 REUTERS/Arnd Wiegmann/File PhotoTHE NEWS Few elements of the energy transition are as hotly contested as the voluntary carbon market. For its critics, the VCM vacillates between snake oil and greenwashing, a form of subterfuge used by heavy polluters to cover up for their emissions without actually decarbonizing. A string of high-profile controversies about the integrity of offsets, particularly those involving reforestation programs, have led many major companies to cease buying them entirely. But a growing number of firms now argue that the fallout risks doing more harm than good, dissuading potential customers from developing what many policymakers regard as a necessary market, and stifling investments in technologies that could help the world curb temperature increases. PRASHANT’S VIEW Startups across the VCM space are dealing with a legacy of mistrust in varying ways. A few are touting changed business models: Isometric charges buyers, rather than sellers of carbon credits; BeZero users pay a fee to access its ratings platform, rather than the issuers of credits paying to be rated. Both, in theory, remove a potential conflict of interest incentivizing credulity over the integrity of credits being sold. Some companies are upping transparency by more clearly showcasing how they reach their calculations. Others are debuting new technologies that, if successful, will more durably remove more-precise amounts of carbon from the atmosphere. Yet the market is still hamstrung by several issues, some of which have to do with its relative youth, and others to do with this legacy of mistrust. For one, companies disagree on what a fully formed carbon market should look like. One startup executive told me VCM assets should eventually resemble corporate bonds — policed by an overarching regulator, rated by third-party agencies that mimic Moody’s or Standard & Poor’s, and each acting as a slightly different financial instrument. Another argued that the very existence of ratings agencies was a sign of the market’s failure to police itself, insisting that VCM products should ultimately be viewed as commodities: In effect, a tonne of carbon removed or offset is equivalent to any other of a similar type, regardless of its provenance or process. Investors are also hesitant to dive wholeheartedly into a market mired in past controversy, suffering either from what one executive labeled FOBCO — a fear of being called out — or from greenhushing, where companies make investments but do not publicize them. In many ways, the end result is the same, proponents argue: Fewer buyers in the market, leading to reduced demand for new supply of carbon credits, curtailing investment into the startups exploring frontier technologies that could cut emissions. The counter argument, of course, is that allowing companies to use offsets in particular reduces incentives for investment and innovation in ways for them to cut emissions from their operations and supply chain. For differing reasons, both offsets and removals also require huge amounts of due diligence on the part of buyers — the former because of the reputational risk associated with investing in the wrong type of offset, potentially making headlines for the wrong reasons; the latter due to the fact that many of the underlying technologies that power removals are so new, meaning buyers have to hire their own scientists to verify their credibility. That means that, for now, many such assets are uncertain or unaffordable for smaller companies. | 
