Stuart Rowland, founder and CEO of Revalue, explains why current certification goals are missing the net.
Since the early days of carbon markets, we’ve treated carbon credits like commodities: raw, fungible units indistinguishable from one another. This has been our mental model – no different from the model used for crude oil.
This was an appealing model for carbon markets, which were a new and challenging concept for people, businesses and governments to wrap their heads around at the start. Treating them like a commodity made them quick to gain traction and, importantly, easy to understand. This has been vital in establishing carbon markets as viable solutions to the climate crisis.
But now that carbon markets are established and their quality is under scrutiny, is it possible that this model is no longer suitable? Did it lead to unintended consequences that have negatively affected the quality of carbon credits today? I believe this is a question worth exploring.
Why thinking of a credit as a commodity may be problematic
Treating carbon credits like a commodity was a natural – and smart – mental model to adopt. One molecule of CO2 is indistinguishable from another, and so it follows that one tonne of CO2 in a single carbon credit must be indistinguishable from another.
Yet, it’s clear from today’s current market that something isn’t adding up. We don’t treat all carbon credits equally – even if they’ve achieved the same standards of verification.
These ‘same’ credits have different levels of durability, different risk profiles, different ecosystem benefits, different levels of scientific rigour, different levels of reporting on their real-world impact, and so on. There is massive differentiation from one credit to another. You can buy a carbon credit for $3, $30, or $300+ today. This is not the pricing behaviour of a fungible commodity.
How this commodity thinking restricted the market’s potential
This way we think about carbon credits has contributed significantly to many of the challenges the industry has experienced. This principally comes down to the dynamic it has created in which developers design credits simply to pass certification standards – nothing more. After all, a credit is like a barrel of crude oil; there’s no way to improve it.
Early developers became factories for certification-passing credits. The goal became to get the certification stamp of approval and then sell the commodity. Differentiate on the project story, not the credit.
The problem is that the certification standards are often relatively low, and those low standards have set the highest bar. I worry that the majority of developers today still focus on meeting the certification standards and ‘next generation’, high-quality credits are simply considered those that don’t take shortcuts.
Would you establish a restaurant with the single goal of passing the food safety standards? Or sell a car based on it having passed its safety test at the garage? Imagine what our restaurants and cars would be like if we were building to meet the minimum standards. We must go further.
Why thinking about carbon credits as products offers a better model
So, what would be a better mental model to adopt, knowing what we do now? My suggestion is to start treating carbon credits as differentiated products, instead of fungible commodities.
By perceiving carbon credits as products, the certification standards would become the starting line, not the finish line.
Developers would seek to meet and beat the certification standard requirements, buyers would demand higher and better specifications, and we would kick off a cycle of real innovation – no longer capped by just meeting the basic standards – leading to better carbon credits for the market and the planet.
This shift would also bring buyers closer to developers. As it stands, developers, financiers and buyers sit far too far apart, since there’s no incentive for them to work more closely together (nobody needs to align on what a great barrel of oil looks like).
Instead, developers should continually innovate and show buyers just what is possible in 2025: LiDAR capturing biomass measurements at sub-6mm resolution, scientifically rigorous counterfactual approaches backed by top academics, and breakthroughs to create 1,000+ year carbon storage in carbon credits which value natural ecosystems!
I believe we can really change the world if we break away from a barrel of oil mindset for carbon credits. Let’s see the carbon credits of today as first-generation products – pioneering, but with all the limitations and bugs that come with all first-generation products.
If we allow ourselves to not only meet, but to go beyond the base standards, the headroom for innovation is huge. Better science, better data, better technology, greater transparency. Carbon credits can and should become cutting-edge products – improving at an exceptional pace – ensuring impact claims that the market, and the planet, can trust.
