Hello Community!
For those of you who are following how carbon credits markets are developing. Recently, there's been a flood of opinions, articles and research into this. Some investors said "doomed" "collapsed" and some are using words like "rebirth" "maturity". So which one is it in your view?
Of course the recent article in Guardian is a necessary mirror, not a villain. But here are some resources in case you'd like a snapshot of what's happening
There is no money as carbon markets collapse - article in Guardian. Here's an overview:
- Credibility Crisis: Investigations revealed that over 90% of forest carbon offsets did not represent real carbon reductions, according to studies published in Science, PNAS, and others. Most credits were based on flawed calculations and overstated deforestation threats.
- Impact on Verra: Verra, the world's leading certifier, was at the center of the controversy. Its methodology for calculating avoided deforestation was found to be deeply flawed.
- Market Boom and Bust: At its peak, the voluntary carbon market was worth $2 billion, with credits selling for $30 each. Big companies like Netflix and Shell bought millions of credits. But after the revelations, confidence collapsed, and funding dried up.
- Kasigau Corridor Case (Kenya): This was one of the most successful offset projects, protecting dryland forests and providing jobs for local communities. Now, without carbon credit revenue, its future is uncertain
- Broader Risk: Many conservation projects worldwide relied on carbon credit income. With the market gone, these forests face renewed threats of logging, agriculture, and degradation unless alternative funding is found
- Systemic Flaws: The collapse highlights the danger of relying on offsets as a primary climate solution. Credits often promised more carbon savings than they delivered, creating a false sense of progress.
- Future Outlook: Experts argue that offsets should only complement real emissions cuts, not replace them. There's growing pressure for stricter standards, transparency, and alternative financing for conservation
Let's look on what it means for Shell:
- Strategic Retreat from Offsets: Shell was once the largest publicly known buyer of carbon credits, aiming to generate 120 million credits annually through nature-based projects. However, after investigations revealed that most offsets lacked credibility, Shell abandoned its $100M annual investment plan and began selling parts of its carbon project portfolio.
- Financial Drivers: Spot prices for REDD+ credits fell from $12.50 in 2022 to $3.60 in 2023, making offsets less economically attractive. Shell shifted focus to high-return fossil fuel ventures and is exploring engineered carbon removal technologies like Direct Air Capture, which offer more permanence but are costly and hard to scale.
- Reputation & Compliance: The collapse forces Shell to rely more on direct emissions reductions and alternative technologies to meet its 2030 goal of cutting operational emissions by 50%. It also signals a broader industry trend away from offsets toward in-house decarbonization.
Are carbon offsets fixable? Co-joint comprehensive study by University of Oxford, University of Sussex and University of Pennsylvania - review of all the evidence. Full review attached
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Main Finding: Most widely used carbon offset programs overestimate their climate impact by a factor of 5–10 or more. Despite decades of attempts to improve quality, fundamental problems-such as additionality, leakage, double counting, impermanence, and verification failures-remain largely unresolved.
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Implication: These issues are considered systemic and intractable, meaning incremental fixes won't solve them. The authors warn that both voluntary and compliance carbon markets risk being undermined by overcrediting and poor integrity.
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Recommendation: Shift focus away from traditional offsets toward high-integrity, durable carbon dioxide removal and storage (potentially lasting 100–1,000 years), and explore alternative financing models for conservation and sustainable development.
The sWhere do you stand in this? What are your observations? Share your thoughts here
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tudy argues that most current offset types should be phased out because they are a "dangerous distraction" from real climate solutions-namely rapid and sustained emissions reductions and investment in permanent carbon removal. The study recommends the framework of "fixing" - see attached.
Finally, to help us make sense of it all, we are running an in-person event on January 27th in London where our guest speaker, Mike Azlen, CEO of Carbon Cap Management, will talk to us about this asset class and you have an opportunity to ask questions and learn from others while sharing a drink afterwards. Book your place here.
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Aya Pariy
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