The voluntary carbon market has been in a flurry in the past year to define integrity and quality for carbon credits. Between the recently released Core Carbon Principles from the Integrity Council for the Voluntary Carbon Market, to the Claims Code of Practice from the Voluntary Carbon Market Initiative, we now have more guidance and insight than ever before to guide carbon crediting programs and project developers toward high quality and integrity.
But the question remains: are companies willing to spend more for higher-quality carbon credits, as they seek to credibly achieve their climate goals? Little research exists to quantify the preferences of carbon credit buyers themselves—which credit attributes they prefer, how much they are willing to pay for them, and which qualities they consider must-haves. Understanding these preferences – and what shapes them – can help reveal pathways to a higher-quality voluntary carbon market, including by better directing carbon credit suppliers’ investments, as well as guiding interventions by standard setters and civil society organizations to where they are most needed.
To better understand carbon credit buyer preferences, Boston Consulting Group (BCG), with contributions from EDF, surveyed nearly 500 company leaders in charge of voluntary carbon credit purchases for their companies. The results are now in: the new study found that buyers across market segments are willing to pay significantly more for credits with demonstrably high quality.
Specifically, the study found that buyers prioritize the following attributes of carbon credit quality:
- GHG impact: Buyers want to be sure that the credits they purchase are actually reducing greenhouse gas emissions. Survey respondents across all market segments showed the highest willingness-to-pay for credits with higher GHG impact scores, representing higher levels of confidence in the GHG impact of the credit. Buyers in almost all segments were unwilling to buy credits with low GHG impact scores, even at very low prices. Both robust project transparency and MRV can provide more confidence in GHG impact:
- Project transparency: Buyers want to be able to trust that the projects or programs they are supporting are legitimate and effective. They want to see clear and transparent information about the projects or programs, including how they are designed, implemented, and monitored.
- Measurement, reporting, and verification (MRV): Buyers want to be sure that the credits they purchase are based on accurate measurement and verification of their underlying emissions reductions. They want to see independent verification of the projects’ emissions reductions.
- Project or program type: Buyers have different preferences for different types of projects or programs. For example, most respondents preferred and were willing to pay more for higher-quality nature-based reduction credits, especially jurisdictional REDD+ (JREDD+) credits, showing the potential value of programs that use jurisdictional-level approaches.
- Co-benefits: Buyers prefer projects that provide other benefits in addition to emissions reductions. These co-benefits can include things like biodiversity conservation, local job creation, and air or water quality improvement.
- Location: Buyers may have preferences for projects that are located in certain regions or countries.
- Benefits sharing: Survey results revealed buyers don’t value benefits sharing as highly as other attributes. This reveals the need for more transparency by projects and programs on benefit sharing, as well as increased buyer education on the importance of benefit sharing to credit quality. As one survey respondent said: “We’re so busy worrying about credibility that we’re not as focused on benefit sharing. But if it could be more transparent, then for sure we’d look at it more.”
The 500 companies surveyed include a range of companies across the globe and from diverse industries—from major multinational Fortune 500 firms to small and medium enterprises.
Buyers across market segments are willing to pay significantly more for credits with demonstrably high quality.
The study’s findings have several important implications for stakeholders in the voluntary carbon market (VCM).
- First, project and program developers should tailor their strategies and product portfolios to meet the expressed quality needs of buyers. They should focus on projects that have high GHG impact, are transparent, and have strong MRV. They should also carefully consider the co-benefits of their activities and the location of their projects or programs.
- Second, buyers should be aware of the importance of carbon credit quality and should be willing to pay more for high-quality credits that can deliver actual climate benefits with confidence and transparency. They should also educate themselves about the different types of carbon credits and the different attributes of credit quality.
- Third, third-party organizations, such as NGOs, standard setters, and rating agencies, should continue to educate buyers about credit quality and to develop standards and guidelines for high-quality credits. That’s what EDF’s Carbon Credit Quality Initiative, in partnership with Oeko-Institut and World Wildlife Fund (US), aims to achieve.
- Finally, the study’s finding that “low prices are not a primary motivator of credit purchase decisions” suggests that project and program developers, buyers, and third parties seeking to improve the quality of the voluntary carbon market should not base their decision-making on an assumed “race to the bottom” in the voluntary carbon market. Rather, they should use buyers’ willingness to pay for demonstrated quality to guide them in designing practical interventions that strengthen the integrity and impact of the voluntary carbon market.
The voluntary carbon market is a growing market, and the survey results show that companies’ demand for high-quality credits is clear. By understanding the most important attributes of carbon credit quality, buyers, project developers, and third-party organizations can all contribute to ensuring that the VCM can live up to its potential in addressing the climate crisis. We all want to see a transformation of the market toward high quality and integrity—and it’s up to all of us to achieve it.
Find the report here.
