The interplay between voluntary and compliance carbon markets: Implications for environmental integrity

Klas Wetterberg, Jane Ellis and Lambert Schneider

No 244, OECD Environment Working Papers from OECD Publishing

Abstract: This paper investigates the interplay between voluntary and compliance carbon markets, with a focus on the environmental integrity implications, in particular mitigation of greenhouse gases. It explores different types of carbon credit markets and the different ways that these markets can, and could, interact. Furthermore, the paper examines how developments in voluntary and compliance carbon markets can impact the mitigation effectiveness of carbon credit markets, including on both the supply and demand sides. The analysis finds that while carbon credit markets could unlock mitigation ambition and action, they also have significant environmental integrity risks that merit government attention. The paper suggests some guiding principles for governments in identifying how to engage with different carbon markets, and recommends that they take strategic, focused and collaborative action. The paper also highlights potential policies that could enhance environmental integrity across carbon markets. In addition to domestic carbon markets, governments could monitor how international and self-regulatory carbon market frameworks evolve. Governments can also assess the role that carbon credit markets play in achieving their climate objectives, and identify opportunities to enhance their mitigation effectiveness.

Keywords: Article 6; carbon credits; carbon tax; climate change; climate mitigation; compliance carbon market; demand; emissions trading system; environmental integrity; ETS; greenhouse gas emissions; net zero; supply; voluntary carbon market (search for similar items in EconPapers)
JEL-codes: F55 G14 H23 Q52 Q54 (search for similar items in EconPapers)
Date: 2024-07-18
New Economics Papers: this item is included in nep-ene and nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:oec:envaaa:244-en

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