Voluntary carbon market and standard setters: lessons from financial regulation

Standard setters are private entities responsible for certifying that the carbon credits traded on the voluntary market correspond to genuine greenhouse-gas mitigation. Recently, they have been empowered to confer regulatory benefits through their certifications. For example, in several jurisdictions, emitters receive tax reductions when they purchase carbon credits approved by these bodies. In this contribution, we draw on the finance literature to provide reasons suggesting that granting standard setters such power may exacerbate greenwashing in the voluntary carbon market and undermine the regulatory mechanisms that depend on carbon credits. We conclude by proposing practical measures that could help address these challenges.