Atlantic Council GLOBAL ENERGY CENTER
ISSUE BRIEF
The Flaws in Project-based Carbon Credit Trading and the Need for Jurisdictional Alternatives APRIL 2024
BYRON SWIFT Contributing Authors: KEN BERLIN, GEORGE FRAMPTON, AND FRANK WILLEY
I. Introduction and Summary It has long been recognized that the creation of funding programs to pay for the value of carbon sequestration in tropical forests could be a powerful tool to address climate change. Such programs, if implemented effectively, could unlock funding for forest and ecosystem conservation in developing countries while supporting local economies and reducing carbon emissions into the atmosphere. This issue brief assesses the current widespread market-based methodology using voluntary carbon offsets to reduce deforestation based on individual projects in developing countries. This methodology generates credits that are then sold by traders to private businesses to offset their carbon emissions—and is under severe attack. This carbon credit market grew fourfold from $500 million in 2020 to almost $2 billion in 2022,1 but has been thrown into serious and broad disrepute by a series of critical analyses and investigations that conclude, in the words of one extensive review of the largest certifier of forest carbon credits, 90 percent of the currently certified offsets were “likely to be worthless.”2
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1
Approximately 40 percent of such credits are based on forest conservation projects. “New! State of the Voluntary Carbon Markets 2023 Finds VCM Demand Concentrating Around Pricier, High-Integrity Credits,” Ecosystem Marketplace, accessed April 10, 2024, https://www. ecosystemmarketplace.com/articles/new-state-of-the-voluntary-carbon-markets-2023-finds-vcmdemand-concentrating-around-pricier-high-integrity-credits/.
2
Patrick Greenfield, “Revealed: More than 90% of Rainforest Carbon Offsets by Biggest Certifier Are Worthless, Analysis Shows,” Guardian, January 18, 2023, https://www.theguardian.com/ environment/2023/jan/18/revealed-forest-carbon-offsets-biggest-provider-worthless-verraaoe; and Lisa Song and James Temple, “The Climate Solution Actually Adding Millions of Tons of CO2 into the Atmosphere,” ProPublica and MIT Technology Review, April 29, 2021, https:// www.propublica.org/article/the-climate-solution-actually-adding-millions-of-tons-of-co2-intothe-atmosphere; and Romm, “Are Carbon Offsets Unscalable?” Ivy S. So, Barbara K. Haya, and Micah Elias, Voluntary Registry Offsets Database, Berkeley Carbon Trading Project, University of California, Berkeley, May 2023, https://gspp.berkeley.edu/research-and-impact/centers/cepp/ projects/berkeley-carbon-trading-project/offsets-database.