Correlation or Causation? Challenges in Assessing the Effect of Carbon Credit Use on Corporate Climate Action

The report investigates whether corporate use of carbon credits substitutes or complements internal emission reductions. A review of existing literature shows mixed results: while several studies find a positive correlation between carbon credit use and internal emission reductions, a peer-reviewed study by Stolz and Probst (2025) finds no significant correlation and provides qualitative evidence of 'mitigation deterrence' in some cases. Interviews with companies indicate that the role of carbon credits is shifting due to greenwashing concerns and the rise of science-based targets (SBTi). The authors conclude that developing a robust empirical study to prove causality is inherently challenging due to endogeneity, data limitations in the CDP database, and structural changes in corporate climate strategies.

• Theoretical mechanisms suggest carbon credits can either substitute or complement internal reductions. Substitution occurs if credits are used to achieve a target cost-effectively (the 'target effect') or if they crowd out a fixed climate budget (the 'investment effect'). Conversely, they may complement reductions if a company only sets a target because credits are available, thereby incentivising some internal abatement.
• Empirical studies on the correlation between carbon credit use and internal emission reductions are contradictory. Several studies (Sylvera 2023, MSCI Carbon Markets 2023a, Watanabe et al. 2024) report a positive correlation, but the only peer-reviewed study (Stolz and Probst 2025) finds no significant relationship between the number of retired credits and Scope 1 emission reductions.
• Qualitative evidence suggests that for some large-scale users, carbon credits directly compete with internal mitigation measures. Examples include Shell, Eni, and Inpex (via the target effect) and Delta Air Lines and easyJet (via the investment effect).
• Interviews reveal a shift in corporate behavior since 2023; companies are more reluctant to use carbon credits for offsetting claims due to increased media focus on integrity issues, greenwashing accusations, and legal risks.
• The adoption of science-based targets (SBTi) has increased dramatically, with the number of companies setting such targets growing by more than 4,000 percent between 2017 and 2025. This trend complicates causal analysis as SBTi targets generally prohibit the use of credits to meet near-term goals.
• Developing a causal empirical study is deemed 'inherently challenging' due to endogeneity (where factors like profitability or regulation affect both credit use and reductions), measurement errors in self-reported CDP data, and the lack of information on whether specific climate targets allow for offsetting.
• The report identifies several confounding factors that correlate with carbon credit use and may independently drive emission reductions, including institutional ownership, mandatory emission disclosure (e.g., EU ETS), and the share of staff working on environmental matters.

APA

Lauer, S., Schneider, L., Haase, I., Cook, V., & Jung, H. (2025). Correlation or Causation? Challenges in Assessing the Effect of Carbon Credit Use on Corporate Climate Action. Carbon Market Watch. https://carbonmarketwatch.org/wp-content/uploads/2025/11/Final-Report-Use-of-carbon-credits-incl-summary.pdf

Chicago

Lauer, Sophia, Lambert Schneider, Isabel Haase, Vanessa Cook, and Hannes Jung. Correlation or Causation? Challenges in Assessing the Effect of Carbon Credit Use on Corporate Climate Action. Carbon Market Watch, 2025. https://carbonmarketwatch.org/wp-content/uploads/2025/11/Final-Report-Use-of-carbon-credits-incl-summary.pdf.

Wikipedia

{{cite report |last1=Lauer |first1=Sophia |last2=Schneider |first2=Lambert |last3=Haase |first3=Isabel |last4=Cook |first4=Vanessa |last5=Jung |first5=Hannes |title=Correlation or Causation? Challenges in Assessing the Effect of Carbon Credit Use on Corporate Climate Action |publisher=Carbon Market Watch |date=25 November 2025 |url=https://carbonmarketwatch.org/wp-content/uploads/2025/11/Final-Report-Use-of-carbon-credits-incl-summary.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{lauer2025correlation, author = {Lauer, Sophia and Schneider, Lambert and Haase, Isabel and Cook, Vanessa and Jung, Hannes}, title = {{Correlation or Causation? Challenges in Assessing the Effect of Carbon Credit Use on Corporate Climate Action}}, institution = {Carbon Market Watch}, year = {2025}, month = nov, url = {https://carbonmarketwatch.org/wp-content/uploads/2025/11/Final-Report-Use-of-carbon-credits-incl-summary.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }