Carbon markets are often described as a supply problem.
Not enough high-quality projects. Not enough durable removals. Not enough finance reaching ecosystems, industrial decarbonisation or emerging climate technologies.
That diagnosis is incomplete.
Carbon markets also have a demand problem.
Project developers need to know that credible buyers will exist when their projects deliver. Investors need to see a plausible revenue pathway before funding early-stage infrastructure. Communities and landholders need confidence that benefit-sharing commitments will endure beyond the first credit issuance.
Without dependable demand, many high-integrity projects struggle to move from concept to investment decision.
A new World Economic Forum briefing, developed with KPMG, argues that advance market commitments can help bridge this gap. The proposal is straightforward: buyers make forward commitments to purchase eligible climate or nature outcomes once they are delivered, reducing uncertainty and helping developers secure finance.
The principle is promising.
But an advance commitment does not automatically create a credible carbon market.
It can reduce risk. It can aggregate demand. It can provide a revenue signal.
It can also lock buyers into weak projects, reward poorly specified outcomes or create claims that run ahead of delivery.
The quality of the commitment matters as much as the quantity of capital behind it.
Why the market struggles to scale
High-integrity carbon projects often face a difficult financing sequence.
They must spend money before they generate revenue.
For a nature-based project, early costs may include land-rights assessment, local engagement, ecological studies, project design, baseline development, legal agreements, monitoring systems and independent validation.
For engineered removal or industrial capture, costs may include research, pilot plants, engineering studies, equipment procurement, energy contracts, storage arrangements and verification systems.
In both cases, credit revenue may arrive years later.
This creates a familiar problem.
Developers need capital to prove they can deliver. Investors want proof of delivery before providing capital.
Advance market commitments can help resolve some of this tension.
A buyer commits in advance to procure future verified outcomes, subject to defined conditions. The commitment does not necessarily mean paying for credits immediately. It means providing enough visibility that developers and lenders can take investment decisions with greater confidence.
This can be particularly useful for:
Durable carbon removal
Methane-abatement projects
High-integrity nature restoration
Carbon capture and geological storage
Novel monitoring technologies
Low-carbon industrial processes
Climate solutions in regions where capital is scarce or expensive
What an advance market commitment should include
A credible commitment should not be a broad promise to “support carbon markets.”
It should define the outcome being purchased.
At minimum, buyers should be clear about:
The project type and technology or ecosystem pathway
The methodology used to quantify emissions reductions or removals
The crediting standard and eligibility requirements
The expected delivery period
The volume and price structure
The treatment of under-delivery
Additionality requirements
Monitoring, reporting and verification arrangements
Reversal-risk management
Social and environmental safeguards
Claims rules for the buyer
Termination, substitution and dispute-resolution provisions
The more novel or early-stage the project, the more important these details become.
A forward purchase agreement should not turn uncertainty into a hidden risk for either side.
It should allocate risk transparently.
Advance demand can reduce the cost of capital
The commercial logic is significant.
If a project developer can show a credible long-term buyer, it may be easier to raise equity or debt. A lender may view future contracted revenue as less risky than a project relying entirely on uncertain spot-market demand.
This can reduce the cost of capital.
For climate technologies that require upfront infrastructure, the difference can be decisive.
Consider a direct-air-capture facility, a biochar production system or a carbon-storage hub. These projects may require years of engineering, permitting and construction before they deliver a single verified tonne.
A corporate buyer willing to make a long-term, conditional purchase commitment can give investors confidence that the project will have a market once operational.
That does not eliminate technology, delivery or policy risk.
But it can shift the economics from speculative to financeable.
The danger of buying before evidence exists
Advance purchasing also has risks.
A buyer may commit to a project that never delivers. A methodology may change. A technology may underperform. A nature-based project may face drought, wildfire, land conflict or reversal. A storage project may be delayed by infrastructure or permitting.
This is why buyers should distinguish between:
A commitment to fund early development
A commitment to purchase verified delivery
A claim that a climate outcome has already occurred
These are not the same thing.
A company that supports an early-stage project can communicate that it is funding innovation or contributing to market development. It should not claim carbon removal before the removal is independently verified and the relevant contractual conditions are met.
The claims boundary matters.
It protects buyers from overstatement and protects emerging projects from being judged against outcomes they have not yet had the opportunity to deliver.
Aggregation can help smaller buyers participate
Large corporations can negotiate long-term offtake agreements directly.
Smaller companies often cannot.
They may lack the procurement capacity, legal resources or budget to assess individual carbon projects. They may also be unable to commit to large volumes over many years.
This is where pooled demand can be useful.
Buyer clubs, procurement platforms and aggregated advance market commitments can spread due-diligence costs and allow more organisations to participate.
But aggregation should not dilute accountability.
Every participant should understand:
What type of outcomes are being procured
What risks remain
Which standards and safeguards apply
How project performance is monitored
How claims can and cannot be made
How funds are distributed across the portfolio
A collective vehicle can reduce transaction costs.
It should not obscure the underlying assets.
Public policy still matters
Private demand alone will not build a functioning market.
Governments have roles in:
Establishing credible rules for claims and disclosure
Supporting measurement and verification infrastructure
Recognising high-integrity methodologies
Clarifying tax and accounting treatment
Protecting local rights and environmental safeguards
Building shared infrastructure for CO₂ transport and storage
Using public procurement to support strategically important solutions
Ensuring carbon markets complement, rather than replace, direct emissions reductions
The strongest market design is likely to be public-private.
Private buyers can bring capital and commercial discipline. Public institutions can establish rules, reduce systemic risk and protect public interest.
Carbon markets need demand with discipline
Advance market commitments could be a practical mechanism for scaling climate and nature solutions.
But they should not be treated as a shortcut around quality.
The market does not need buyers who are merely willing to pay early.
It needs buyers willing to pay early for outcomes that are:
Additional
Measurable
Durable
Transparently verified
Socially legitimate
Appropriately priced
Honest about uncertainty
Complementary to direct emissions reductions
That is a more demanding form of demand.
It is also the kind of demand that can make carbon markets investable without making them less credible.