Best Practices: A New Risk-Reward Calculus For Voluntary Carbon Credit Utilization

Published 31 October 2023 by Connor Taylor & Ryan Skinner &

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Executive Summary

The voluntary carbon market (VCM) is experiencing a turbulent 2023, after a period of significant growth in 2021 and 2022. The market ecosystem has encountered significant stakeholder backlash, levied at participants operating at all stages of the carbon credit life cycle, from project developers to end-purchasers. A carbon credit theoretically represents a single tonne of emissions mitigation funded voluntarily; however, systemic volatility has led to widespread doubts that this concept has a basis in reality, creating market-wide hesitation about whether firms should offset at all – and if so, how they should do so, to avoid potential reputational damage. This report can be used by executives seeking to upgrade their carbon offsetting strategies to mitigate reputational risk while contributing to global emissions mitigation.

Table of contents

The ground has shifted beneath the carbon credit market
The carbon credit market has suffered recent reputational setbacks
Firms must better manage reputational risk as carbon market perceptions shift
Understanding the new carbon market risk-reward calculus
Decarbonization use cases vary in the new risk-reward calculus
Risk in offset strategies can be mitigated through transparency
Carbon credit rating agencies bring clarity to the market
De-risking carbon offset strategies through disclosures

Table of figures

Figure 1. Quality requirements for carbon offsetting projects
Figure 2. Traditional carbon credit generation processes under fire in 2023
Figure 3. Carbon credit taxonomy
Figure 4. Carbon credit corporate perceptions in 2023
Figure 5. Carbon offset use cases

About the authors

Connor Taylor

Senior Analyst
Connor is a Senior Analyst in the Verdantix Net Zero & Climate Risk practice. His current research agenda focuses on carbon management software, climate change consulting services, and the voluntary carbon markets. Connor joined Verdantix in 2021, with prior experience in EHS technology sales and development. He holds a BA from the University of Cambridge in Anglo-Saxon, Norse and Celtic.

Ryan Skinner

Research Director, Net Zero & Climate Risk
Ryan is the Research Director for the Verdantix Net Zero & Climate Risk practice. He guides the research team to develop compelling research at the intersection of net zero strategies, carbon management, climate risk and technology. Prior to joining Verdantix, Ryan was a principal analyst at Forrester Research, where he initiated the research into ESG data and analytics offerings. He also has extensive experience of helping software companies with their messaging, positioning, market and technology strategies. Ryan studied at Duke University, the University of Manchester and the University of Oslo, and speaks Norwegian fluently.

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