Author: Steph Harris

Stephanie Harris is a director on the Carbon Markets team, where her primary focus is managing the company's voluntary carbon offset portfolio.

Looking ahead: the 2023 global carbon markets

The voluntary market (VCM) experienced heightened volatility in 2022, with an early, rapid price surge and plateau, followed by periods of recalibration. Despite this, there were numerous indications of healthy market growth, including the development of highly anticipated preliminary guidance on carbon credit quality and claims, increased focus on transparency and liquidity, and potential convergence of compliance markets with the voluntary market. 

In this blog post, we will explore some of these market trends and discuss how the market developments in 2022 may have a lasting impact in 2023 and in years to come.

Initiatives to Support Market Growth 

Both the growing interest and heightened criticism levied against carbon credits stem from the influx of organizations seeking to take action on climate change outside of their value chain. Since the inception of the VCM, standard bodies and registries have governed market interactions and have sought to improve credit quality. Efforts to codify a common framework for evaluating quality have only accelerated in the last year. Organizations such as the Voluntary Carbon Markets Integrity Initiative (VCMI), The Integrity Council for the Voluntary Carbon Market (IC-VCM) and the Science Based Targets Initiative (SBTi) are all working in parallel to provide clarity and guidance for both supply and demand-side market participants.

In Q3 of 2022, the IC-VCM released a draft of their Core Carbon Principles (CCPs), which aim to establish a global standard threshold for “high-quality” carbon credits and ensure consistency across the market. This initiative will evaluate carbon-crediting programs and methodologies against the CCPs, and will ultimately work with registries to label specific projects that are deemed “CCP-eligible”. The final version of the IC-VCM’s guidance is expected to be released later this year. Beyond developing a standardized framework, the IC-VCM could help bolster market credibility and facilitate investment in early-stage climate mitigation activities that are critical to achieving the goals of the Paris Agreement, including new carbon removal projects and other emerging technologies. Considerable feedback has been provided during the public consultation period, and it remains unclear what the finalized framework will include and how these standards will be adopted across the market.

The VCMI is also expected to release its own framework later this year. The goal of this initiative is to strengthen corporate guidance for making credible claims about the use of carbon credits on the pathway to net zero. Similarly, SBTi is expected to publish its recommendations on credible beyond value chain mitigation (BVCM). We anticipate that this guidance will encourage companies to maximize their climate impact and make transparent claims about their carbon credit purchases.

While the VCM is confronting some of these challenges, market participants are taking steps to improve transparency and liquidity through the increased use of trading platforms, standardized products, and project ratings. In the meantime, standard bodies and industry initiatives will be expected to answer pressing questions around how to improve project quality and incentivize the adoption of credible carbon credit claims. Whether leading governing bodies will align on their recommendations and how the market will respond to this new guidance remains to be seen.  

Compliance and Voluntary Market Overlap

According to a recent BloombergNEF article, global compliance markets cover approximately 20% of global greenhouse gas emissions and reached a value of more than $850 billion in 2021. The need for VCM regulation is increasing alongside the development and expansion of global compliance market frameworks. Many market participants are speculating that the distinction between voluntary and compliance markets is becoming increasingly blurred and more markets could soon be overlapping.

The 2015 Paris Agreement further blurs the distinction between compliance and voluntary carbon markets. Article 6 of the Agreement, which was discussed at length at the last two COP summits, establishes an international carbon market and allows countries to trade carbon reductions and removals to achieve country-level GHG reduction targets. Article 6 also establishes an accounting mechanism known as “corresponding adjustments” to ensure only one country is counting the emission reduction toward its NDC, or Nationally Determined Contribution. Countries and airlines are expected to use credits with corresponding adjustments for compliance purposes, while questions still remain over how corresponding adjustments (or the lack thereof) will impact the kinds of carbon credit claims that can be made by companies. 

“The 2015 Paris Agreement further blurs the distinction between compliance and voluntary carbon markets. Article 6 of the Agreement, which was discussed at length at the last two COP summits, establishes an international carbon market and allows countries to trade carbon reductions and removals to achieve country-level GHG reduction targets.”

As we have outlined, there is much in flux this year in the VCM. The initiatives above all aim to provide confidence and consistency in the market to help scale demand for critical carbon mitigation tools that will be required to meet the challenge of limiting warming to 1.5C. As regulatory bodies and voluntary standards announce updates throughout the year, 3Degrees will continue to provide guidance to clients on emerging best practices around claims and carbon credit procurement. 

What just happened? Distilling the year that was 2021 in the voluntary carbon market

Last year was a remarkable one for the voluntary carbon market (VCM). As organizations around the world mobilized around ambitious climate targets, the demand and subsequent price for carbon credits reached an all-time high. In 2021, for the first time in the market’s history, the VCM broke the $1B mark.

Important subtext to these big, bold market headlines is that the increased price of carbon credits is actually a positive sign for VCM longevity and climate action more broadly. Higher prices provide an incentive for new project development and serve as a forcing function for organizations and governments to prioritize internal emissions reductions.

This past year in the VCM has left some folks scratching their heads. What were the primary drivers of this rapid demand surge in 2021? And what trends can we expect to continue?

Primary drivers of upward price movement in the voluntary carbon market

Increased climate commitments and Net Zero targets
Since the enactment of the Paris Agreement in 2016, many organizations have been aligning their climate goals with science-based emissions reductions to limit warming to 1.5 °C. It wasn’t until this past year, however, that the Science-Based Target Initiative (SBTi) adopted Net Zero as its centralized decarbonization framework, which now has over 750 companies (and counting) committed. SBTi’s Net-Zero Standard focuses on carbon removal credits to address residual emissions in the target year, as well as mitigation outside of an organization’s value chain. Apart from SBTi, there are a variety of emerging climate commitments in which carbon credits play a role in both near and long-term targets.

The heightened demand caused by increased climate commitments has contributed to the run up in carbon credit prices across all project types. Our clients continue to be interested in nature-based projects, projects that actively remove carbon, or projects that avoid short-lived climate pollutants, such as methane capture at landfills or dairy farms. Beyond the environmental benefits, many of our clients are aligning their carbon credit purchases with projects that have clear co-benefits that support the UN’s Sustainable Development Goals (SDGs).

The influx of carbon market participants
2021 also saw a significant increase in new market entrants from new project developers and technology providers, to new trading platforms and first-time carbon credit buyers. We’ve seen new technologies emerge to support project monitoring, reporting, and verification, as well as new project types that historically weren’t feasible in the previous market landscape. We’re noticing trading groups expanding their existing environmental commodities businesses to include voluntary carbon products, as well as new platforms and exchanges that are streamlining trading opportunities through standardized contracts.

Another notable development in 2021 was the formation of a variety of groups aiming to establish centralized carbon credit quality standards. Most notably, the Taskforce on Scaling the Voluntary Carbon Market (TSVCM). This private sector-led initiative led to the formation of the Integrity Council for the Voluntary Carbon Market (IC-VCM), a governance body that has set out to create a framework for quality standards in the market, driving up integrity and credibility through its Core Carbon Principles which are expected to be finalized in 2022.

As these new participants carve out their own roles in the market, the increased activity has brought more attention to the VCM, creating optimism around integrity, pricing, and future growth.

Emergence of crypto-carbon platforms
Last year we saw the rise of the crypto-carbon space that involves bridging carbon credits onto blockchains. For some, the incentive is to bring transparency and accessibility for broader market participation, as well as accelerate the price of carbon credits as a signal to develop new, high-quality projects. The decentralized finance groups allow users to bridge credits on-chain into carbon pools. Putting the scale into perspective, carbon credit retirements intended to be bridged with the largest platform contributed to approximately 13% of all Verra retirements in 2021. As of now, over 18M credits have been tokenized.

At this point it’s unclear whether this technological advancement is helping or hindering market oversight and the global adherence to quality carbon credit standards, but what is certain is that its impact is being felt across the market.

Projections show no signs of voluntary carbon market slowing

The coalescence of these and other factors is contributing to never-seen-before growth in the VCM. Project developers have a stronger incentive to bring new projects to market, but the complexity of new project development requires time, technical expertise, and significant capital, and thus won’t immediately ease near-term supply constraints. As a result of the upward carbon price movement, we’re noticing that some project developers are less willing to forward sell credits from existing projects despite the heightened demand for long-term offtake, which adds to the feeling of a supply crunch.

So what can organizations expect in terms of future carbon prices? BloombergNEF recently published an inaugural Long-Term Carbon Offset Outlook 2022 that addresses this question by modeling out three potential scenarios for how carbon supply, demand, and pricing may shake out.

According to BloombergNEF, the voluntary carbon market scenario assumes the market remains similar to how it looks today. Both avoided emissions and carbon removals are accepted, leaving the market with excess supply and ineffectively low prices. In contrast, the removal scenario allows only carbon removals, leaving the market undersupplied and high-priced. The final hybrid scenario takes a gradual approach from today’s voluntary market to a removals-only market, allowing pricing to rise at a manageable rate.

There’s a wide range of price outcomes in these potential scenarios, ranging from $11 – $224/ton, as well as a variety of factors that will contribute to how these scenarios might actually play out. Given the future uncertainty of the market and the current optimism many participants are feeling, 3Degrees continues tracking the market closely to understand the impact that the dynamics of supply and demand have on our client’s procurement strategies.

What these trends mean for carbon credit procurement and climate action

The general consensus in the market seems to be that voluntary carbon credit buyers should anticipate that prices will continue to climb as an increasing number of organizations set more aggressive climate commitments. Carving out a dedicated carbon budget or setting an internal carbon price is an effective strategy to account for total emissions while establishing funds for future carbon reduction investments.

With a lot of recent buzz around carbon removals, market participants are awaiting more explicit guidance on how removals play a role in supporting SBTi’s Net-Zero Standard, or other long-term net zero targets. In addition, buyer’s are seeking guidance on the role that carbon credits can play in mitigation beyond an organization’s value chain. However, there’s important work to be done today in critical sectors that are not yet regulated, and carbon credits are a valuable tool that enable organizations to take action now. We encourage all companies to set and pursue emission reductions targets that go beyond business-as-usual practices, in addition to leveraging carbon credits to increase their impact on mitigating climate change. While carbon credits are not a strategy on their own, when effectively leveraged, they complement near and long-term climate targets.

Looking to 2022 and beyond, it’s imperative that all market participants work to strengthen the integrity of the VCM by supporting high quality projects that are third-party verified using internationally recognized standards, advocating for openness and transparency, and adhering to sound and credible emissions reduction claims. 3Degrees continues to support high-quality projects in key sectors, and can help clients navigate the uncertainty in this rapidly changing market landscape.

COVID-19’s Impact on Shipping Emissions — and What Companies Can Do About It


It has been nearly six months since COVID-19 upended nearly everything across the globe – disrupting lives, businesses, and industries in ways that will forever change the world. Many state and federal governments enacted shelter-in-place orders earlier this year that shuttered brick-and-mortar businesses or drastically limited the number of customers allowed through their doors. In an effort to contain the spread of the virus, residents in many countries are still being encouraged to limit their activities to those that are absolutely essential. One result of these lifestyle adjustments is an unprecedented number of consumers going online for their shopping needs.

According to a recent study by Adobe, online shopping sales in June of this year were up 76% compared to the same time last year.

These trends are likely to stick around even after the pandemic is behind us, with an expected 160% growth in online shopping from consumers who rarely or never shopped online before COVID hit. While there are obvious benefits of being able to shop from the safety of your home, the almost constant stream of delivery trucks in neighborhoods around the world has increased shipping-related carbon emissions. 

Even before the pandemic, transportation emissions posed an increasing challenge in the fight against climate change. In 2016, the transportation sector surpassed the power sector as the largest emitter of greenhouse gas (GHG) emissions in the United States, responsible for over 29%1 of total emissions in the U.S., and 24%2 globally. In response, many businesses, particularly consumer goods and e-commerce companies, have been focused on better understanding their indirect (Scope 3) emissions and taking steps to address them. 

One of the most significant demonstrations of this commitment was in early 2019 when Etsy became the first major online shopping destination to offset 100% of carbon emissions from shipping. As a global online marketplace, 98% of the company’s total carbon footprint falls within its Scope 3 emissions, driven by sellers shipping goods to buyers. The company took action to mitigate this carbon impact by investing in four unique emission reduction projects to offset the emissions from its global supply chain — and it cost them less than a penny per package. 

With the current rise in online shopping and uncertainty about when or if consumer shopping behavior will return to a ‘pre-COVID normal’, many more companies have an opportunity to follow Etsy’s lead and take action to address the impact of their increased shipping-related emissions.

To take action on their shipping emissions, companies must first understand the scale of their footprint. While some companies calculate their shipping emissions on their own, many organizations opt to outsource this step. Advisors like 3Degrees can inform customers about the data required to perform these calculations, such as the, weight, distance, and mode of transportation of the goods being shipped. We then take these inputs and use emissions factors from WRI’s GHG Protocol to create a complete shipping emissions report with total metric tons of CO2 that result from goods shipped.

With a shipping footprint calculation completed, organizations can then work with a trusted firm to develop a portfolio of verified emission reductions (VERs) from existing projects, or support the development of new emissions reduction projects that tie directly to their business, industry, or supply chain. By matching verified emission reduction credits to their total shipping footprint, companies can make carbon neutrality shipping claims, reduce the environmental impact of their business, and play an important role in helping to decarbonize transportation.  

COVID-19 has been a stark reminder that we are all connected citizens of this planet. With the long list of negative impacts brought on by this global pandemic, let’s not let this change in consumer shopping behavior add to that list by further accelerating climate change.

Companies can and should step up and take action to mitigate that impact and ensure that the environment doesn’t continue to suffer in a post-COVID world.

For more information on how 3Degrees can help your organization calculate its shipping emissions or take steps to address them, please contact us.

1.  Bloomberg Sustainable Energy in America Factbook:
2. IEA Tracking Transport Report:


The Role of Carbon Offsets in Corporate Sustainability (part II)

city clouds

Part II – Carbon Offset Best Practices

In our first article in this series, The Role of Offsets in Corporate Sustainability, we explored common carbon offset project categories, and how offsets can play an important near-term role in companies’ broader sustainability efforts. We also highlighted why offsets sometimes are sometimes criticized, and discussed why or why not those critiques are valid.

In this second article in the series, we take a closer look at best practices for organizations that utilize carbon offsets as one of many tools in their sustainability toolbox.

First, reduce your emissions wherever possible

The first step in any company’s climate action plan should be to reduce all emissions that are within its direct control, including its own operations and supply chain. This action may take many different forms depending on the nature of the organization, but all organizations should develop and implement a carbon reduction strategy. Typically, this begins with an audit of operations, an internal evaluation, coordinating with suppliers in the supply chain, or any other process to identify sources of emissions and calculate the company’s total greenhouse gas (GHG) emissions footprint. After the sources have been identified, companies can set emission reduction targets and develop plans to specifically address the impacts associated with those sources and activities. 

Use offsets as a bridge to long-term, industry-specific solutions for decarbonization

It is nearly impossible for even the most efficient and sustainable organizations to completely avoid activities that result in GHG emissions. Some industries are already subject to GHG regulations, such as the oil and gas industry in California. However, in other industries that aren’t yet regulated, many organizations are stepping up to take voluntary action. Until the largest industries – such as transportation and agriculture – are fully decarbonized, it will not be possible for organizations to address the entirety of their climate impacts through internal changes. Lack of viable technologies, resource constraints, and other obstacles can make the path challenging. This is where carbon offsets play an important role. Offsets can be an instrument that allows corporations to add onto baseline activities that are already working toward sustainable operations. By investing in emission reduction projects, organizations can take immediate action on their Scope 1 (direct) and Scope 3 (indirect) GHG emissions that are otherwise difficult to address.

Ensure you support high-quality emission reduction projects

It is critical to remember that not all offsets are equal in their impact. Organizations need to be thoughtful when sourcing carbon offsets, ensuring they are from projects that are third-party verified using internationally recognized standards that are managed and maintained by independent, not-for-profit organizations. The ultimate goal is to support emission reduction projects that align with the company’s industry or supply chain, or its geographic, social, and economic impacts. 

Is there a role for carbon offsets to play in corporate sustainability? Yes, absolutely. But it’s important to remember that carbon offsets are just one tool available to companies seeking to build a comprehensive sustainability strategy. And while offsets are not a singular solution to climate action, they can offer an important mechanism for corporations to achieve near-term climate goals and address hard-to-reduce emissions sources.

The Role of Carbon Offsets in Corporate Sustainability (part I)

corporate buildings among trees

Part I

Exploring how, when, and why carbon offsets are important – as well as their limitations

As more organizations around the globe heed an urgent call for climate action, carbon offsets are one tool they can use for near-term emission reductions. While the impact of investing in carbon offset projects is sometimes debated, these instruments can play an important role in bridging the transition to net-zero emissions. 

In this first article of a two-part series, we’ll explore how, when, and why offsets can play a vital role in companies’ broader sustainability efforts, as well as examine some limitations.

As defined by virtually all market participants, including the Climate Action Reserve, a carbon offset is a third-party verified, greenhouse gas (GHG) emission reduction, removal, or avoidance equivalent to one metric ton of carbon dioxide equivalent (CO2e). Carbon offsets are a funding mechanism to support emission reduction projects within non-regulated sectors, including within an organization’s supply chain. From an environmental integrity standpoint, all verified emission reduction projects must meet the notion of “additionality” – meaning, these reductions would not have been achieved without funding from the sales of carbon offsets. 

There is a rigorous and conservative quantification of the actual emission reductions achieved through a verification process that includes detailed due diligence by third-party verifiers. These verifiers operate under approved methodologies detailing these processes, and must maintain accreditation under relevant standards bodies in order to maintain their status as verifiers. These entities ensure that the carbon offsets generated do, in fact, represent the emissions reductions or removals that are being claimed. 

While there are many different project types, carbon offset projects are often categorized as follows:

  • Carbon removal: Carbon removal projects include nature-based solutions that actually remove carbon from the atmosphere, such as certain types of forestry projects, as well as carbon capture and storage (CCS) projects.
  • Carbon reductions: These projects focus on avoiding greenhouse gas emissions (such as capturing the methane that normally would be released from a dairy farm). While these projects don’t actually sequester existing carbon, they reduce the amount being released into the atmosphere.   

So what is the role of carbon offsets in corporate sustainability initiatives? And why are some detractors concerned?

An offset is not a long-term, singular solution for decarbonization. Yet, some critiques of offsets anchor on an “either/or” premise – i.e., organizations are either going to purchase carbon offsets or pursue longer-term solutions to reduce their emissions footprint. In reality, it’s more nuanced, as explained below….

Do offsets provide permission to “pay-to-pollute”? 

Detractors of carbon offsets often claim that offsets provide permission to “pay-to-pollute” — so businesses purchase offsets but do not actually change their behavior. These critics say that since offsets reflect emission reductions, companies can continue to postpone the systemic change that is required to address climate change and continue to buy offsets instead. 

It’s important to note that most supporters of offsets (3Degrees included) do not believe they are the ultimate tool to address climate change. First and foremost, organizations need to reduce their direct emissions wherever they can. However, it is nearly impossible for an organization to completely avoid Scope 1 and Scope 3 emissions (e.g., emissions from transportation and/or supply chain), which are also difficult to address. In these instances, carbon offsets are an appropriate tool to employ and provide a funding mechanism to support emission reduction projects — including projects that directly address those transportation or supply chain emissions. For many organizations, carbon offsets can also serve as a bridge while they work on developing the necessary long-term solutions, which can be complex and take time to come to fruition. Case in point: Etsy was able to immediately offset their shipping emissions for less than a penny per package using carbon offsets while simultaneously working on a broader strategy that includes collaboration with industry leaders, shippers, and policymakers to lead the shipping industry toward decarbonization. The company is supporting immediate emission reductions and galvanizing action for more systemic, long-term solutions.

But carbon offsets don’t address societal inequities.

Climate change magnifies deep societal inequities: the most vulnerable populations disproportionately experience the negative impacts of climate change. Some groups criticize carbon offsets because the impacts of the offset projects are often not linked geographically, socially, or economically to the environmental impact of the offset-purchaser’s operations. However, by definition, carbon offsets are not mechanisms for addressing all environmental impacts, only climate-related (e.g, greenhouse gas) emissions.  

Even though carbon offsets themselves are not designed to address local impacts, companies can link the selection of emission reduction projects to the major geographical, social impact, and/or economic impacts of their GHG footprint or overall operations. They can also select specific offset projects that provide environmental or social benefits (e.g., local air pollutant reduction, water quality improvement, women’s empowerment, job creation, biodiversity, poverty reduction, etc.) that align with their overall sustainability goals. The impact of these projects extends beyond the carbon benefits. And it’s a step – though many more steps are still needed – to ensure a just transition to a low-carbon economy.

The process around carbon offsets is too complex. 

Carbon offset projects often require complex accounting and in-depth verification to uphold the environmental integrity of the GHG reductions. Critics sometimes point to possible margins of error in carbon offset accounting as a justification for discounting their overall value as an instrument for carbon reduction. This rationale, however, forgets that carbon offset methodologies always err on the conservative side of greenhouse gas accounting, and it also misses the intent of offsets as a tool in a larger sustainability strategy. 

Offset funding acts as an incentive for implementing carbon beneficial changes in industry practices. When an organization selects projects directly related to its industry or supply chain, this impact directly connects to the source of the emissions. For example, when Lyft sought to make all its rides carbon neutral, it invested in projects that offered reductions in transportation sector emissions, like automotive manufacturing and waste oil recycling. Projects like these have a direct connection to the automotive supply chain (and Lyft’s Scope 3 emissions).    

Carbon offsets exist in a complex and intertwined world of corporate sustainability goals, and offset methodologies are inherently complex as they require analysis from technical, policy, and economic perspectives. While critics may highlight shortcomings of carbon offsets as a comprehensive solution, these mechanisms play an important role for organizations who want to take immediate climate action, while also pursuing the long-term work needed for more systemic decarbonization solutions.

Next up: In part two of this series, we explore carbon offset best practices.