Domestic carbon credit mechanisms revisited: how do they stack up now?

BeZero Carbon

19 February 202612 min

Markets and Policy

Domestic carbon credit mechanisms are expanding, with some governments incorporating them into compliance schemes - raising the stakes for market design. This report updates our December 2024 analysis, assessing ten schemes against a six-factor transparency framework. It acknowledges a persistent tension: credits are modelled, while compliance liabilities are measured more directly, so fungibility can introduce uncertainty. Progress is evident in the design of some mechanisms, but major disclosure gaps remain, especially on project-level accounting data and retirement attribution.

Here are some key takeaways from the report

Domestic carbon credit mechanisms continue to proliferate globally. A growing number of jurisdictions are integrating these credits into compliance carbon-pricing systems, reinforcing their role in achieving national decarbonisation targets.
The structural tension identified in our December 2024 report remains: equating project-based credits with compliance liabilities on a tonne-for-tonne basis embeds modelling uncertainty into regulatory systems. Robust market design must therefore recognise and manage this asymmetry.
Transparency remains the cornerstone of credible integration. Public disclosure of additionality tests, carbon accounting assumptions, risk buffers, retirement data and co-benefits is essential to enable scrutiny and avoid a “race to the bottom” in credit issuance.
This updated analysis expands the scope of our original assessment to ten domestic crediting mechanisms, including Thailand’s Premium T-VER and France’s Label Bas-Carbone, and reflects developments in registry access and disclosure practices across several schemes.

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