The Future of the Voluntary Offset Market: The Need for Corresponding Adjustments

The voluntary carbon market is growing rapidly, in part due to the large number of companies and other non-state entities setting net zero targets. However, at the same time the voluntary carbon market also faces a new challenge, namely because all countries have reduction targets under the Paris Agreement there may be nowhere to generate offset credits that reduce emissions below what would happen anyway. One potential solution is to implement ‘corresponding adjustments’ whereby countries that host offset projects adjust their GHG accounts so that they do not also claim the reductions caused by projects. The need for corresponding adjustments has been highly contested by standard-setters, commentators, and participants in the voluntary carbon market, and this paper aims to move the debate forward by providing a clear statement of the problem and an analysis of the arguments made against the need for corresponding adjustments. We find that the arguments against corresponding adjustments do not address the fundamental requirement that voluntary offsets must achieve a lower level of emissions than would have happened anyway, and we suggest that attention should now focus on how corresponding adjustments can be implemented in a fair and efficient way. We also highlight that the need for corresponding adjustments only arises if carbon credits are used to make offsetting claims, and that an alternative option is to develop the market for ‘contribution’ claims, which do not require corresponding adjustments.