Andrea, your proposal is timely and important — but I fear the project-based carbon market may already be spiraling beyond repair.
Over the past few years, we’ve seen a shift in focus from expanding demand to constraining supply. Entire categories of mitigation projects have been discredited, often under the banner of “quality criteria” that seem more aimed at swaying public opinion than supporting economically rational GHG mitigation. The result? Buyers are retreating in the face of controversy. Instead of increasing demand, we are suppressing it. Developers face growing investment risks, and new supply — especially from the types of projects that need carbon income most — is drying up.
We are not just sitting on a legacy overhang; we are actively creating the conditions for future scarcity and system collapse.
Worse still, there is now a widespread recognition that rules and assumptions evolve so rapidly that today’s “credible” credit could become tomorrow’s stranded asset. That’s not how a functional market should operate. If we don’t honour the investments and mitigation efforts of the past — those made under good-faith early action — then the system won’t evolve. It will wither.
Instead of investing in scalable, verifiable climate solutions, we’re pouring resources into a ballooning ecosystem of standards bodies, rating agencies, oversight boards, and marketing firms. This doesn’t promote integrity — it fosters complexity, confusion, and distrust. Meanwhile, the actual work of mitigation is sidelined.
I therefore dislike the term "bad bank." But a dedicated fund to honour early action — by purchasing and retiring credits generated from pioneering investments under the VCM and CDM — could be a viable solution. Only by recognizing historical efforts and ensuring that future investments are protected from similar discrediting can we secure a continued role for project-based mechanisms at the international level.
I agree with Philipp that a „early action rewards“ scheme would be useful; while the word „bad“ in „bad bank“ would just make the market haters feel reassured. In Australia, developers can opt to engange into a sort of put option agreements with the government so they have a base price and assured demand in case voluntary demand does not materialize. This avoids old credits to pile up over time. Something similar, globally, could be interesting. Nevertheless, ir would be next to impossible to agree on a single set of criteria that would qualify any credits for such a scheme. Vintage year? Methodology? The next endless discussion about what counts and what not would be just around the corner. Let‘s admit carbon markets face paradoxa, some of which are very hard to resolve by definition, by embracing these the market can deliver what it can and it would be clear what it cannot.
Thanks, Christian for your comment. I believe the word “bad” may have triggered some concern, but my intention was simply to refer to credits that should be isolated—either due to poor quality or because they no longer hold commercial value. The idea is to create a space where these credits can be transparently managed, rather than continuing to circulate in a way that undermines market confidence.
Thanks, @Philipp Hauser . I share your concern about the growing complexity of the market, there's a clear trend toward over complication, and it risks alienating the very stakeholders we need to engage.
On the term bad bank, I want to be clear: it's not about discrediting the efforts of the early pioneers in this space. Their work laid the foundation for everything we’re building today. But the market is evolving, and we need to acknowledge that many legacy credits no longer meet current expectations of integrity and climate impact. We need a mechanism to reflect that shift and move forward with clarity.
Thanks for your comment, Philipp! I fully agree but I still believe there’s a path to fix the carbon market. It will require radical decisions and a real willingness to break with the status quo. We need structural change if we want trust and integrity to return.
The Death Spiral We Need to Acknowledge
Andrea, your proposal is timely and important — but I fear the project-based carbon market may already be spiraling beyond repair.
Over the past few years, we’ve seen a shift in focus from expanding demand to constraining supply. Entire categories of mitigation projects have been discredited, often under the banner of “quality criteria” that seem more aimed at swaying public opinion than supporting economically rational GHG mitigation. The result? Buyers are retreating in the face of controversy. Instead of increasing demand, we are suppressing it. Developers face growing investment risks, and new supply — especially from the types of projects that need carbon income most — is drying up.
We are not just sitting on a legacy overhang; we are actively creating the conditions for future scarcity and system collapse.
Worse still, there is now a widespread recognition that rules and assumptions evolve so rapidly that today’s “credible” credit could become tomorrow’s stranded asset. That’s not how a functional market should operate. If we don’t honour the investments and mitigation efforts of the past — those made under good-faith early action — then the system won’t evolve. It will wither.
Instead of investing in scalable, verifiable climate solutions, we’re pouring resources into a ballooning ecosystem of standards bodies, rating agencies, oversight boards, and marketing firms. This doesn’t promote integrity — it fosters complexity, confusion, and distrust. Meanwhile, the actual work of mitigation is sidelined.
I therefore dislike the term "bad bank." But a dedicated fund to honour early action — by purchasing and retiring credits generated from pioneering investments under the VCM and CDM — could be a viable solution. Only by recognizing historical efforts and ensuring that future investments are protected from similar discrediting can we secure a continued role for project-based mechanisms at the international level.
— Philipp D. Hauser
I agree with Philipp that a „early action rewards“ scheme would be useful; while the word „bad“ in „bad bank“ would just make the market haters feel reassured. In Australia, developers can opt to engange into a sort of put option agreements with the government so they have a base price and assured demand in case voluntary demand does not materialize. This avoids old credits to pile up over time. Something similar, globally, could be interesting. Nevertheless, ir would be next to impossible to agree on a single set of criteria that would qualify any credits for such a scheme. Vintage year? Methodology? The next endless discussion about what counts and what not would be just around the corner. Let‘s admit carbon markets face paradoxa, some of which are very hard to resolve by definition, by embracing these the market can deliver what it can and it would be clear what it cannot.
Thanks, Christian for your comment. I believe the word “bad” may have triggered some concern, but my intention was simply to refer to credits that should be isolated—either due to poor quality or because they no longer hold commercial value. The idea is to create a space where these credits can be transparently managed, rather than continuing to circulate in a way that undermines market confidence.
Thanks, @Philipp Hauser . I share your concern about the growing complexity of the market, there's a clear trend toward over complication, and it risks alienating the very stakeholders we need to engage.
On the term bad bank, I want to be clear: it's not about discrediting the efforts of the early pioneers in this space. Their work laid the foundation for everything we’re building today. But the market is evolving, and we need to acknowledge that many legacy credits no longer meet current expectations of integrity and climate impact. We need a mechanism to reflect that shift and move forward with clarity.
Thanks for your comment, Philipp! I fully agree but I still believe there’s a path to fix the carbon market. It will require radical decisions and a real willingness to break with the status quo. We need structural change if we want trust and integrity to return.