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Effectiveness and legitimacy of forest carbon standards in the OTC voluntary carbon market

External Reference/Copyright
Issue date: 
17 August 2011
Publisher Name: 
CBM Journal
Eduard Merger and Till Pistorius
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In recent years, the voluntary over-the-counter (OTC) carbon market has reached a significant market volume. It is particularly interesting for forest mitigation projects which are either ineligible in important compliance markets or confronted with a plethora of technical and financial hurdles and lacking market demand. As the OTC market is not regulated, voluntary standards have been created to secure the social and environmental integrity of the traded mitigation projects and thus to ensure the quality of the resulting carbon credits. Building on a theoretical efficiency-legitimacy framework, this study aims to identify and analyse the characteristics and indicators that determine the efficiency and organisational legitimacy of standards for afforestation / reforestation carbon projects. The results show that the market is still in an immature stage characterized by significant fragmentation: on the one hand, the new standards act as 'market-making' intermediaries and contribute to the quality and transparency of the OTC market. On the other hand, the variety of different standards imposes new hurdles for their efficiency and creates confusion instead of confidence among potential buyers. However, despite the lacking legitimacy of the standards, they already constitute an crucial element of the voluntary market and provide valuable learning experiences for existing and planned compliance markets - especially if challenging projects of the forest sector are to become an integral component of the efforts to mitigate greenhouse gas emissions, e.g. under REDDplus.

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Extpub | by Dr. Radut