The carbon credit market, created as a fundamental mechanism for the transition towards a low-carbon economy, is at a decisive moment in its history. What began as an innovative solution in the Kyoto Protocol in 1997 has grown into a global market valued at $2 billion in 2023, but which now faces unprecedented questions about its actual effectiveness in combating climate change. The current crisis is not just about a few isolated problematic projects, but reveals deep structural flaws that compromise the entire system. Over the past two years, rigorous journalistic investigations, independent academic studies, and analyses by nongovernmental organizations have exposed how much of the carbon credits traded do not represent real emissions reductions, or protect forests that were never truly threatened. This credibility crisis reached its apex in January 2023, when a series of reports by The Guardian, in partnership with the organization SourceMaterial, revealed that more than 90% of REDD+ (Reducing Emissions from Deforestation and Forest Degradation) credits issued by the main certifiers were, in essence, “ghost credits” that did not deliver on their climate promise.

The impact of these revelations was immediate and profound. The price of voluntary carbon credits plummeted 62% in the first half of 2023, several large corporations announced the suspension of their credit purchases, and institutional investors began to demand stricter standards. Behind these numbers is an even more worrying reality: many of the projects questioned were located in vulnerable regions, where local communities pinned their hopes on revenues that proved illusory. The case of the Kariba project in Zimbabwe is perhaps the most emblematic example – a scheme that generated millions in credits claiming to protect a forest that, according to further investigations, was never under significant threat, while the resources promised to local communities simply did not materialize. This type of situation not only undermines confidence in the carbon market, but also puts at risk the entire global effort to combat climate change through market mechanisms.

The Crisis in Depth

A detailed analysis of the problems plaguing the carbon credit market reveals an interconnected set of methodological flaws, regulatory gaps, and conflicts of interest that have been perpetuated for years. At the heart of the matter is the concept of additionality – the fundamental idea that a carbon project should only generate credits if it proved that emissions reductions would not occur without the financial incentives provided by the sale of those credits. In practice, however, this basic principle has been repeatedly violated. Studies conducted by the Berkeley Carbon Trading Project analyzed more than 300 forestry projects on three continents and found that 78% of them failed to demonstrate adequate additionality. In many cases, project developers have used questionable methodologies to establish their “baselines” – estimates of how much deforestation would have occurred in the absence of the project – artificially inflating these figures to create the illusion of further emissions reductions.

The problem of additionality is compounded by the phenomenon of “leakage,” which occurs when the protection of an area simply shifts deforestation activities to neighboring regions. Advanced geospatial analyses carried out by the University of Cambridge showed that 42% of REDD+ projects analysed in the Amazon, Congo and Southeast Asia showed clear evidence of significant leakage. In the Brazilian case, the Envira Amazônia project, which generated millions in credits claiming to protect 200,000 hectares of forest, saw much of the logging pressure simply transfer to adjacent Indigenous lands, largely nullifying the claimed climate benefit. These problems are exacerbated by a certification system that, until recently, operated with notoriously lax standards and with obvious conflicts of interest, since the certifiers themselves are paid by the developers of the projects they evaluate, creating a perverse incentive to approve questionable projects.

The Road to Recovery

In the face of this multifaceted crisis, the carbon market is undergoing its most significant transformation since its inception. At the heart of this shift is the Integrity Council for the Voluntary Carbon Market (ICVCM), which in 2023 launched its Core Carbon Principles – a comprehensive set of standards aimed at restoring the credibility of the system. These principles set strict requirements for additionality, permanence, and monitoring, as well as introducing new safeguards against leakage. The full implementation of these standards is scheduled for 2025, and early analyses suggest that they could eliminate up to 70% of the credits currently available on the market, keeping only the highest quality projects. At the same time, technological advances are revolutionizing the verification of carbon credits. Startup Pachama is leading this movement with a platform that combines high-resolution satellite imagery, LiDAR sensors, and artificial intelligence algorithms to monitor forestry projects with unprecedented accuracy. Its system can detect changes in forest biomass with a margin of error of only 5%, in contrast to the 30-40% typical of traditional methods.

Conclusion

The credibility crisis that has shaken the carbon credit market represents both a challenge and a historic opportunity. The problems exposed in recent investigations are real and profound, but they have also created the necessary momentum for structural reforms that have long been needed. The way forward is not to abandon market mechanisms as a tool in the fight against climate change, but rather to rebuild them on more solid, transparent and scientifically robust foundations. Emerging new regulations, combined with technological advances in verification and monitoring, have the potential to transform the carbon market into a genuinely effective tool for financing the climate transition. However, this potential will only be realized if all actors involved – project developers, certifiers, corporate buyers, and regulators – learn from past mistakes and unconditionally commit to environmental and social integrity. The case of the Paiter Suruí project in the Brazilian Amazon shows that, when implemented correctly, carbon credits can indeed generate real climate benefits while supporting local communities and conserving critical ecosystems. This should be the blueprint for the future of the market – a future where every carbon credit represents a genuine ton of emissions reduced or removed, and where every dollar invested in offsets actually contributes to a more sustainable planet.