Examining Global Governance Challenges of Voluntary Carbon Offset Projects: An Agenda for Reforming the Voluntary Carbon Market

Abstract

There is substantial evidence demonstrating the contribution of greenhouse gases (GHGs) to global climate change, originating from both businesses and individuals across various sectors and countries worldwide. Although the responsibility for climate change and its mitigation has often been primarily assigned to the governments of sovereign nations as signatories of relevant international climate agreements, many large businesses and individuals are now undertaking various self-regulating initiatives to combat climate change by reducing their carbon emissions footprints. These initiatives fundamentally focus on voluntary carbon offsetting (VCO) projects, which are increasingly becoming legal, social, and ethical obligations embedded in corporate governance practices that shareholders, as well as the general public, now demand from companies as part of ‘corporate climate accountability’ or ‘carbon accounting’. These days, VCO is gaining traction in both public and private international climate governance; however, serious governance issues and reputational concerns have begun to emerge regarding offset projects.

This article employs an analytical approach to examine the existing global governance structure of the VCO market ecosystem. More specifically, it identifies various structural challenges, both legal and in terms of accountability, that the global VCO landscape faces. The article advocates for a reform of the current governance structure of the VCO market and, accordingly, makes policy recommendations based on innovative structural design solutions for effective global VCO governance. Therefore, it contributes to the development of soft legal, regulatory, and policy frameworks aimed at promoting accountability, transparency, and credibility, as well as fostering market, technical, and structural innovations within the VCO project ecosystem. Overall, the article contributes to the ongoing debate regarding the potential role and shortcomings of VCO in climate change governance.