near the village of Masako, Democratic Republic of Congo. Photo by Ollivier Girard/CIFOR via Flickr (CC BY-NC-ND 2.0).

John Cannon is a staff features writer with Mongabay. Find him on Bluesky and LinkedIn.

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