Back to insights

A balancing act: the use of carbon credits in compliance markets

  • Isobel Sizer
    Policy Analyst
  • Lily Ginsberg-Keig
    Policy Manager
  • Finn O'Muircheartaigh
    Director Policy & Markets
The first global stocktake, concluding at COP28, is expected to reveal that governments need to accelerate climate action to meet their Nationally Determined Contribution (NDC) targets. To fill the climate action gap, governments are looking to carbon pricing mechanisms. By implementing compliance carbon markets or carbon taxes, governments can encourage decarbonisation and raise climate ambition. Carbon credits are a useful complement to these policies, facilitating climate action, a lower cost of transition, and encouraging green finance while allowing countries to meet their NDCs. This report investigates the use of carbon credits within government policy and the impact of this growth on the voluntary carbon market.

Here are some key takeaways

  • Carbon credits are increasingly used by governments within compliance mechanisms to drive corporate emissions reductions and help to meet NDC targets.

  • The potential demand for carbon credits from compliance markets could represent almost double the amount of the annual demand in the VCM. 

  • Article 6 could catalyse the use of carbon credits within regulated schemes by allowing countries to claim emissions reductions as part of their NDCs.

Contents

  • Introduction

  • What are the drivers of carbon credit use in compliance markets?

  • How are carbon credits used in climate policy?

  • How do carbon credits support government objectives? 

  • How is the growth of compliance credits affecting the voluntary carbon market? 

  • Considerations for policymakers

  • Conclusion

Get access

Already a customer? Login to the Platform.

BeZero Carbon is committed to protecting and respecting your privacy. Occasionally, we would like to contact you about our products and services, as well as other content that may be of interest to you. If you consent to us contacting you for this purpose, please tick below:

PLEASE NOTE: The BeZero Carbon Rating sets out BeZero Carbon’s opinion on a particular carbon credit or project based on publicly available information. It is a statement of opinion as at the date expressed and does not constitute a solicitation, recommendation or endorsement by BeZero Carbon or any third party to invest, buy, hold or sell a carbon credit, nor is it a statement of fact, and nor should it be relied upon in isolation.

BeZero Carbon is committed to protecting and respecting your privacy. Occasionally, we would like to contact you about our products and services, as well as other content that may be of interest to you. If you consent to us contacting you for this purpose, please tick below:

You can unsubscribe from these communications at any time by following the link at the bottom of each communication. For more information on our privacy practices, please review our Privacy Policy.