The flaws and opportunities in the voluntary carbon market: 5 data-driven charts behind 1.8 billion tons of offsets

10 minute read

Executive Summary

Wovoka developed a free public tool to comprehensively explore the voluntary carbon market (VCM). Every 24 hours we aggregate, clean, and standardize project-level data from the ~1.8 billion issued offsets from the major VCM registries and merge in quality information from third parties. While much criticism has been made on specific projects within the VCM, we show the findings from exploring the entire dataset.

We find that:

  • The two largest registries (Verra and Gold Standard) have the lowest average project quality scores.
  • Wetland restoration and grassland conversion have among the highest quality scores, but these categories have among the lowest number of projects. Renewable energy projects rate among the lowest quality but have high, mostly historic volume.
  • Among the 15 largest carbon offset developers by volume, only the two largest, private-equity backed players are developing projects in multiple categories. Most project developers narrowly focus on forestry or renewable energy credits.
  • There is no evidence that higher-quality projects are retired (e.g. claimed) at higher rates than lower-quality ones, suggesting a lack of transparency for buyers. Or if price is the unobserved variable driving the non-relationship, there is a clear lack of fungibility between offset claims.
  • However, looking specifically at the top 40 corporate retirees of carbon offsets by volume, we see evidence of discernment in project quality. Namely, the relatively higher-volume retirees have on average invested in higher-quality projects.

The current flaws of the voluntary carbon market to adequately price, demonstrate credibility of projects, and transparently tie claims to offset buyers does not reduce the need for a global system of rewarding these efforts. According to the 2022 IPCC report, ecosystem preservation and restoration is the activity with the 2nd largest potential for 2030 emissions reduction with nearly equivalent potential to solar and wind generation (~7GT CO2e/year vs. ~8GT CO2e/year respectively). To give up on ecosystem preservation and protection is to give up on the planet.


1. The public, especially consumers, should demand details behind net zero claims.

Ultimately, climate change is a public policy and coordination problem. We laud the developments of carbon accountancy start-ups (e.g. Watershed, Persefoni, Avarni) that are empowering companies with technology platforms to more easily measure and reduce their carbon footprint and renewable energy developers that are lowering the carbon intensity of electric grids around the world. However, we’ll still need some level of hydrocarbons for certain energy-intensive applications, which means we’ll need some form of carbon removals and carbon offsets to achieve carbon neutrality. The public must be educated and keep companies accountable from making unfounded net zero and carbon neutrality claims.

2. Registries require clear and consistent disclosure of the purchasing company and date of retirement in the registry.

In our complete and cleaned dataset across the four major registries, only 16% of the entire retirement dataset by row count & 50% by volume contains no information on who retired it to make a claim. Further, retirement by “3rd party” (e.g. offset brokers) is the 2nd largest single retirer. If companies are using these offsets to make an environmental claim, it should be 1:1 traceable back through the registry with full details of who is making the claim and for what project; otherwise, externally assessing the validity of an individual company's net zero or carbon neutrality claims are nearly impossible. Finally, corporate names should be standardized – and simple misspellings corrected – before it is forever preserved on the registries.

3. All third-party quality raters strive to make some simple version of their project quality metrics public.

This would enable corporate buyers and project developers to more efficiently transact, and to restore waning public confidence in the VCM. Additionally, the public could then more easily see higher retirement of higher-quality projects, thereby the industry avoids the market-wide backlash from a few bad actors and/or bad projects with vastly overstated carbon claims. We applaud BeZero and Renoster for their efforts in making their ratings publicly available.

4. Investors and corporate buying teams look more deeply into the types of projects that may be structurally higher quality and currently underfunded.

Particularly, Wetland Restoration (i.e. “Blue Carbon” or mangrove, seagrass, and peatland carbon projects), which has the highest project quality ratings among the entire VCM but very few projects currently (~10 projects, representing only 1.3 million offsets, or less than 0.1% of total issued volume). We are currently in the process of developing an early-stage pipeline of potential sites in this space.

What is the voluntary carbon market doing today?

In practice, carbon credits have been endlessly lambasted as inadequate in their current form by all members of media and civil society. Estimates of over-crediting on popular forestry projects range from 70% to 90%. (Even John Oliver has gone in.) In spite of these challenging headwinds, we believe that this market is collectively – albeit slowly – on the way to correcting itself.

The intense and increasing scrutiny on the quality of these credits will slowly push credit purchasers (“retirees,” in carbon credit parlance) to put their dollars and euros towards projects with legitimate environmental impact. Startups like Sylvera, BeZero, Calyx Global, and Renoster are being founded on the central purpose of providing better transparency to this decades-old and historically voluntary market. Global regulations such as Singapore’s carbon tax ($34/ton in 2026) &NYC’s Local Law 97 ($268 USD/ton) are putting real and stiff prices on carbon emissions, some of which are allowed to be offset. Traded prices of carbon offsets remain volatile – current renewable energy credits trade at $8-10/ton, forestry credits at $15-25/ton according to Ecosystem Marketplace and others – but we still believe long term there will be a shortage of high-quality, nature-based projects.

We built the Wovoka platform to explore the voluntary carbon market in order to better understand what currently exists within the voluntary carbon market, what is being transacted, and by whom.

Our data and analysis

The Wovoka platform ingests carbon credit project, issuance and retirement details on a daily basis from the four largest international registries (Verra, Gold Standard, ACR, and CAR). It standardizes certain data fields across the different registries and also merges in associated project-level data on project ratings from carbon credit rating providers (currently BeZero).

The dashboard is publicly accessible at requiring only an email address so we can keep you informed about upcoming releases and further research reports. Our free tool allows you to visualize trends across the 1.8 billion tons recognized by the four major international crediting agencies by project type, country, project developer, & country.

Here's our findings:

1. Among the four most prominent international carbon credit marketplaces, the two largest and most prevalent, Verra and Gold Standard, have the lowest average project quality.

Figure 2. Project quality average ratings across each of the four major registries showing that CAR has the highest average quality by a marginal amount, but also has the lowest percentage of total issuances given a quality rating (plot data available here).

Here we note that the vast majority of projects are not rated (we used various imputation methods to obtain complete data across all project) and as such few conclusions can be drawn definitively, but this by itself highlights the need for ratings agencies to offer full market coverage. This may also suggest that the majority of projects on registries are not actively traded and as such, there is little value in assigning a rating to many projects.

Further, while the Gold Standard and Verra registries do tend to have the lowest project ratings on average (e.g. the lower likelihood that the project's stated carbon benefits are in fact real), the average quality gap is quite small (0.01 to 0.09, based on our project quality metric.)

2. Among the 10 best rated and 10 worst rated categories of projects, Wetland Restoration stands out as the highest average quality ratings, but among the lowest total issuance volume.

Figure 3: Wetland Restoration and Avoided Grassland Conversion stand out as the top two project categories with the highest average ratings of projects fitting those methodology types (plot data available here).

Many of the historic renewable energy-focused carbon projects stand out with lower average ratings likely driven by concerns about additionality, namely concerns that the carbon revenues weren't meaningfully determinative of whether the project was going to proceed or not. The number of projects of this type has also decreased since the 2020 decision of Gold Standard and Verra to exclude middle-income countries' grid-connected renewable energy projects from crediting.

Wetland Restoration stands out with potential. This category includes carbon projects related to mangroves, seagrass, and peatlands. It is clear to see why there is burgeoning interest in these types of projects (also called “blue carbon”) as ecosystems such as mangroves hold ~4x the carbon sequestration potential as any terrestrial ecosystem. In addition, mangroves and seagrass serve important ecosystem functions for marine animals and the livelihood of coastal communities.

Several notable and potential projects in this space include:

3. Among the top 15 project developers by issued volume, only South Pole and Anew are developing in multiple project categories.

Figure 4. Thirteen of the top fifteen developers by total issued volume of carbon credits have either a sole focus in forestry or renewable energy. It is only the private-equity backed South Pole and Anew that are developing across a diverse range of project scopes (plot data available here).

The vast majority of project developers are focused on a single project scope. South Pole, with funding from Temasek, and Anew, with funding from TPG, are the only top developers with a diverse range of project scopes. Private equity is clearly moving into the carbon credit space with Rubicon Carbon seeking to raise $1B to build a platform and financial instruments to support buyers of carbon credits. Oak Hill Advisors and partners recently bought $1.8B of US forest land to use for carbon offsetting, following a $500M joint venture for the same effort only ~12 months before.

We believe there will be further consolidation of project developers and the creation of multi-scope project development entities that use similar back-office functions to produce project development documents and benefit from the diversification of project scopes among their portfolio of credit issuances.

4. There is no evidence that higher-quality projects are retired (e.g. claimed) at higher rates than lower-quality ones, suggesting a lack of transparency for buyers.

Figure 5. Plot of every retired project based on quality score and percentage of the project that was retired as of August 2022. No predictive power was found between quality score and the degree to which the project was retired (plot data available here).

While we had hoped to find a correlation here, there was none, even when looking just at the top 40 or top 100 projects by total issued volume. Given 3rd party rating agencies to support the offset buy-side (e.g. Sylvera) are only a few years old, it is perhaps to be expected that quality was difficult to discern on what project volumes to buy and retire throughout the decades-long history of the carbon offset market. We leave the exploration of this relationship across time as an area of investigation for future researchers.

It is also important to note that price is not recorded within the publicly available registry datasets, which may be causing unobserved variable bias in this relationship. Certainly, if registries were to require price disclosure at retirement, it would help level the playing field for project developers to discover transacted prices to benchmark for their pipeline and for corporate customers to know they are paying a fair price for a comparable offset. This would also reveal the incredibly high transaction fees (>15% in many cases) from offset brokers extracting value in trading and speculating on price changes in the period between issuance and retirement.

However, importantly, if price is the unobserved variable driving the non-relationship between project quality and project retirement rates, that is prima facie evidence for the lack of fungibility in the offset market. That is, it would be evidence that not all offset claims are equal and interchangeable, in the same way that if you found one person agreeing to sell a share of Berkshire Hathaway for $10,000 and another for $25,000, you’d reasonably conclude that not all shares are equal in some meaningful way.

5. High-volume retirees, that is, the largest global corporations claiming the benefits of carbon credit projects, do seem to filter and select for higher-quality projects on the whole.

Figure 6. Plot and table of the top 40 offset purchasers by total volume showing some predictive power that the higher the purchaser volume of retirements, the higher quality their portfolio on average. (plot data available here).

These figures show the behavior of the largest end retirers in our dataset, namely those that voluntarily self-identify in the international registries when they claim and retire a credit in the registry. It must be noted that the data quality across all the retirement data, however, is extremely poor with numerous issues:

  • There were several large retiring entities that were for specific projects/initiatives for which we couldn’t identify the ultimate sponsor company that we have excluded from the above chart.
  • The 2nd largest retirer is “Third Party”. We believe this happens when a carbon brokerage firm (who often also does origination) retires large tonnage on behalf of a large, unidentified third-party enterprise client. We believe this practice should be changed by the registries to drive further transparency.
  • There is also far too much “missing data”. A shocking 16% of the entire retirement dataset by row count & 50% by volume contains no information on who retired it to make a claim, simply that there was a retirement by an unidentified party on a (mostly) identified date.
  • We had to spend several weeks cleaning & standardizing retirer names to single recognizable entities. This was a combination of manual work and automated parsing/regex. We wish the registries required disclosure of retirer identity in a modern web form with data entry checks or a drop-down, so work like this doesn’t have to be done at the data layer.

Ultimately, we see no reason that a company retiring an offset to make a claim should not be clearly and consistently documented by name in the registry.

Among the lowest-quality, high-volume retirers we see many market participants making “carbon neutral” claims based on extremely suspect offsets. For instance, Primax Colombia’s offset purchases have been widely reported as a tax avoidance manuever using low-quality offsets to avoid a $5/ton carbon tax levy. For the other low-rated retirers, it is hard to discern whether the choice of credits is out of lack of transparency and awareness, or simply driving to achieve a carbon neutrality/net zero claim statement with the lowest total cost.

On the positive side, Volkswagen, Disney, and Eni are all among the top 10 retirers by volume and retiring with portfolio quality above what would be expected from the overall trend in the data. Whether they invested in dedicated carbon offset purchasing teams or simply allocated higher budgets to these efforts than others, we would love to highlight & champion similar companies like this. Among the best rated of small-scale buyers in our dataset is Ducks Unlimited, a non-profit supporting wetland restoration efforts to protect North American waterfowl, which has an active carbon program to protect and restore wetlands and grasslands.

Overall, we find it extremely positive that the largest purchasers in this space on average distinguish quality between carbon assets and believe this means that high-quality carbon assets have long-term price appreciation upside. As the market continues to deepen in volume and the tooling ecosystem continues to grow, we expect to see more discernment and diligence in the carbon procurement process.

Conclusion and next steps

The voluntary carbon market has many flaws in its implementation today, but it is critical to create a market that allows for payments to projects that genuinely protect and restore critical ecosystem services that sequester carbon. We have so little time and carbon budget left. The IPCC report makes clear how large and critical the ecosystem and protection opportunity is for 2030. True nature-based removals are provably scalable, self-maintaining & environmentally beneficial. While technological solutions like direct air capture should be part of the overall planetary carbon removal regime, their current cost is still $500+/ton and at minuscule scale in comparison to nature-based estimates of ~$20-100/ton and at massive existing scale.

To have a chance to limit warming to 1.5C by 2030, nearly every viable ecosystem preservation and restoration project must be funded and green-lit while still holding out hope for the long-tail possibility that energy-intensive, industrial carbon removal technologies will catch up. Projects with local communities at the center, high carbon sequestration rates, 100+-year storage potential, and demonstrable co-benefits make the best candidates for projects, with blue carbon showing early promise as a potential game changer.

Blue carbon ecosystems (mangroves, seagrass, and peatlands) store some ~10-24B metric tons of carbon, while smaller in scope that the total carbon storage of the world’s terrestrial forests and vegetation (~450-650B tons), these coastal ecosystems sequester carbon at ~3x the rate of the most productive tropical forests and over ~7x the rate of temperate forests. They can also store ~3-5x more carbon per hectare than tropical forests, locking the carbon away in the soils as opposed to above ground biomass, which always carries forest fire release risk, which will be an increasing concern on an ever-warming planet.

They are under immense development pressure too. According to NOAA, Since the 1940s, 30-50% of mangrove ecosystems have been lost and since the 1990s, 50% of seagrass meadows have been destroyed. As a result, while these ecosystems cover just the thin coastal fringe of ~5% of the tropical forest area, they account for ~20% of emissions from deforestation. These losses are especially acute in Southeast Asia which has the highest deforestation rate of any region globally, yet holds ~15% of the world’s tropical forests and ~33% of the world’s remaining mangrove forests. As a result, Bain and others see an >$10B opportunity in Southeast Asia alone with some of the highest-quality, investable carbon offset project potentials.

We are committed to producing high-quality nature-based carbon credits through community-driven restoration initiatives.

Wovoka's progress

Wovoka is focused on scaling the origination of blue carbon projects in Southeast Asia, starting in the Philippines, where our company is co-located. Our pioneer reforestation project in Camarines Norte is in the feasibility stage while the other projects in three other sites in the Philippines are currently in the works.

Our projects focus on the conservation, restoration, and management of coastal ecosystems like mangroves, seagrass beds, and salt marshes, which have exceptional carbon sequestration capabilities. By investing in these projects, we’ll not only combat climate change, but also support local communities, enhance fish nurseries, provide coastal resilience, and promote biodiversity.

If you are a corporate looking to credibly reach net zero or a carbon project developer looking for a high-quality project pipeline, please feel free to get in touch for potential ways to collaborate. We have immediate opportunities in several 2,000-5,000 hectare sites for restoration and protection projects and have a goal of unlocking 500,000 hectares for science- & data-driven project evaluation by the end of 2023 working with our large-scale partner land owner & land stewards.

Wovoka's commitment

In order to stand a chance at preserving our planet, we need both high-quality data to make decisions and high-quality carbon projects to invest in. Wovoka is committed to sharing all of our work to date on the VCM in the hope that others may utilize the full data from the major registries when making decisions or trying to understand the market.

For transparency & completeness, we’ve made publicly available our Jupyter CoLab notebook that drives most of the analysis if you wish to step through it more deeply and point out any errors, which may or may not exist.

To get access to the full voluntary carbon market data platform, click here.

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