Trend watch: carbon markets & offsets integrity in 2026

The voluntary carbon market contracted by 75% between 2021 and 2024—collapsing from $2.1 billion to just $535 million—as integrity scandals exposed that over 90% of leading offset projects failed to deliver promised emission reductions (Guardian/Die Zeit investigation, 2023). Yet paradoxically, this market correction is catalysing the most significant reforms in carbon finance history. As the Integrity Council for the Voluntary Carbon Market (ICVCM) reports that only 4% of credits meet its Core Carbon Principles standards, the 2026 landscape presents both existential risks and generational opportunities for climate-focused founders, investors, and corporate buyers navigating this rapidly evolving terrain.

Why It Matters

Carbon markets represent one of humanity's primary mechanisms for pricing atmospheric pollution and channelling capital toward decarbonisation. The compliance carbon market—encompassing government-mandated emissions trading systems like the EU ETS—reached approximately $595 billion in 2024, while the voluntary market, despite its contraction, remains critical for corporate net-zero commitments beyond regulatory requirements (Global Growth Insights, 2025).

The integrity crisis extends far beyond financial losses. When corporations purchase fraudulent offsets, they delay genuine emission reductions while claiming climate progress—a phenomenon researchers term "mitigation deterrence." The October 2024 CFTC enforcement action against CQC Impact Investors, charging the company with fraudulently obtaining millions of carbon credits by manipulating cookstove project data in Africa and Asia, marked the first-ever U.S. regulatory action against carbon market fraud, signalling a fundamental shift toward accountability.

For founders building in climate tech, understanding carbon market dynamics is essential regardless of direct involvement in offset projects. Carbon pricing affects everything from renewable energy project economics to supply chain emissions accounting. The emerging quality infrastructure—rating agencies, verification technologies, and standards bodies—presents significant entrepreneurial opportunities. Meanwhile, the €20-50/tonne pricing for nature-based credits meeting Core Carbon Principles, versus €50-250+ for durable removals like biochar and enhanced weathering, creates differentiated market segments requiring distinct business models.

Key Concepts

The Quality Spectrum: Avoidance vs. Removal

Carbon credits fall into two fundamental categories with dramatically different integrity profiles. Avoidance credits prevent emissions that would otherwise occur—protecting forests from deforestation, distributing efficient cookstoves, or capturing methane from landfills. These dominated the voluntary market historically but face the most severe credibility challenges because proving what would have happened without intervention (the counterfactual baseline) requires assumptions vulnerable to manipulation.

Removal credits physically extract CO2 from the atmosphere through processes ranging from reforestation to direct air capture. While removal projects face their own verification challenges, they offer a simpler value proposition: either the carbon is sequestered or it isn't. Microsoft's 2025 portfolio, concentrating 74% in bioenergy with carbon capture and storage (BECCS), reflects sophisticated buyer migration toward removal-focused procurement.

The Core Carbon Principles Framework

The ICVCM's Core Carbon Principles (CCPs), published in version 2 in January 2024, establish the global quality benchmark around three pillars:

Governance: Effective tracking, transparency, and robust third-party validation Emissions Impact: Additionality (would not occur without carbon credit incentive), permanence, conservative quantification, and no double counting Sustainable Development: Social and environmental safeguards plus net-zero transition contribution

As of late 2025, seven major carbon-crediting programmes have achieved CCP-Eligible status—including Verra, Gold Standard, Climate Action Reserve, and American Carbon Registry—covering approximately 98% of market volume. However, only 36 methodologies have achieved CCP-Approved status, with 22 failing to meet requirements. The result: just 51 million credits carry the CCP label, representing merely 4% of 2024 issuance.

Article 6 and the Paris Agreement Architecture

COP29 in late 2024 established new Article 6 rules governing international carbon trading between countries. Article 6.2 enables bilateral carbon credit transfers with "corresponding adjustments" to prevent double counting between national inventories. Article 6.4 creates a centralised UN mechanism replacing the Kyoto Protocol's Clean Development Mechanism. These frameworks will increasingly shape voluntary market practices as countries integrate carbon markets into their Nationally Determined Contributions.

What's Working

Rigorous Third-Party Rating Systems

Independent credit rating agencies—Sylvera, BeZero Carbon, Renoster, and Calyx Global—have transformed buyer due diligence. These firms apply project-level scrutiny using satellite imagery, scientific modelling, and on-site verification to assign quality grades. Corporate buyers increasingly require minimum rating thresholds for procurement, creating market pressure that rewards genuine emission reductions.

Sylvera's methodology, for instance, evaluates REDD+ projects across additionality, permanence, carbon accounting, and safeguards dimensions, producing letter grades that correlate with secondary market pricing. This transparency enables founders building carbon-adjacent products to make informed decisions about offset integration.

Durable Carbon Removal at Scale

The durable carbon removal market—encompassing direct air capture, enhanced rock weathering, biochar, and BECCS—has achieved commercial traction despite higher costs. Microsoft's April 2025 commitment to over 10 million metric tons of removal credits, including an $800 million deal with AtmosClear for 6.75 million tons via BECCS over 15 years, represents the largest single carbon removal purchase in history.

This demand signal is unlocking project finance. The Indigo Ag soil carbon deal (2.85 million tons) became the largest soil carbon removal contract ever, while Rubicon Carbon's Uganda forestry project engaged 50,000+ smallholder farmers in afforestation. Crucially, major buyers are requiring third-party verification, durability guarantees (>1,000 years for engineered solutions), and lifecycle assessments demonstrating atmospheric CO2 removal on a net basis.

Regulatory Enforcement Momentum

The CFTC's whistleblower programme, which has paid $370 million to tipsters since 2014 and generated $3.2 billion in enforcement relief, now explicitly targets carbon market fraud. The October 2024 CQC Impact Investors prosecution—charging executives with manipulating survey data to inflate emission reductions by approximately 2x—establishes precedent for criminal liability.

The EU's Empowering Consumers Directive banning generic "climate neutral" claims from September 2026 compounds reputational risk for greenwashing. Corporate Sustainability Reporting Directive (CSRD) assurance requirements demand higher-quality credits. These regulatory tailwinds accelerate market consolidation around credible standards.

What's Not Working

Legacy REDD+ Project Credibility

Forest protection projects, which dominated voluntary market volumes, face systemic credibility challenges. Scientific analyses consistently find that leading REDD+ projects overestimate deforestation baselines—the counterfactual rate of forest loss without intervention—by an average of 400%. The Guardian investigation found over 90% of Verra's rainforest credits may represent "phantom" reductions.

Verra's March 2025 suspension of four major auditors (TÜV Nord, China Classification Society, China Quality Certification Centre, and CTI Certification) from agriculture and forestry projects—the registry's first-ever auditor suspensions—followed discoveries that 37 Chinese rice-paddy methane projects lacked credible verification. Over 57 projects require re-auditing. The December 2024 cancellation of Shell-linked afforestation projects (4.5 million credits) after investigations found missing government approvals further erodes confidence.

Structural Conflicts of Interest

Carbon registries face inherent conflicts: they earn fees from project registration and credit issuance while simultaneously setting quality standards. This creates pressure to approve projects and methodologies that expand revenue. Verra's October 2024 "digitalisation initiative"—automating project review to accelerate approvals with reduced staff—raised integrity concerns among observers who noted the tension between throughput and scrutiny.

The auditor ecosystem mirrors these conflicts. Validation and Verification Bodies (VVBs) are paid by project developers to certify emission reductions—the entities benefiting from positive findings. Until independent funding mechanisms emerge for verification, structural incentives will continue favouring approval over rejection.

Supply Constraints for High-Integrity Credits

With only 4% of credits meeting CCP standards, demand from serious corporate buyers far exceeds supply. This creates a bifurcated market: premium prices (25%+ above baseline) for CCP-labelled credits, while vast volumes of legacy credits trade at discounts but face increasing buyer rejection.

For founders, this supply gap presents both opportunity and caution. Building businesses dependent on high-integrity credit availability requires understanding multi-year procurement timelines and potential price volatility as quality standards tighten.

Key Players

Established Leaders

Verra — Largest voluntary carbon registry with 1.3+ billion credits issued; undergoing significant reform following integrity scandals including auditor suspensions and methodology revisions to align with ICVCM standards.

Gold Standard — Founded by WWF; emphasises sustainable development co-benefits alongside emission reductions; launched 2024 Carbon Market Regulations Tracker and Article 6.2 Protocol collaboration with Singapore.

ICVCM — Industry governance body administering Core Carbon Principles; assessed 7 major programmes and 36 methodologies as CCP-compliant through 2025.

Climate Action Reserve — CCP-Eligible North American registry with strong forestry and livestock methane methodologies.

Emerging Startups

Sylvera — London-based carbon credit rating agency using satellite data and machine learning; raised $57 million Series B in 2022.

Pachama — U.S. startup applying AI and satellite imagery to forest carbon verification; partners include Salesforce, Shopify, and SoftBank.

Charm Industrial — Bio-oil carbon removal converting agricultural waste to stable carbon; major Microsoft procurement partner.

Isometric — Science-based carbon removal verification platform focused on engineered solutions; registry for durable removals.

Key Investors & Funders

Salesforce Ventures — Backed South Pole and multiple carbon tech platforms through climate-focused fund.

Temasek's GenZero — Singapore sovereign wealth fund dedicated to decarbonisation; major South Pole investor.

Lowercarbon Capital — Chris Sacca's fund backing carbon removal including Charm Industrial, Heirloom, and Running Tide.

Frontier — Advance market commitment by Stripe, Alphabet, Meta, Shopify, and McKinsey committing $1 billion+ to carbon removal purchases.

Examples

1. Microsoft's Carbon Removal Portfolio Transformation: Microsoft committed to becoming carbon negative by 2030, requiring removal of more carbon than it emits annually. After emissions increased from 12 million to 17 million tonnes CO2e between 2020 and 2023—driven by AI data centre expansion—the company accelerated procurement, purchasing approximately 8 million tons of durable removal credits over two years. The April 2025 AtmosClear deal ($800 million for 6.75 million tons via BECCS) exceeded all durable credits purchased by all companies in 2024 combined. Microsoft's approach prioritises 1,000+ year durability, third-party lifecycle verification, and portfolio diversification across BECCS, enhanced rock weathering, and soil carbon.

2. South Pole's Kariba Project Collapse: South Pole, one of the world's largest carbon offset developers with 800+ projects across 50 countries, faced existential scrutiny when Bloomberg investigations revealed its flagship Kariba REDD+ project in Zimbabwe may have generated 5-30x more credits than justified. The project had sold credits to Volkswagen, Nestlé, L'Oréal, Gucci, and McKinsey. In October 2023, South Pole terminated its partnership and exited the project. The company subsequently implemented enhanced quality controls—including 3-year REDD+ monitoring versus Verra's 6-year requirement—but the scandal catalysed industry-wide reassessment of forest carbon methodologies.

3. CFTC v. CQC Impact Investors: In October 2024, the U.S. Commodity Futures Trading Commission filed its first-ever enforcement action against carbon credit fraud, charging CQC Impact Investors and executives Kenneth Newcombe (former CEO) and Jason Steele (COO) with manipulating cookstove project data across Africa and Asia. Investigators found falsified survey data inflating emission reductions by approximately 2x, generating credits worth tens of millions of dollars sold to unsuspecting buyers. The company received a $1 million fine. The case established that carbon credits constitute commodities subject to CFTC anti-fraud jurisdiction, opening enforcement pathways affecting voluntary market participants.

Action Checklist

Audit existing carbon credit portfolios against ICVCM Core Carbon Principles; identify credits from non-CCP-Eligible programmes requiring replacement
Implement minimum quality thresholds requiring independent ratings (Sylvera, BeZero, or equivalent) at specified grades before procurement
Diversify beyond avoidance credits toward durable removal solutions (BECCS, enhanced weathering, biochar) for long-term portfolio integrity
Establish project-level due diligence procedures including methodology review, baseline credibility assessment, and on-site verification for material purchases
Build multi-year offtake relationships with verified project developers to secure supply amid CCP-compliant credit scarcity
Monitor regulatory developments including EU Empowering Consumers Directive implementation (September 2026) and CFTC enforcement expansion
Engage legal counsel on potential liability exposure for historical offset claims that may face greenwashing challenges

FAQ

Q: How should early-stage climate startups approach carbon offsets for their own operations? A: Prioritise emission reductions over offsets—investors and customers increasingly scrutinise "reduce then offset" hierarchies. When offsets are appropriate, procure CCP-labelled credits from reputable registries, require independent ratings, and document due diligence. Budget €25-75/tonne for nature-based solutions meeting quality standards; €75-300/tonne for durable removals. Avoid marketing claims exceeding procurement reality.

Q: What's the investment case for carbon market infrastructure startups? A: Three segments show strong fundamentals: (1) MRV (Measurement, Reporting, Verification) technology applying satellite, sensor, and AI verification to project monitoring; (2) rating and risk assessment platforms providing buyer due diligence infrastructure; (3) removal project development, particularly BECCS and enhanced weathering where Microsoft-scale demand signals de-risk deployment. Avoid pure marketplace models dependent on legacy credit volumes facing structural decline.

Q: Are REDD+ forest credits ever appropriate for corporate procurement? A: Selective procurement remains viable but requires rigorous project-level assessment. Require independent ratings at top-tier levels, review specific baseline methodologies for conservative deforestation assumptions, verify community engagement and benefit-sharing, and confirm CCP-Approved methodology status. Avoid projects from registries or developers with documented integrity failures. Consider REDD+ as one component of diversified portfolios rather than primary procurement strategy.

Q: How will Article 6 implementation affect voluntary markets? A: Article 6 creates pathways for voluntary credits to contribute toward national climate targets through "corresponding adjustments"—deductions from host country inventories when credits transfer internationally. This increases integrity requirements but potentially enhances credit value by linking to compliance-grade infrastructure. Founders should monitor which registries and methodologies achieve Article 6 eligibility as this becomes a quality signal.

Q: What distinguishes legitimate carbon removal from greenwashing? A: Legitimate removal demonstrates: (1) atmospheric CO2 reduction on a lifecycle basis including all upstream emissions; (2) permanence guarantees—years for soil carbon, centuries for biochar, millennia for geological storage; (3) third-party verification by independent assessors without developer conflicts; (4) conservative quantification methodologies with uncertainty buffers; (5) transparent monitoring, reporting, and reversal compensation mechanisms. Claims lacking these elements warrant scepticism.

Sources

Integrity Council for the Voluntary Carbon Market. "Core Carbon Principles, Assessment Framework and Assessment Procedure," Version 2. January 2024. https://icvcm.org/core-carbon-principles/
U.S. Commodity Futures Trading Commission. "CFTC Charges Former CEO of Carbon Credit Project Developer with Fraud Involving Voluntary Carbon Credits." Press Release 8994-24. October 2024.
Guardian/Die Zeit/SourceMaterial. "Revealed: More Than 90% of Rainforest Carbon Offsets by Biggest Certifier Are Worthless." January 2023.
Grand View Research. "Voluntary Carbon Credit Market Size, Share & Trends Analysis Report, 2024-2030." 2024.
Microsoft Corporate Responsibility. "Carbon Removal Program." 2025. https://www.microsoft.com/en-us/corporate-responsibility/sustainability/carbon-removal-program
ICVCM. "CCP Impact Report 2025: Core Carbon Principles at the Heart of Market Transformation." 2025. https://icvcm.org/ccp-impact-report-2025/
Bloomberg. "Carbon Offset Seller's Forest Protection Projects Questioned." March 2023.
Climate Change News. "Verra Used Junk Carbon Credits to Fix Shell's Offsetting Scandal." December 2025.