The carbon offset market has been damage recently, bringing some real doubt to its legitimacy. First, it’s important to understand the intent of these offsets is to better gauge the legitimacy of the market moving forward.

Voluntary carbon markets exist for companies and other buyers to purchase carbon credits. The credits offset their emissions and can be used to attempt to achieve “net zero” targets. A lot of these are forest based. Some believe the carbon capturing attributes of the forest or other landscapes can offset a company’s emissions.

With pressure from political, environmental and shareholder activists, companies found themselves bolstering sustainability efforts and even touting ambitious net-zero goals. Reducing emissions can be difficult both on an operational level and throughout a company’s supply chain.

Offset markets were thought to be a large part of the answer, to achieve the somewhat misleading net-zero pledge. Companies began purchasing them and for a while, the market was booming as the price of carbon credits increased.

In 2023 a lot of companies pulled back from this market. Accusations of greenwashing grew, as did internal concerns for reputational risk. This was borne in part out of increased scrutiny and studies.

“In January 2023, a report by The Guardian, the German weekly Die Zeit and Source Material assessed credits certified by Verra, a leading carbon standard. The investigation found that more than 90% of their forestry credits did not represent real emissions reductions.”

In August, a study in Science assessed forestry programs significantly overestimated their prevention of deforestation.” (CSIS-Center for Strategic and International Studies). January 2024

While not extinct, an approximate drop of 60% in the value of these offsets posed a real challenge to this still potentially emerging market.

It seems carbon credits should be more scrutinized for real validity. Companies should not use them as a substitute, but rather a complement to aggressive real carbon emissions reductions.

Most new markets go through difficult growing pains. This may be a natural phase toward a truer market, to dramatically increase the capital needed globally for eco-restoration in the face of climate change.

Tom Koehler
FOLBR Director of Climate Action