Voluntary carbon markets (VCMs) were intended to channel private capital toward emissions reductions that regulatory systems alone have not been able to achieve — financing verified reductions in sectors and geographies that public budgets and compliance frameworks have not reached.

Instead, VCMs have struggled under the weight of problems that adequate design should have anticipated and prevented: weak measurement, compromised verification, opaque pricing, unclear legal status, and a persistent tendency among buyers to use offsets as a substitute for, rather than a complement to, reducing their own emissions. The good news is that there are governance and structural reforms, including binding limits on how offsets can be used, that would address many of the challenges facing VCMs.

The Problems Facing VCMs

The difficulties facing VCMs are neither incidental nor temporary. They are the foreseeable result of foundational design gaps that have gone unaddressed as VCMs scaled.

Our new white paper, Voluntary Carbon Markets: Limitations and Solutions, maps thirty-seven specific issues across eight interlocking domains. The full list is long, but the underlying logic is straightforward: VCMs have scaled far beyond their institutional infrastructure. The domains — supply, governance, market, price, transaction, legal, systemic, and ethics — interact in ways that make piecemeal fixes insufficient.

The problems begin at the foundation. On the supply side, systematic overestimation of climate benefits, compromised verification, additionality failures, and leakage mean that many credits do not correspond to their claimed emissions reductions. Those integrity failures are compounded by weak governance: carbon storage projects are vulnerable to reversal through wildfires, land-use change, or political instability, and the buffer pools meant to absorb such losses are not capitalized to actuarial standards or subject to independent oversight.

Further up the value chain, the absence of standardized credit taxonomies and regulated exchanges means that most trading occurs over-the-counter — privately negotiated between parties rather than on a public exchange — through brokers with opaque margins; this produces price signals that are too unreliable to direct capital toward the highest-quality projects. Legal uncertainty further undermines VCMs: the property status of carbon credits is undefined or contested in many jurisdictions, cross-border enforceability is fragile, and fraud thrives where registry oversight is thin.

Underlying all of these issues is a systemic problem that no technical fix can resolve on its own. In practice, many buyers treat offsets as a first resort, purchasing credits to support public climate claims while deferring the investments that would reduce their own emissions. Carbon removal and credit quality improvements cannot substitute for decarbonization. Without rules that 1) restrict offset use to residual emissions that cannot be eliminated through direct operational changes, and 2) require companies to demonstrate decarbonization progress first, VCMs’ core problem persists: VCMs enable companies to report progress without delivering it.

Reform Is Possible, But It Has to Be Systematic

The paper’s reform agenda identifies twenty-two solutions organized around four pillars. Because VCM failures are so interconnected, no single reform is sufficient on its own. A fix to measurement without a fix to VCM infrastructure leaves price signals unreliable. Legal reform without disclosure requirements means that improvements in measurement standards and VCM infrastructure have no mechanism by which regulators, investors, or the public can hold actors accountable for compliance. The pillars are designed to operate as a system, with progress in one reinforcing progress in the others.

Pillar 1: Measurement, verification, and data quality. Unified measurement, reporting, and verification (MRV) standards — a single science-based framework applied uniformly across registries and project types — needs to replace the current landscape of competing, inconsistent methodologies. Together, the following solutions would, among others, address the most serious integrity failures on the supply side:

• Mandatory auditor rotation — third-party verifiers periodically replaced, with developer-funded verification arrangements prohibited;
• Ex-post credit issuance — credits issued only after reductions are independently verified, not modeled in advance;
• Real-time dynamic baselines — fixed project-inception baselines replaced with continuously updated scenarios driven by satellite imagery;
• Post-crediting monitoring — verification obligations extended beyond the initial crediting period to ensure the ongoing integrity of permanence claims.

Pillar 2: Market infrastructure and price transparency. Cross-registry interoperability, with shared identifiers and real-time public retirement records, is a technical prerequisite for eliminating double-counting. Regulated credit exchanges would move voluntary carbon transactions out of opaque over-the-counter broker markets and onto platforms with publicly visible price benchmarks. A centralized blacklist of invalidated and fraudulent projects would help eliminate some of the most straightforward forms of abuse.

Pillar 3: Legal, regulatory, and policy reform. These reforms address the jurisdictional deficits that make VCMs fragile. National legislation formally recognizing carbon credits as transferable intangible property would establish the legal foundation for enforceable claims to ownership and title. Developer clawback liability — legally enforceable obligations to remediate invalid or over-issued offsets — would create accountability where none currently exists. Mandatory free, prior, and informed consent requirements would address the equity failures that leave host communities exposed to project harms without meaningful participation or recourse. Offset use caps would establish binding, declining limits on the proportion of any corporate climate target that can be satisfied through purchased offsets — directly addressing the tendency to treat offsets as a substitute for direct emissions reductions rather than a complement to them.

Pillar 4: Transparency, disclosure, and anti-greenwashing rules. Intermediary fee disclosure, know-your-offset due diligence requirements, and a legally binding framework specifying permissible environmental representations would make the earlier reforms visible to investors, regulators, and the public — and enforceable against bad actors.

The Underlying Question

Ultimately, there is one test against which all of these reforms should be judged: do the credits issued under VCMs represent real, additional, and durable greenhouse-gas reductions relative to a credible counterfactual? Every reform in the paper — unified MRV, ex-post issuance, post-crediting monitoring, clawback liability, restricted offset claims — is instrumental to passing that test.

Without systemic reform, VCMs may be displaced altogether — whether by compliance systems that supplant them, regulatory mandates that override them, or reputational collapse that erodes their license to operate. That displacement would arrive precisely when private capital for climate mitigation is most urgently needed. The cost of inaction is far greater than the cost of reform.

This post is based on the May 2026 white paper “Voluntary Carbon Markets: Limitations and Solutions.” The full paper is available here.