Embracing imperfection: Carbon offset markets must learn to mitigate the risk of overcrediting.

The role of carbon offset markets in accelerating climate action has been widely anticipated. Recently, fundamental questions have emerged about the role of carbon credits in the wake of widespread quality critiques of existing carbon offset projects. In tandem, many large corporate buyers are slowing their voluntary investments in carbon credits or shifting to less public vehicles for those investments. The discourse to date has focused on raising the quality bar of carbon credits, which is critical. However, it has broadly overlooked the fact that heterogeneous quality and uncertainty may be an inherent attribute of carbon projects. Carbon credits are an intangible good that may always have imperfect accounting. The success of carbon offset markets in part depends on embracing this imperfection, rather than obscuring or ignoring it. Thus, we propose that carbon offset markets need new mechanisms that account for-and encourage-iterative methodological improvements in how carbon credits are issued. These may include a variety of insurance-like mechanisms, warranties, and ex post adjustment mechanisms. They each work to guarantee that issued credits deliver on their promises, much like how carbon storage reversals are already guaranteed by credit registries. Market actors have already started testing such solutions, from true insurance products to buffer pools to discounted credit portfolios. Here, we highlight opportunities and challenges to achieve this goal, including the potential role of carbon registries, private actors, and large institutions.