Carbon markets are entering a new phase.
For much of the voluntary carbon market’s history, the central question was whether companies should buy carbon credits at all.
Critics focused on weak projects, misleading claims and the risk that credits could substitute for direct decarbonisation.
Supporters argued that well-designed carbon finance could direct capital toward projects that would otherwise struggle to secure funding.
That debate has not disappeared. But it is no longer the only question.
The market is now moving toward a more practical and demanding agenda: how should carbon credits be regulated, authorised, monitored, financed and used in credible climate claims?
This is a significant shift. It means carbon credits are becoming less like generic voluntary purchases and more like environmental assets that carry specific rights, obligations, risks and evidence requirements.
A recent analysis associated with Columbia University’s Carbon Markets Initiative describes the market as entering a new regulatory era, with governments playing a more active role in the governance of project-based credits.
For buyers, investors and project developers, the implication is clear: the next growth cycle in carbon markets will depend less on headline volume and more on institutional credibility.
From voluntary claims to governed assets
A carbon credit is often described in simple terms: one credit represents one tonne of carbon dioxide equivalent reduced, avoided or removed.
In reality, a credit represents a more complicated package of assumptions and rights.
It may depend on a baseline that estimates what would have happened without the project. It may rely on a methodology, monitoring plan and verification process. It may involve land rights, community agreements, government permissions and a registry record. Its value can depend on whether it is used for a voluntary corporate claim, an aviation scheme, a compliance obligation or an Article 6 transaction between countries.
Those distinctions are becoming more important.
In a less regulated market, buyers could treat credits as broadly comparable commodities. In a more regulated market, they will need to understand the specific legal, environmental and claims context of each unit.
The practical questions are changing:
Has the project received appropriate host-country authorisation?
Is the credit intended for voluntary use, a compliance programme or an international transfer?
Is there a risk of double counting between a corporate claim and a national climate target?
Which methodology was used, and what are its limitations?
How is permanence or reversal risk managed?
Who owns the credit and who has the right to make a related claim?
What regulatory or consumer-protection rules apply to the buyer’s public communications?
These are not technical details to leave to a registry or broker. They are central to the credibility of the investment.
Article 6 is changing the market’s centre of gravity
The Paris Agreement’s Article 6 framework is one reason that carbon markets are becoming more formal.
Article 6 creates a potential framework for international cooperation on emission reductions, including the transfer of internationally traded mitigation outcomes between countries. It introduces concepts that are less familiar in voluntary markets, including host-country authorisation and corresponding adjustments.
A corresponding adjustment is intended to prevent the same emission reduction from being counted both by the country where it occurred and by another country or entity using it toward a target or claim.
The system is still evolving, and implementation will vary across countries. But the direction of travel matters. Governments are becoming more involved in deciding which projects can generate internationally transferable units, how those units are accounted for, and how the economic value is shared.
That can improve integrity. It can also add complexity, cost and political risk.
For companies, Article 6 should not be treated as a simple quality label. An Article 6-linked credit may provide stronger governance in some respects, but buyers still need to understand the project, methodology, contract, delivery risk and claim being made.
Claims are becoming the pressure point
The market’s regulatory evolution is not only about carbon accounting. It is also about consumer protection and corporate communications.
Environmental claims are facing increasing scrutiny in the UK, EU and other major markets. Terms such as “carbon neutral,” “climate positive” and “net zero” can create legal and reputational exposure if they imply more than the underlying evidence supports.
A company that buys carbon credits may have made a valid financial contribution to climate action. That does not automatically mean it can claim that its product, service or entire business has no climate impact.
The distinction matters.
A credible approach separates:
Direct emissions reductions within the company’s own operations and value chain.
Investments in climate mitigation beyond the value chain.
Purchases of carbon removals for residual emissions.
Support for projects that may generate co-benefits but have uncertain carbon outcomes.
Marketing claims made to customers, investors and the public.
The more formal the carbon market becomes, the less defensible it will be to use vague language that collapses all of these activities into a single “offset” narrative.
What buyers should do now
The market’s regulatory shift creates an opportunity for companies to improve their carbon-credit governance before new rules make poor practice more visible.
Five actions are particularly important.
1. Create a carbon-credit policy.
Set out why credits are purchased, which claims they can support, which project types are eligible, how quality is assessed and who approves decisions.
2. Separate procurement from communications.
Carbon-credit purchasing should be managed by people with sustainability, finance, legal, risk and procurement expertise. Marketing teams should not be the sole owners of the process.
3. Perform project-level due diligence.
Review methodology, additionality, permanence, land rights, benefit-sharing, verification, reversal arrangements and delivery risk.
4. Understand the claims pathway.
Ask whether a credit is intended for voluntary action, a compliance programme, an Article 6 transfer or another use. Do not assume credits are interchangeable.
5. Keep an evidence trail.
Retain contracts, registry records, retirement certificates, methodology documents, risk assessments and approvals. If challenged, a company should be able to show what it bought and why.
The market will become smaller before it becomes stronger
A more regulated carbon market may not grow in a straight line.
Higher standards can exclude weak projects. Government authorisation can take time. Better monitoring can raise costs. Corporate buyers may become more cautious. Some credits that were once widely used may no longer support the claims buyers want to make.
That is not necessarily a sign of failure.
It may be the necessary transition from a broad, claims-led market to a more disciplined system that can attract long-term capital and public trust.
The companies most likely to benefit are not those that buy the cheapest available credit. They are those that understand the environmental asset, the regulatory context and the claim they are making.
Carbon markets are not becoming simpler. They are becoming more investable—but only for buyers prepared to treat integrity as a core commercial requirement.