Carbon markets have become a cornerstone of global climate action. By converting avoided emissions, emission reductions, and carbon removals into tradable assets, countries gain new pathways to meet their Paris Agreement commitments. Companies can likewise offset some of their emissions as they transition toward net-zero operations. But as the world scrambles to stay below the 1.5°C threshold, is the carbon market system fit for purpose? Or is there the risk that its rules and incentives are slowing down the pace of response?
The ingredients of a carbon project
A carbon project is a mechanism that allows organisations to offset their emissions by investing in activities that ‘sequester’ carbon from the atmosphere, avoid the release of carbon into the atmosphere, or reduce ongoing carbon emissions. The principles that emerged under the Kyoto Protocol gave companies two routes to act: reduce emissions internally and offset what remains through certified projects that capture or prevent carbon emissions elsewhere.
Among project types, nature-based solutions (NbS) projects are the most common. NbS projects reduce/avoid emissions or increase carbon storage by restoring or managing ecosystems such as forests, grasslands, agricultural land or wetlands. To be viable, a project needs three core ingredients. First and foremost, it needs land, and enough of it to make the project worth investing in (more on this below). Secondly, it needs proof of degradation — essentially a recent track record of past risk, or evidence of imminent future risk, and preferably both. These risks encompass deforestation, overgrazing, fires, unsustainable agricultural practises or other deterioration in ecosystem quality, and the intervention needs to demonstrate that it addresses actual or imminent loss, rather than starting from a pristine baseline. And thirdly, you need to be able to prove ‘additionality’: that without external carbon finance the activity could not and would not take place. Evidence of additionality ensures that verified credits are only issued where carbon revenue is essential for project implementation.
Quality, Integrity and the ‘Perfect Credit’
So, if you’re a project developer, and assuming you have these three ingredients in place, you’ll be looking for ways to make your project attractive to investors. The shorthand for this is ‘credit integrity’, with high integrity credits attracting a value premium and a host of interested blue-chip buyers. So, on top of land, proof of degradation and additionality, what do the large players of this world look for when deciding how and where to allocate their carbon offsetting money?
The baseline must-have is good science. As C4ES founder Anthony Mills put it, the closer carbon scientists can get to predicting and then counting every molecule of carbon captured, the better (and the more bankable) the project. In design terms, this involves highly technical data collection and analysis across a range of disciplines, from soil testing to water quality to vegetation surveys. The carbon market system in its current form is not geared around ‘rules of thumb’ but relies on rigorous cross-disciplinary practice by environmental scientists, agronomists, hydrologists, microbiologists and remote-sensing specialists to predict to the most scientifically sound degree exactly what the carbon results will be.
In addition to rigorously applied carbon science, projects that generate high integrity credits tend to share three other characteristics. Firstly, they are designed with, co-owned by, and delivered with the meaningful participation of local communities. This is more than a moral point about ‘local ownership’ — any large-scale carbon removal project requires thousands of people, sometimes hundreds of thousands, to change how they make a living — whether transitioning from unsustainable agricultural practices to forest stewardship, improving rangeland management, or adopting climate-smart practices and technologies. Unless those people are fully bought in from the outset, that’s not going to happen.
Community participation, however, isn’t simply a case of getting community buy-in and sign-off at the design stage. It’s about building in tangible benefit sharing — including financial and non-monetary benefits — and then actually making it happen. Any project that lets down its local stakeholders is not only going to fail, with up-front investment going down the drain. It’s also going to send a signal to other communities in the target country, and potentially much further afield, that carbon developers are not to be trusted. Free, Prior and Informed Consent (FPIC) provides a practical framework for community participation. It ensures decisions are voluntary and informed, taken before activities start, and revisited at defined milestones so participants get and stay on board. In practice, this means accessible information, inclusive project governance and management, transparent revenue distribution and functioning feedback and grievance channels. FPIC enables communities to co-design project activities and interventions, ensuring that the solutions reflect their priorities, absorb their traditional knowledge, and correspond with their lived experience. Projects that maintain consent and deliver agreed benefits retain trust and can flex over time as conditions evolve to keep implementation on track. In other words, community participation is a cornerstone of the entire carbon removal landscape.
Secondly, response to climate change isn’t all about the carbon. As the world heats up, critical natural ecosystems experience biodiversity loss, while the erosion of centuries-old livelihoods in agriculture and fishing presents millions with a choice between poverty, internal displacement and migration to the global north. Carbon projects which can predict benefits in terms of biodiversity preservation and livelihoods protection and then show compelling and measurable evidence of delivering them, are going to earn a premium over standard carbon credit pricing.
Thirdly, robust monitoring is essential. This means putting in place a system that clearly tracks how carbon is stored or reduced — including soil sampling, satellite data and verifiable carbon accounting — alongside tracking of biodiversity protection and human socioeconomic benefits. A buyer of high quality credits — whether a government or a global corporation — will demand systematised evidence that a given project sequesters carbon and regenerates eco-systems and attracts returning birds, mammals and insect species and supports local livelihoods. This combination is the Holy Grail of the carbon market, and is what provides the returns that both developers and investors seek.
Balance is Everything
In reality, even with all three ingredients in place a carbon project can only succeed when it balances the essential interests of the community, the environment and biodiversity, the investor, and the government. Communities must see real livelihood benefits, ecosystems must show measurable improvement, investors must have confidence in long-term credit integrity, and governments must see national and policy alignment. When all four of these align, a project becomes both feasible and durable. But if any of these spheres fall out of sync, the risk increases of the project eventually running into social, regulatory, financial or ecological challenges. This four-way balance highlights that carbon project development goes far beyond standards compliance — it requires developers to play multiple roles simultaneously: community engagement, biodiversity stewardship, institutional support, government liaison, and investment preparation.
Too big, too expensive, too slow?
But playing all these roles, and all this scientific and social rigour, has ramifications for carbon projects. The first consequence is that, simply put, carbon projects need to be very big. Because designing a project and verifying carbon removals and reductions is a complex, resource-intensive process that can take years (and involve field surveys, biodiversity assessments, stakeholder consultations and third-party audits and a host of other reviews) they only make investment sense when they cover very large tracts of land — for example a minimum of 50,000–100,000 hectares for avoided deforestation and managed forest projects. Because vast quantities of land in climate-vulnerable regions — notably in Africa — are configured under fragmented or customary tenure systems, aggregating enough area for large projects can be challenging.
The second consequence is that projects are relatively slow to develop. Although design science is getting better and quicker, and with the use of remote sensing, drones and other technology will accelerate further still, the project design and development phase usually takes at least wo years, and although it can happen quicker – C4 EcoSolutions has taken ambitious projects from feasibility study to implementation in not much more than a year – it can be much longer before implementation activities get going.
The third repercussion is that it’s much easier for investors to buy into a project in a relatively developed, socially predictable and politically stable country than in one with higher levels of uncertainty. It’s not by accident that South Africa is host to over a 100 carbon projects, while countries like Mali, Chad and Niger lag far behind in attracting and leveraging carbon finance. A million trees planted in Mali since 2020 sounds impressive to the layperson. But in a country on the frontline of the world’s largest and fastest-growing desert, it hardly registers as a drop in the ocean — or perhaps more suitably, a grain of sand — against the scale of the challenge and the scope of the required response.
These ‘repercussions of rigour’ in the carbon removal and reduction project sphere raise a difficult question: have we built a system that is too expensive, too slow and too demanding to meet the urgency of the climate mitigation need? Is our response to the so-called climate emergency delivered through a system not geared for emergency response at all?
Finding the Middle Ground
To a great extent, the painstaking nature of today’s carbon system, and the stringency of investor asks, is a necessary overcorrection from past mistakes, including a number of high-profile projects, some with deep investment by blue-chip companies, which crumbled when doubts over the credibility of their predicted carbon credit outturn emerged. The fallout from these failures sent the carbon design and verification industry into hyperdrive. Where early carbon project design documents were perhaps 15 pages long — and rife with loopholes — today’s methodologies can exceed 150 pages, with multiple additional modules of information.
Alongside this methodological tightening, a parallel movement emerged to bolster buyer and market confidence through high-integrity crediting labels and oversight frameworks. Entities like the Integrity Council for the Voluntary Carbon Market and Abacus have played a valuable role in raising the bar for social, environmental, and climate integrity in carbon projects, and these standards increasingly serve as additional quality assurance layers that buyers and developers use to differentiate high-integrity credits from the broader market.
So, the ‘shift to integrity’ represents a push-back from the market, pure and simple. The value of any currency — and a carbon credit is, at heart, a form of currency — hinges on confidence in the basis on which that value is judged. From 1920s Germany though 2000s Zimbabwe to the Argentinian Peso crisis, history shows that that when confidence in a currency’s value drivers becomes shaky, currency collapse doesn’t follow far behind.
But if this all feels like over-correction, there are signs of the pendulum beginning to establish where the middle ground is. The major verification agencies are slowly loosening the screws to make projects quicker and less resource-intensive to scope and design. To give one example, replacing – costly on-site soil sampling with remote sensing and drone-based hyperspectral monitoring to track biomass growth and soil carbon changes over time represents one of many adjustments that will ease the resource and time burden without sacrificing quality and undermining investment integrity.
The Road Ahead
The carbon market, and the natural and social science which underpin it, is still relatively young. Having swung from under-regulation to extreme rigour, it may now be inching towards a sweet spot that will balance credibility and investor-readiness with the pace required to address the climate crisis as it happens.
Many challenges remain, not least the difficulty of bridging the early funding gap between concept development and investment at scale — something we look at in detail in another post. But the carbon market, though imperfect, is evolving fast. Digitisation and automation of verification, drone and satellite monitoring, the development of a more mature framework for biodiversity crediting: these and other near-term developments will lower costs, accelerate timelines, and offer a richer picture of holistic environmental value. As C4ES’s Jaun van Loggerenberg puts it, in balancing integrity, scale and speed, it’s better to be too rigorous now and slowly loosen the taps than too lenient and lose the market altogether. It’s still early days, but the direction of travel is right.
