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Carbon Market Watch defends its investigation into Colombian forestry projects, arguing that these projects produce 'hot air' credits that allow fossil fuel companies to avoid paying national carbon taxes. The organization refutes Verra's claims that its methodology was flawed, asserting that multiple assessment methods—including national reference levels and Ministry of Environment estimates—confirm the overestimation of emission reductions. It further contends that Verra's claims regarding community benefits lack transparency and that current auditing processes have failed to ensure environmental integrity.

The policy brief warns that the EU ETS is at risk of a new oversupply of allowances due to the fast decarbonisation of the power sector and the impact of the COVID-19 pandemic. It argues that the current Market Stability Reserve (MSR) is insufficient to manage the expected surplus from coal phase-outs, which could reach 1.55 billion EUAs by 2030 based on planned closures, or 5.31 billion EUAs if current trends continue. To maintain environmental integrity, the author recommends a one-off cap reduction of 450 million allowances, increasing the linear reduction factor to 3.1% from 2023, raising the MSR intake rate to 36%, and implementing a rule to cancel allowances held in the MSR for more than three years.

The document analyzes how free emission allowances under the EU ETS led to up to 50 billion euros in windfall profits for energy-intensive industries between 2008 and 2019. It challenges the 'carbon leakage' justification for these allowances, noting a lack of evidence for industrial relocation. The author recommends transitioning to full auctioning of permits and utilizing the resulting revenues for climate innovation and a just transition.

The report analyzes the Mataven and Kaliawiri REDD+ projects in Colombia, finding they generated approximately 21 million more carbon credits than justified by official government reference values. These 'hot air' credits were used by companies, primarily Primax Colombia SAS, to avoid paying the national carbon tax, leading to an estimated US$62 million in potential forgone tax revenues. The document attributes this to a system failure involving conflicts of interest for verification bodies, lack of stringency from standards like Verra (VCS) and ProClima, and insufficient enforcement by the Colombian Ministry of Environment and Sustainable Development.

A policy brief by Carbon Market Watch analyzing how the Matavén and Kaliawiri REDD+ projects in Colombia used artificially high baselines to generate millions of excess carbon credits. These credits were used by companies, primarily Primax Colombia SAS, to avoid paying the national carbon tax, leading to an estimated $33 million loss in state revenue from these two projects alone. The report highlights systemic failures involving project promoters, verification bodies, and the Colombian Ministry of Environment.

Between 2008 and 2019, fifteen CO2-intensive industrial sectors in nineteen EU countries earned estimated additional profits between €30 billion and over €50 billion from the EU ETS. These profits were derived from three primary sources: the overallocation of free emission allowances, the use of cheaper international credits (CERs/ERUs) for compliance, and the passing through of opportunity costs of free allowances into product prices. The iron and steel sector was the largest beneficiary, with profits ranging from €11.9 billion to €16.1 billion. In contrast, the aviation sector experienced a net loss of €151.2 million due to the need to purchase allowances. The report argues that free allocation may no longer be fit for purpose and recommends increasing the share of auctioning combined with targeted investment subsidies or a Carbon Border Adjustment Mechanism (CBAM) to reduce windfall profits and encourage decarbonization.

Carbon Market Watch argues that the rapid operationalisation of Article 6 of the Paris Agreement must not undermine environmental integrity or inclusiveness. The submission identifies several critical 'building blocks' required for the mechanism to function, including the establishment of a conflict-of-interest-free Supervisory Body, the implementation of independent grievance mechanisms, and the rigorous review of methodologies regarding additionality and permanence. It further advocates for an automatic partial cancellation of units to ensure overall mitigation in global emissions and the creation of proactive stakeholder notification systems to improve transparency beyond simple document availability.

Carbon Market Watch argues against the use of 'net' targets in the EU Climate Law, asserting that carbon removals from forests cannot replace the need for gross emission reductions. The organization advocates for a 65% reduction in emissions by 2030 and the exclusion of carbon removals from the EU carbon market to prevent big emitters from using offsets to avoid cutting pollution.

Carbon Market Watch argues that the EU ETS has failed to significantly reduce industrial emissions since 2012 due to free pollution permits and exemptions. To achieve climate neutrality by 2040, the briefing recommends increasing the Linear Reduction Factor (LRF), strengthening the Market Stability Reserve (MSR), ending free allowance allocations for industry and aviation, and earmarking 100% of auctioning revenues for climate action and innovation.

The document argues that a share of proceeds for adaptation should be levied on all Article 6.2 and 6.4 transactions as a monetary contribution with a floor value to ensure stable funding. It further asserts that all Internationally Traded Mitigation Outcomes (ITMOs) and Article 6.4 emission reductions (A6.4ERs), including those from sectors or gases outside a host Party's NDC, must be subject to corresponding adjustments to prevent double counting and maintain environmental integrity.

The letter urges EU officials to adopt gross greenhouse gas reduction targets and separate carbon removal targets to ensure that forest restoration does not serve as a 'smoke screen' for climate inaction in the energy, transport, and industrial sectors. It argues that fossil carbon and atmospheric carbon pools are distinct and that forest sinks are too impermanent and uncertain to justify market-based offsets.

The document advocates for a global carbon price on shipping to drive decarbonisation, suggesting that such a measure must avoid offsets and free permits while using revenues to fund green infrastructure and support vulnerable nations through rebates rather than exemptions.

The document critiques carbon offsetting as a "cheap way out" that often lacks environmental integrity and instead promotes a "contribution model." Under this model, companies finance climate projects without claiming the resulting emission reductions as their own, allowing for more transparent reporting of both positive and negative climate impacts.

Carbon Market Watch recommends strengthening the EU ETS by increasing the Linear Reduction Factor to 5.8% (or 3.1% with a cap reduction), raising the Market Stability Reserve intake rate to 36%, and ending free allowances for aviation and energy-intensive industries. The organization advocates for the inclusion of international maritime transport and waste incineration, while opposing the inclusion of road transport, buildings, and Carbon Dioxide Removal (CDR) credits.

The author contends that voluntary carbon offsetting is risky and unsustainable, often leading to double counting where both a company and a host country claim the same emission reductions. The document proposes a 'contribution claim' model, combined with internal carbon pricing, where companies fund climate action in other countries to support Paris Agreement goals without claiming carbon neutrality. If offsetting continues, the author insists on 'corresponding adjustments' to ensure reductions are not counted toward national targets, while warning that financing projects in countries with low ambition rewards 'climate laggards'.

Carbon Market Watch expresses significant concerns regarding the Taskforce on Scaling Voluntary Carbon Markets' blueprint, stating that it risks creating a speculative financial market that benefits the financial sector more than the climate. The organization argues that scaling the market without first addressing systemic integrity issues, such as the lack of transparency and the use of low-quality offsets, could lead to widespread greenwashing and a net increase in global greenhouse gas emissions. It specifically opposes the use of biological carbon sinks for offsets due to non-permanence and measurement uncertainties, and rejects the introduction of core carbon spot and futures contracts as a means of increasing opacity.

A joint letter from civil society organizations calling on the European Commission to prevent the adoption of unsustainable fuels in the maritime and aviation sectors. The authors argue that crop-based biofuels and liquefied natural gas (LNG) may increase emissions or create stranded assets, and instead advocate for the promotion of green electro-fuels produced from renewable electricity to support the European Green Deal's 2050 carbon neutrality goal.

The author contends that expanding carbon pricing to the transport and buildings sectors would shift the burden of emission reductions from polluting companies to consumers and undermine the EU's goal of cutting greenhouse gas emissions by at least 55% by 2030. The text argues that the Effort Sharing Regulation (ESR), which covers approximately 60% of EU emissions, should be improved by raising binding national targets and removing 'loopholes'—specifically flexibilities related to the EU emissions trading scheme and the land-use sector—rather than being repealed or reduced in scope.

The policy brief contends that relying on carbon offsets to meet climate targets is risky and unsustainable due to issues with environmental integrity and the risk of 'double counting' under the Paris Agreement. It argues that offsets can displace domestic climate action and mask the scale of the climate crisis by offering a cheap alternative to deep sectoral transformation. To address these failures, the document proposes shifting from a 'compensation' model to a 'contribution' model, where companies fund host country climate efforts without claiming carbon neutrality. Additionally, it suggests 'practice-based credits' that reward the implementation of sustainable practices rather than quantified results, which is particularly useful for land-use projects where permanence is difficult to guarantee. The brief emphasizes that these alternatives better align with sustainable development goals and protect companies from reputational risks associated with fraudulent offsetting claims.

The report argues that while carbon markets were originally designed for zero-sum offsetting, they can be repurposed for results-based climate finance (RBCF) to quantify and verify mitigation impacts. It identifies a specific 'niche' for RBCF: supporting technologies that have passed the R&D stage but are not yet market-mature. The authors highlight several limitations, including a bias toward the cheapest mitigation options, high transaction costs for monitoring, reporting, and verification (MRV), and a lack of effectiveness in least developed countries (LDCs) where emissions are low. To maximize impact, the report suggests shifting from rewarding to enabling through host-country policy commitments, reducing MRV stringency when credits are not used for offsetting, and complementing RBCF with upfront grants or loans.