CARBON MARKETS 101

The document explains the distinction between cap-and-trade systems (ETS) and baseline-and-credit mechanisms, detailing the evolution from Kyoto Protocol markets to the Paris Agreement's Article 6. It critiques carbon offsetting for enabling greenwashing and failing to reduce absolute emissions, while highlighting the specific shortcomings of CORSIA and REDD+. The guide advocates for a shift toward a 'climate contribution' approach where credits are cancelled without offsetting claims to support global climate action.

• There is a fundamental distinction between Emissions Trading Systems (ETS) and carbon crediting mechanisms: ETS involves trading pollution permits (allowances) for future emissions, whereas crediting mechanisms trade reductions that have already occurred in the past.
• Carbon offsetting is criticized for not reducing absolute emission levels and creating perverse incentives that discourage companies from pursuing internal decarbonization.
• The Clean Development Mechanism (CDM) under the Kyoto Protocol is considered a failure because a vast majority of its emission reductions would have occurred regardless of the mechanism, and it lacked essential safeguards for local communities.
• Article 6.2 of the Paris Agreement allows countries to trade internationally transferred mitigation outcomes (ITMOs) but lacks independent oversight and allows countries to keep trade data confidential, risking the trade of low-quality credits.
• Article 6.4 of the Paris Agreement introduces 'mitigation contribution units' which count toward the host country's climate target and cannot be used for offsetting, representing a shift away from traditional offsetting.
• The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is flawed because it only covers the growth of international flight emissions (excluding domestic flights) and focuses solely on CO2, ignoring other significant non-CO2 climate impacts.
• The voluntary carbon market is dominated by Verra and the Gold Standard, with a high concentration of credits coming from forestry, land-use, and renewable energy projects, many of which face risks regarding additionality and baseline-setting.
• REDD+ initiatives, particularly those from private standards, are criticized for exaggerated credit quantities and a lack of integrity, while the original UN REDD+ framework is not a carbon crediting system and lacks binding audits.

APA

Carbon Market Watch (2024). CARBON MARKETS 101. https://carbonmarketwatch.org/wp-content/uploads/2024/06/101-report-layout-carbon-markets-230224.pdf

Chicago

Carbon Market Watch. CARBON MARKETS 101. 2024. https://carbonmarketwatch.org/wp-content/uploads/2024/06/101-report-layout-carbon-markets-230224.pdf.

Wikipedia

{{cite report |author=Carbon Market Watch |title=CARBON MARKETS 101 |date=February 2024 |url=https://carbonmarketwatch.org/wp-content/uploads/2024/06/101-report-layout-carbon-markets-230224.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{carbonmarketwatch2024carbon, author = {{Carbon Market Watch}}, title = {{CARBON MARKETS 101}}, institution = {Carbon Market Watch}, year = {2024}, month = feb, url = {https://carbonmarketwatch.org/wp-content/uploads/2024/06/101-report-layout-carbon-markets-230224.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }