Carbon Offsets: Enduring and Evolving

Carbon Offsets: Enduring and Evolving
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Despite political shifts and changes in climate policy, the carbon offsets market continues to expand. Strong momentum suggests sustained growth through 2025 and beyond.

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Key Takeaways:

  1. Carbon offsets have remained a key part of corporate decarbonization strategies, playing a vital role despite shifting political landscapes and climate policy changes.
  2. The voluntary carbon market is positioned for sustained growth, fueled by several key factors: a potential update to SBTi guidelines permitting offsets as part of climate reduction strategies, the introduction of new principles enhancing market oversight, and the looming 2030 deadline for corporations to achieve their decarbonization targets.
  3. High-quality carbon offsets are essential to ensure the continued economic growth of the voluntary carbon market and to foster trust in its effectiveness.

Carbon offsets have long been a cornerstone of corporate decarbonization strategies, though their role has evolved over time. In 1988, Dr. Mark Trexler, under contract with the World Resources Institute, developed the first land-based carbon offsets–a philanthropic initiative designed to encourage companies to reduce their carbon emissions ahead of public policy mandates.

What began as a charitable effort quickly transformed into a market-based solution, with carbon offsets becoming an important mechanism for global emissions reductions.

By 1997, carbon offsets played a pivotal role in securing support for the Kyoto Protocol, an international treaty aimed at cutting global carbon emissions. The United States, among other industrialized nations, agreed to sign the treaty largely due to the inclusion of carbon offsets. The U.S. ultimately chose not to ratify the agreement, later withdrawing its signature following the transition from President Clinton to President Bush.

The pattern repeated itself with the 2016 Paris Agreement: the U.S. initially joined under President Obama, withdrew under President Trump, and rejoined under President Biden, only for Trump to withdraw again.

Through these political shifts, carbon offsets have endured as a vital tool for corporate decarbonization. Today, two-thirds of the world’s largest corporations incorporate offsets into their net-zero strategies–a figure expected to rise in 2025–thanks to the potential update to SBTi guidelines allowing carbon offsets as part of SBTi-certified carbon reduction targets.

Previously, many companies outside the two-thirds already implementing carbon offsets avoided them to maintain their SBTi certification. With the possible updates to SBTi’s guidelines, more companies may now consider adopting offsets as part of their broader sustainability strategies.

The voluntary carbon market has seen significant fluctuations over the past decade. Between 2016 and 2021, retired carbon credits—representing purchased and permanently removed offsets—increased from 34 MtCO2e to 165 MtCO2e. However, demand plateaued between 2021 and 2024, largely due to media scrutiny over low-quality carbon offsets that failed to deliver their promised impact.

During this stagnation, organizations like the Integrity Council for the Voluntary Carbon Market and the International Organization of Securities Commissions (IOSCO), developed new guidelines to improve transparency and market oversight.

To maintain its economic growth, the voluntary carbon market must prioritize improving the quality and reputation of carbon offsets. 

At the same time, Green Builder Media, in partnership with CNaught, is helping restore confidence in carbon offsets by offering high-quality options that meet rigorous standards and eliminate redundancy in the market. Our carefully curated carbon offset portfolios provide businesses with verified, impactful solutions to meet their sustainability goals. You can explore our selection here.

With the potential update to SBTi guidelines, the introduction of stronger market oversight principles, and the fast-approaching 2030 climate target deadline for many corporations, the voluntary carbon market is expected to thaw and regain momentum, setting the stage for continued growth.