Navigating Risk As Carbon Markets Mature

Building on the rapid growth of the carbon markets in 2022, expansion is expected to continue this year—not only in transaction volume, but also in the types of available carbon products in both the voluntary and compliance markets. Amid this growth, concerns persist regarding the integrity of certain carbon products, and as products proliferate and the market matures, participants in the carbon markets have a host of risks and considerations to keep in mind.

Carbon markets 101

• What are carbon markets? The term "carbon markets" encompasses two main types of marketplaces where carbon products are traded: compliance markets and voluntary markets. Compliance markets are regulated markets established by law in a particular jurisdiction or internationally. In these markets, regulated entities must meet specified emissions limits, which they can satisfy by the purchase and retirement of eligible carbon products; their emissions reduction obligations drive the demand