Carbon offsets, and the voluntary carbon markets (VCMs) through which they are sold, were supposed to bridge that final step to a carbon-neutral economy, directing private finance into carbon removal while companies cut their own emissions.
However, credibility issues have plagued the VCMs, and the market has stalled. Allegations of greenwashing, weak verification, and projects that provide very little climate benefit while harming local communities have all set the offsetting world back. Efforts to improve accountability through tech have gone some way to solving the issue of integrity, but devolving and localising VCM governance could be the kind of structural change needed to kickstart the market again.
By forcing buyers to use territorially defined, locally governed offsetting programs, this policy would shorten accountability chains, align projects with the needs of local communities and ecosystems, and rebuild trust in the system.
Demand in VCMs has taken a tumble
Carbon offsets are tradable certificates that represent one tonne of carbon dioxide emissions either avoided or removed from the atmosphere. They are an important part of many companies’ net zero strategies, often comprising the final stage of achieving carbon neutrality. Once companies have reduced their operational emissions as much as possible, they can use these carbon offsets to cancel out the residual emissions that remain.
According to GlobalData, the carbon offsets market will be worth more than $250bn by 2050. But despite this predicted valuation—and the major role offsets will have to play in climate mitigation—demand for these offsets has stalled since 2021.
A major reason for the VCM’s faltering is the series of scandals that unfolded over the last few years, seriously damaging the credibility of carbon offsetting. A 2023 investigation by The Guardian found that the vast majority of credits claiming to protect rainforest ecosystems had been hugely exaggerated.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataVerra, the largest standards body, faced analysis suggesting a large share of its rainforest credits delivered little or no climate benefit and was subsequently subject to public and scientific challenge. Separately, the Kariba REDD+ project—associated with broker South Pole—faced exposés alleging over‑crediting, opaque finances, and failures to deliver promised community benefits.
As well as the verification issues, carbon offsetting has also come under criticism for harming the local areas around projects. Reporting on Kariba and other schemes found that large sums flowed to intermediaries while village communities saw little investment, and in some instances, conservation enforcement produced social tensions or rights complaints. Because the governance is often so remote and opaque, local people lack the power to hold developers to account and to shape benefits. As a result, both businesses and consumers lost faith in the concept of carbon offsetting.
Localised carbon markets mean decisions are made closer to the ground
Devolving and localising VCMs would mean formalising territorial registries and governance for offsetting at sub‑national levels (regions, provinces, or local authorities). Companies wishing to buy offsets would have to use the specific VCM for their local area, providing finance for local nature and climate mitigation projects. Existing examples of this include the UK’s Woodland Carbon Code and the Land Carbon Registry, which already operate with local standards, verification, and benefits frameworks, showing how nationally tailored codes can function. Expanding this model to all VCMs would mean the local authorities approve project methodologies, manage local registries, and oversee benefit distribution.
This will help to alleviate the two main issues currently stifling demand for carbon offsets. Firstly, integrity will improve because oversight is closer to the project. This means local regulators and communities can verify baselines, monitor outcomes more frequently, and raise early alarms about over‑crediting or mismanagement. And secondly, social outcomes will improve because finance will flow directly to projects designed for local ecology and livelihoods. As a result, communities will gain a clearer stake and stronger mechanisms to ensure benefits reach them.
On top of helping to solve carbon offsets’ credibility issues, this strategy might also improve public perspectives on the journey to net-zero. The growing anti-ESG movement and the right-wing populists that promote it have damaged public opinion of climate action, often claiming it is a pointless waste of taxes. By bringing climate mitigation policies that also improve quality of life—like urban tree-planting—to the communities that fund them, localised VCMs could strengthen global support for climate action.
