Carbon markets FAQ

The document outlines the two primary types of carbon markets—cap-and-trade and carbon crediting systems—and distinguishes between compliance markets, which are based on obligatory targets, and voluntary markets used for corporate social responsibility. It highlights the role of Article 6 of the Paris Agreement in establishing new international market mechanisms. The text critically assesses carbon offsetting, particularly REDD+ forestry projects, noting that they often generate exaggerated credits and lack adequate safeguards. It concludes that carbon credits cannot scientifically be proven to reliably neutralise one tonne of CO2 and recommends that companies move toward a 'climate contribution' or 'beyond value chain mitigation' (BVCM) model to provide climate finance without making misleading offsetting claims.

• Carbon markets are divided into compliance markets, which focus on obligatory emissions targets, and voluntary markets, which are used by organisations for public relations or corporate social responsibility. The distinction between the two is increasingly blurred, as seen in the aviation sector where airlines use credits for both the UN's CORSIA obligations and voluntary PR campaigns.
• International carbon markets are governed by Article 6 of the Paris Agreement, which introduced two new mechanisms (Article 6.2 and Article 6.4) to replace those from the Kyoto Protocol. While the overall rulebook was agreed upon at COP26 in October 2021, specific design elements and implementation requirements remain under negotiation.
• Forestry-based carbon credits, specifically those under the REDD+ framework, are heavily criticised for generating exaggerated credit quantities, having questionable climate impacts, and lacking safeguards for local communities and the environment.
• Carbon offsetting is scientifically unreliable because one credit cannot be proven to neutralise one tonne of CO2. Nature-based solutions are particularly risky due to their short lifespans compared to the centuries emissions remain in the atmosphere. This has led to legal actions and a planned EU ban on product-level offsetting claims starting in 2026.
• To avoid greenwashing, the document advocates for a 'climate contribution' approach where companies buy and cancel credits to provide climate finance without claiming emission reductions. Alternatively, companies may adopt a 'beyond value chain mitigation' (BVCM) model focusing on finance rather than assumed tonnes of reductions.

APA

Marcos, M. V. (2024). Carbon markets FAQ. Carbon Market Watch. https://carbonmarketwatch.org/2024/03/01/carbon-markets-faq/

Chicago

Marcos, Miriam Vicente. Carbon markets FAQ. Carbon Market Watch, 2024. https://carbonmarketwatch.org/2024/03/01/carbon-markets-faq/.

Wikipedia

{{cite report |last1=Marcos |first1=Miriam Vicente |title=Carbon markets FAQ |publisher=Carbon Market Watch |date=1 March 2024 |url=https://carbonmarketwatch.org/2024/03/01/carbon-markets-faq/ |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{marcos2024carbon, author = {Marcos, Miriam Vicente}, title = {{Carbon markets FAQ}}, institution = {Carbon Market Watch}, year = {2024}, month = mar, url = {https://carbonmarketwatch.org/2024/03/01/carbon-markets-faq/}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }