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The document defines essential carbon market terminology, including the distinction between cap-and-trade and compliance markets, the mechanics of carbon credits and budgets, and specific regulatory frameworks like the EU's CBAM and the ICAO's CORSIA.

The author contends that the EU's CRCF framework relies on unscientific methodologies and lacks social safeguards, potentially fueling 'green-grabbing' and land inequality. The document further criticizes the proposed next phase of the CAP for lacking a ringfenced budget for environmental action and granting member states too much autonomy, which may lead to a 'race to the bottom' regarding environmental safeguards. It concludes that carbon and nature credits are unsuitable tools for ensuring a fair standard of living for farmers.

The statement critiques the 'like-for-like' principle in climate policy, which suggests matching the atmospheric lifetime or carbon cycle of emissions with corresponding removal types. The author contends that this logic allows industries to use cheap, temporary, and vulnerable removals to avoid deep emission cuts. It specifically highlights the danger of offsetting methane emissions with temporary storage, noting that methane has a permanent climate impact as it breaks down into CO2. The document also discusses the EU Green Claims Directive, noting a divide between the European Parliament's preference for permanent removals for fossil emissions and the more permissive stance of the European Commission and Council. The author concludes that all residual emissions should be balanced only by high-quality removals that lock away CO2 for centuries or millennia.

The document provides a comprehensive introduction to the ETS2, a 'cap and trade' system starting in 2027 to reduce emissions in buildings and road transport by 42% relative to 2005 levels by 2030. It details the market mechanisms, including the Linear Reduction Factor and the Market Stability Reserve (MSR2), and emphasizes that carbon pricing must be paired with complementary policies—such as building renovations and EV electrification—to prevent price volatility and ensure a just transition. The guide also describes the Social Climate Fund (SCF), a €65 billion mechanism designed to support vulnerable households facing energy and transport poverty, and analyzes the distribution and potential misuse of ETS2 revenues among member states.

The report examines 'coal transition credits' as a financial tool for early coal plant closure in Southeast Asia. It finds significant expert skepticism, with only 2 out of 10 experts viewing them as effective. Major risks identified include carbon leakage, baseline inflation, and 'perverse incentives' that may reward polluters. The document concludes that CTCs are not a reliable exit strategy and emphasizes the need for systemic public policy and funding over market-based offsets.

The report examines 'coal transition credits' (CTCs) as a mechanism to accelerate the phase-out of coal-fired power plants in Southeast Asia. While proponents suggest CTCs can unlock private finance for early retirement and just transition measures, a survey of 10 experts reveals widespread skepticism. Key concerns include the risk of carbon leakage, where retired capacity is replaced by other fossil fuels, and the difficulty of establishing conservative baselines to prove additionality. Experts warn that CTCs could create perverse incentives, rewarding polluters and encouraging the delay of retirements to maximize credit issuance. Furthermore, the report highlights structural barriers in Southeast Asia, such as young coal plant fleets and rigid power purchase agreements, and notes that current methodologies, including Verra's VM0052, may have loopholes regarding 'captive' coal plants. The findings suggest that without rigorous guardrails and a focus on public finance, CTCs risk being a tool for greenwashing rather than a driver of genuine climate impact.

The report examines 'coal transition credits' (CTC)—carbon credits generated by retiring coal plants early and replacing them with renewables—as a way to fund the energy transition in Southeast Asia. Based on a survey of 10 experts, the document finds deep skepticism regarding the instrument's effectiveness. Key concerns include 'carbon leakage' (where retired capacity is replaced by other fossil fuels), the subjectivity of baseline scenarios leading to over-issuance, and the risk of 'greenwashing' or rewarding polluters. Experts highlight that only 2 out of 10 view CTCs as effective, warning that without strict safeguards, these credits could undermine genuine decarbonization and fail to provide a 'just transition' for affected workers and communities.

The Corporate Climate Responsibility Monitor reveals that major companies are increasing their use of carbon removals, often relying on low-quality, non-permanent solutions without sufficient transparency. The report highlights issues of double-counting between corporations and governments and argues that carbon removals are being used as a 'licence to pollute' rather than as a supplement to essential emissions cuts.

The International Organisation for Standardisation (ISO) and the Greenhouse Gas Protocol (GHG-P) announced a partnership on 9 September 2025 to merge and align their greenhouse gas accounting frameworks. The collaboration focuses on three core areas: corporate footprints, product footprints, and project-level GHG accounting. While the authors welcome the potential for a unified global framework to reduce fragmentation and reporting burdens, they warn that harmonisation must not lead to the dilution of standards. Specifically, they argue that carbon credits must not be treated as substitutes for direct emission reductions and that scope 3 accounting must not be artificially lowered through certificate trading. The authors also emphasize that the governance of the new standards must be transparent and inclusive to prevent the overrepresentation of large corporate interests, suggesting a model that combines ISO's regulatory recognition with GHG-P's transparency and stakeholder breadth.

Carbon Market Watch warns that allowing international carbon credits in the EU's 2040 climate target could lead to the outsourcing of 140 million to 430 million tonnes of emissions. The organization highlights two interpretations of the Commission's '3% of 1990 EU net emissions' proposal: a cumulative scenario (Scenario 1) and a build-up scenario (Scenario 2). Both would result in higher EU emissions than a fully domestic approach and impose significant costs—ranging from €7 billion to over €30 billion—diverting funds from domestic decarbonization and climate finance. The document further contends that such credits undermine the 2040 target, risk exacerbating inequalities in the Global South, and contradict previous impact assessments favoring a domestic 90-95% net emission reduction.

Carbon Market Watch argues that indirect cost compensation under the EU ETS should be phased out rather than expanded to new sectors. The organization identifies several flaws in the current State aid guidelines, including the use of fossil-fuel-only generation capacity to determine CO2 emission factors and a lack of transparency regarding which companies receive aid. It specifically warns that including primary plastics and organic chemicals in the compensation scheme would subsidize fossil-fuel-reliant production and undermine circular economy efforts.

The policy brief analyzes a June 2025 non-paper from 16 EU member states seeking reforms to the ETS2, the emissions trading system for buildings and road transport. The authors argue that while some suggestions—such as publishing more data and starting auctions early—are low-risk, proposals to modify the MSR2 trigger mechanisms, extend its lifetime beyond 2031, or strengthen price controls would increase the total volume of allowances in the market. Because MSR2 allowances are already additional to the emissions cap, the brief contends that these reforms would lead to higher greenhouse gas emissions, weaken the investment signal for decarbonization, and potentially jeopardize the EU's overall climate goals.

The report finds that while durable CDR (storage >1,000 years) is essential for neutralizing fossil emissions, corporate uptake is low and concentrated among a few companies, notably Microsoft. Many companies instead rely on non-durable CDR, which the authors argue is unsuitable for neutralizing long-cycle emissions. The report highlights risks of double counting between companies and governments and a systemic lack of transparency regarding the environmental and social impacts of CDR projects. It recommends that voluntary initiatives like SBTi require companies to set separate monetary and removal targets based on ability to pay, rather than merging them into net-zero goals.

Carbon Market Watch argues against scrapping the CBAM despite industry complaints about administrative complexity, suggesting instead that the EU quantify actual carbon leakage and circumvention risks before expanding the mechanism to downstream products. The organization emphasizes that complementary EU policies like the Digital Product Passport and international standards can mitigate administrative burdens. It further recommends providing special treatment for Least Developed Countries (LDCs) and Small Island Developing States (SIDS) to align with UNFCCC principles.

The policy brief by Carbon Market Watch and Oeko-Institut criticizes the draft CRCF methodologies for permanent carbon removals, citing critical failures in additionality, biomass accounting, and long-term monitoring. It argues that the current framework risks certifying low-quality units that do not represent actual emission reductions, potentially undermining EU climate action.

Carbon Market Watch proposes extending the EU ETS to include all departing flights from the European Economic Area (EEA), non-CO2 aviation effects, and private jets. The brief argues that the current limited scope—covering only intra-EEA flights—fails to address the sector's full climate impact and misses significant revenue opportunities. By implementing these extensions and applying carbon price multipliers for private jets, the EU could generate substantial funds to finance e-kerosene development, upgrade railway infrastructure via the Trans-European Transport Core Network (TEN-T), and meet international climate finance targets. The author specifically recommends replacing support for biofuels with a focused e-kerosene scheme extended to 2040.

Carbon Market Watch recommends that Zambia's 2025 Carbon Market Regulations include more robust quantitative criteria for greenhouse gas uncertainty, mandatory independent grievance processes, and a minimum activity longevity of 100 years for land-use projects to ensure climate-relevant timescales. The organization also advocates for mandatory benefit-sharing for all activities affecting local communities and the adoption of high-quality methodology labels, such as Article 6.4 or ICVCM's CCP, over CDM or VCS standards.

Carbon Market Watch criticizes proposals to compensate EU exporters under the Carbon Border Adjustment Mechanism (CBAM), arguing that the actual competitiveness risk is limited and that subsidies would reward polluters. The author contends that CBAM revenue should not be used to subsidize EU producers, as this could conflict with WTO rules and encourage the export of polluting products. Instead, the document advocates for targeted financial support for clean technology innovation and the global expansion of carbon pricing.

The document warns that reforming the MSR2 before the ETS2 launches in 2027 could lead to an oversupply of allowances, weakening the price signal and jeopardizing the EU's 2030 climate target of a 42% reduction in covered emissions. It argues that high prices should be managed through 'complementary measures'—such as CO2 standards for vehicles and boiler phase-outs—and the strategic use of the Social Climate Fund and €300 billion in ETS2 revenue. The authors contend that existing safeguards, including a 'soft price cap' of approximately €55 per tonne and the early auctioning of 30% more allowances, are sufficient for the initial phase. They caution that any increase in allowance supply must be 'cap neutral' to avoid exceeding the carbon budget.

Carbon Market Watch (CMW) opposes the UK government's proposed reliance on market-based mechanisms and the VCMI Scope 3 Action Code of Practice, arguing that allowing carbon credits to 'close scope 3 emissions gaps' effectively legitimises offsetting and risks rewarding 'climate laggards'. CMW advocates for a 'contribution' or 'beyond value chain mitigation' (BVCM) model over offsetting and insetting, and suggests that the UK's Environmental Reporting Guidelines (ERG) should mandate, rather than encourage, the disclosure of carbon credit information. The document also recommends 'temperature-alignment claims' (specifically referencing 1.5°C) as a more precise alternative to 'Paris alignment' claims.