The voluntary market for carbon offsets is a crucial tool to address climate change and fund innovative technologies, but credibility concerns are limiting the market's growth, according to the director general of the UN Cop 28 climate summit.
"We need to remove the stigma that surrounds carbon credits" with "low buyer confidence" currently restricting demand, said Cop 28 director general and special representative Majid al-Suwaidi at the International Emissions Trading Association's North America Climate Summit today, a Climate Week NYC side event.
Concerns about environmental integrity have long dogged the voluntary carbon market, which has surged in importance as more companies set climate targets. Credit prices have slipped this year as some corporations retreat from the market.
Finalizing rules around Article 6 of the Paris Agreement, which sets a framework for global carbon trading, is on the agenda for Cop 28, which is being held in Dubai. But the climate summit is also an opportunity to improve the "legitimacy and liquidity" of carbon markets more broadly, al-Suwaidi said.
He offered support for setting general standards for the voluntary market, facilitating public-private partnerships, and creating a global regulatory environment that is "clear and straightforward" for market participants.
Private sector initiatives, including the Integrity Council for the Voluntary Carbon Market, have looked to set general principles for the market, while regulators like the US Commodity Futures Trading Commission have expressed interest in taking action to prevent fraud. But market observers disagree over how far standards and regulations should go, since overly lax rules could prolong reputational risks for offset buyers while overly stringent rules could stifle project development.
So while al-Suwaidi offered general support for scaling up "high-integrity" offset transactions, other policymakers have called for more specific — and more restrictive — rules.
European Commission directorate general for climate action Kurt Vandenberghe today said that "well-regulated" carbon markets can be a powerful tool to reduce emissions. But he also advocated for prioritizing carbon capture and carbon removal projects over so-called "avoidance" projects, which reduce emissions relative to a baseline scenario.
