Letter on carbon: Credit risk

The US government has joined an increasingly desperate global push to restore confidence in the voluntary carbon market

The need to restore confidence in the voluntary carbon market is becoming more pressing by the day. Lingering doubts over the creditability of offsets threaten to undermine the potential of a market that has long been earmarked as a key channel for climate finance and a driver of emission reductions. Issuances of carbon credits in 2023 fell for the second consecutive year, according to the World Bank’s latest report on the state and trends of carbon pricing. The two largest project categories—renewable energy and emission avoidance projects in forestry and land use—both faced a near 50% drop in issuances. Concerns over the integrity of credits have hit avoided deforestation projects particul