Governments must move from principles to policy to help unlock the next wave of voluntary carbon credit market demand, with targeted funding, coordinated interventions and clearer market signals needed to support corporate buyers, experts said at the Carbon Forward Expo in London on 14-15 October.
The carbon credit market has shown resilience despite weak retirement volumes, Chris Shipley, head of global carbon markets at the UK's Department for Energy Security and Net Zero (DESNZ), said, adding that governments now need to help lower the barriers to participation and channel investment into high-integrity credits.
"We see the supply integrity issue as being largely solved. Now it's about governments stepping up, taking action, putting those incentives in place and coordinating those interventions with other governments."
International coordination between governments and targeted use of public funding can help de-risk investment and unlock private sector activity, Shipley said.
On funding support, Shipley said the UK will soon make available around £800,000 to support four to six host countries in establishing reporting and authorisation procedures needed to unlock supply eligible under the first phase of the Carbon Offsetting and Reduction Scheme for International Aviation (Corsia). The funding will help countries establish reporting and authorisation frameworks, supporting both immediate Corsia compliance needs and longer-term market participation, while helping airlines access eligible supply, he said.
The UK government plans to respond to its voluntary carbon market consultation around Cop31 in November. Proposed measures include recognising a minimum quality threshold, clarifying the balance between value-chain emissions cuts and credit use, and drawing on a policy playbook to be announced by the Coalition to Grow Carbon Markets.
The response will also draw on some of the work being done by the International Emissions Trading Association (Ieta) on "safe harbour" measures, that is, reputational and legal protections that could help companies that want to do the right thing by buying carbon credits, Shipley said.
Experts agreed that restoring demand will depend on combining stronger policy support with greater confidence in credit quality. Shipley noted buyers were increasingly favouring credits carrying the Integrity Council for the Voluntary Carbon Market's (ICVCM) high-integrity Core Carbon Principles (CCP) and stronger third-party ratings, with premiums for such credits continuing to widen.
The carbon credit market is witnessing an increasing premium for highly-rated, high-integrity credits, but long-term supply of such credits remains scarce, Mo Safdar, head of origination at Climate Impact Partners, noted.
Safdar said 70pc of the money spent in the voluntary carbon market is on credits rated "BBB" and above, adding that corporate buyers are increasingly seeking long-term access to limited pools of high-quality supply. Future growth will require more buyers willing to commit to multi-year purchasing agreements rather than relying on spot transactions, allowing developers to secure financing and scale projects.
Companies that have made such commitments increasingly view carbon procurement as part of longer-term capital allocation and value-chain planning rather than a standalone sustainability expense, Safdar said.
A growing pipeline of higher-quality projects developed over the past several years should begin entering the market in the next couple of years, Tommy Ricketts, chief executive of ratings agency BeZero, said. This will help rebuild confidence in the market and support future demand, he added.
