Carbon Finance 2.0: How carbon markets reached a 'messy middle' - and what happens next

There are growing signs the global carbon market is approaching an "inflection point", as a combination of strengthened standards, regulations, and corporate net zero targets serve to boost confidence across the sector.

According to carbon market data and ratings provider Sylvera's latest snapshot, credit retirements reached 30.6 million in the third quarter of 2026, down nine per cent year-on-year, but marginally ahead of the same point in 2025 in terms of year-to-date volume. Total retirement market value grew to $211.8m in the third quarter, up from $190.6m, signalling how the average price paid per credit has climbed to $6.92, up from $5.66 a year ago. While the forward carbon removal offtake market remains well below last year's levels, volumes from the rest of the market have nearly trebled year-on-year from eight million to 23 million tonnes, as a more diversified buyer base has emerged.

As Shana Gallagher, net zero head of engagement for the British Standards Institution (BSI), argued during BusinessGreen's latest webinar - Carbon finance 2.0: Navigating the new era of carbon neutralisation, insetting, and updated standards  - the market still has "a long way to go" to deliver on its considerable promise and perform a full role in the net zero transition, but important progress is being made. "We're in the 'messy middle' - where the formal, independently verifiable, standards are still catching up to best practice that is being defined on the front lines," she said. "It is a real inflection point in terms of the standards, the market increasingly realising that we need carbon offsetting projects before we get to net zero by 2050, and that there is a role for those carbon offsets to play as we are simultaneously decarbonising and developing more comprehensive business plans that take climate into consideration."

'Leaning' on existing methodologies

BusinessGreen's latest webinar, hosted in association with Amazon, brought together experts from the tech and retail giant, Ergochair, BeZero Carbon, and the BSI, to discuss the changing nature of the carbon market, the growing interest in inset credits, and how the enhanced credibility of carbon credit projects is allowing them to play an increasingly important role in the delivery of corporate net zero targets.  

Kicking off the discussion, Michelle Jolly, director of sustainability solutions and services at Amazon, acknowledged that previous iterations of the voluntary carbon market had seen low cost and often low-quality credits were generally regarded as a "penance" against high carbon activities. But how the market is perceived is changing, she argued, as more robust standards and due diligence processes have taken effect and are providing assurances that projects are delivering promised carbon reductions or removals.

Tommy Ricketts, CEO and co-founder at carbon credits rating agency BeZero Carbon, added that a vast and growing range of carbon credit projects - from engineered carbon removal solutions to nature-based projects such as peatland restoration - can allow buyers to go "wide and deep" in building credit portfolios that enable companies to support a wide range of different projects and spread the risks associated with any one approach.

The breadth of carbon credit supply is being enabled by relatively robust demand, with Ricketts arguing that despite a high profile backlash against climate action in some markets, corporate players are by and large sticking with their net zero targets and making long-term "beyond the political cycle" commitments. This, he claims, is creating a reliable "backbone" of demand for the market.

"I don't think the market's going backwards," he said. "The only thing I would say is there's definitely a bifurcation between people investing in what's called an offtake - a forward contract of future credits from projects that are perceived to be best practice. That market is substantially bigger than the market for people buying them today in what you call the spot market. Activity in general is multiple higher for people looking to address ongoing emissions in the future with offtakes than what you see on the tradable market today."

It is a trend that suggests demand should continue to grow, as companies look to both cut their direct emissions and source carbon removals for delivery in the 2030s and 2040s that can help tackle any remaining emissions they are responsible for that prove difficult to decarbonise. 

The long term nature of carbon removal projects and contracts makes it all the more importance for companies purchasing credits to be selective and carry out robust due diligence, according to Jolly.

In Amazon's case, the tech giant is fortunate to have international public policy teams well-placed to gauge investment risk in different regions and a human rights team that helps the firm assess whether there are risks associated with new projects.

Jolly summarised Amazon's approach as "leaning" on existing methodologies and standards for the carbon market, while sometimes "going further" still in assessing the viability and credibility of new projects. This detailed due diligence approach then informs the projects the company works with and the nature of the portfolio it wants to build. "We look at the science and say, what are the most important segments to invest in in this decade?" she said. "For us, that's super pollutant abatement, that's deforestation, and then we look and say what methodologies are out there for these. Then we identify the parties and project developers that we want to work with, and the jurisdictions to engage in."

Due diligence and quality control are particularly crucial for Amazon in not only delivering upon its own climate and carbon removal commitments, but helping the approximately 700 companies who have signed up to its Climate Pledge and set targets to reach net zero emissions by 2040. The tech giant recently launches its own Carbon Credit Service, which enables qualifying US and UK companies to both secure advice on carbon credit options and purchase credits through Amazon's platform to support their sustainability and net zero emissions targets. The approach offers a range of companies, including mid-sized businesses without the resources to develop their own in-depth carbon credit strategy, the chance to tap into Amazon's due diligence and assurance activities.

"We want to have extreme confidence that this is going to yield what we say it will, and that we're managing the risks as well as we can," explained Jolly, adding that companies signed up to the Climate Pledge can now enjoy that same confidence when buying credits through the platform. 

It is part of a sector-wide trend that has seen steadily more sophisticated voluntary standards and assurance and verification processes rolled out, providing a template for regulated carbon markets to draw on. "I would say the voluntary initiatives that are developing best practice in real time are keeping up and often working hand in hand with really high ambition industry," said the BSI's Gallagher. "The more formalised standards that are independently verifiable and ultimately embedded in regulation are taking longer just because of the sheer challenge of multilateral negotiation around really a massive transition unlike we've ever faced before."

Inevitably, many environmental campaign groups remain concerned that some carbon credit projects fail to deliver promised carbon reductions or removals. Meanwhile, fears persist that some companies are investing in credits as a means of providing cover for their failure to deliver direct emissions reductions - a charge that is likely to continue as leading tech companies see their emissions climb once again as a result of the AI boom. But within the sector there is a sense that confidence in credit integrity is improving and will continue to do so as new regulated schemes, such as the UN-backed CORSIA aviation offsetting scheme take effect. Meanwhile, the SBTi's new Net Zero Standard are aiming to reassure critics that corporates remain focused on accelerating their internal decarbonisation efforts, alongside any investments in carbon removals.     

Becoming a 'boring' part of business as usual

For Ben Caton, managing director of Ergochair, growing confidence in carbon credit standards has further reinforced the business case for combining decarbonisation efforts with investment in high quality carbon credits. "We are our customers' Scope Three mission," he said. "That's the reality. That's where I sit as the manufacturer - and we know that tenders ask for carbon data."

Supplying this data - and proving Ergochair is willing to "walk the walk" on its carbon commitments - has helped the firm win business and contracts in the past year, he added. "For us, the business case was being granular, honest, and ultimately saying we reduce first, and then credits are second," he said. "People have viewed this for years as a rather expensive exercise, and something that I'm going to have to argue with the board over. But there's a real commercial viability to doing this stuff now."

Caton stressed how a meticulous portfolio approach spanning low carbon fuel and deforestation - developed with support from Amazon - has been of "paramount" importance. "Our portfolio is by design," he said. "We've taken a long-term approach and a really diversified approach because we recognise that we don't know enough. We really had to take advice on that. It was a big learning curve, but it is absolutely crucial."

It is a commitment to managing risks and bolstering credibility that is paying off for the company. "We had one case this year where the details of what we'd done and the lengths to which we had diversified that portfolio approach was the reason why actually we won business," said Caton. "It was not the fact that we'd gone in and we were green, or could be greener than the next person. It was that we could answer the tough questions. We had real answers, and we had diversified the approach, and that was what won it."

Similarly for Gallagher, transparency remains the single most important attribute for anyone navigating carbon markets. "If you can explain in clear terms what you're doing and why, that's usually going to be good enough for your consumers, buyers or clients," she said.

Looking ahead, Ricketts expressed hope the carbon market can soon emerge from today's "messy middle" and become a "boring" part of everyday business, with paying to enable environmental actions considered "table stakes" for doing business. "It should not be this exotic other thing that people do in the periphery," he said. "It would be just a central part of the management of business." As carbon credit standards and due diligence processes strengthen, platforms such as Amazon's new venture make it easier to purchase high integrity credits, carbon removal projects and technologies mature, and the need to reach net zero emissions in the coming decades becomes ever more obvious, there are encouraging signs such a scenario could come to pass much sooner than many observers expect.  

BusinessGreen's webinar - Carbon finance 2.0: Navigating the new era of carbon neutralisation, insetting, and updated standards - was hosted in association with Amazon. You can watch the full session on demand here.