Pervasive Conflicts of Interest in Carbon Markets Risk Undermining Climate Goals, New Report Finds
NEWS RELEASE
December 8, 2025
Washington, D.C. — On the heels of COP30, the United Nations climate conference in Belém, Brazil (November 10-21), a new report from Transparency International U.S. (TI US) documents systemic conflicts of interest in the voluntary carbon market, a system designed to issue and sell carbon credits to offset greenhouse gas (GHG) emissions. In particular, the report shows how governance deficiencies at standard-setting agencies may contribute to the underperformance of accredited climate mitigation projects.
As stated in the report:
Carbon markets, including the Voluntary Carbon Market, have long been promoted as flexible, market-based tools to address climate change by offsetting carbon emissions in one location through emissions reductions in another location. But conflicted interests throughout the lifecycle of the credit process may undermine the efficacy of the market.
The report notes:
For more than two decades, the creation and sale of carbon offset credits has allowed market participants, particularly in the extractive sector, to signal climate ambition without altering their core business models … [and] growing evidence from academic research, investigations, internal audits, and ratings agencies shows that many carbon offset initiatives are fundamentally flawed as a result of structural deficiencies in the development, issuance and auditing processes.
While recognizing challenges across the entire market, the report specifically examines the processes at U.S.-based Verra, the world’s largest standard-setter in the carbon market, finding that ”[F]inancial dependencies between market actors incentivize inflation of offset estimates,” and “the process for selecting project auditors increases the risk of compromising their independence.”
“Some of the project developers, seeking maximum value for their work, also sit on the Boards of Directors of the standard setters,” explained Gary Kalman, Executive Director of TI US. “It’s as if the students are designing their own assignments and grading their own papers.”
The report also noted a lack of complete and robust disclosure of project information, making it difficult, if not impossible in many cases, to independently determine if projects meet their stated goals.
“Structural weaknesses in oversight, including conflicted participants, can compromise the value of carbon offset projects—from African waterfronts to Asian rice fields,” said Kalman.
The report recognized recent reforms implemented by standards setters, including Verra, noting that on certain governance metrics, Verra performs better than its competitors. However, the authors explain that:
Despite years of reform efforts, the [Voluntary Carbon Market] has been plagued by the same structural failures: pervasive conflicts of interest; corporate capture of oversight bodies; opaque credit and financial flows; weak, if any, public engagement or oversight; and a persistent lack of accountability. This has enabled the proliferation of low-quality credits, eroded public trust, and diverted attention from the urgent need to reduce emissions at the source.
The report offers a number of reforms grounded in transparency, independence, and accountability. Specific recommendations, detailed further in the report, include:
- Eliminate conflicts of interest, including financial dependencies between market players that reward credit volume over quality;
- Decentralize governance of standard setting bodies and reduce corporate control;
- Enforce transparency of project documentation and history and accountability for brokers, resellers and other market participants.; and
- Support the transition from offset models to carbon contribution-based frameworks.
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Transparency International U.S. is part of the world’s largest coalition against corruption. In collaboration with national chapters in more than 100 countries, we are leading the fight to turn our vision of a world free from corruption into reality.
Related Resources
- Read Offsetting Accountability: Conflicted Governance in the Voluntary Carbon Market;
- Read Transparency International’s statement on COP30.
Media Contact
Gary Kalman, Executive Director
Phone: +1 215-439-7090
Email: gkalman@us.transaprency.org
@TransparencyUSA
