How do the carbon markets work now?

The current method for creating carbon credits is described below. In essence standards bodies lay down the prescribed methodologies that must be followed for the credits to be approved for sale. Verifiers inspect the projects once the credits are ready to be issued and brokers buy these credits in order to resell them to end buyers, often with large margins.

The carbon credit creation process, whilst thorough, is slow and full of intermediaries, restricting many projects from ever fulfilling their potential.

Standards body

The creation of a carbon credit all starts with a standards body, such as VERRA or Gold Standard. The standards body lays out the prescribed methodology, tools and best practices for the industry. The methodology must first go through an approval process assessing the social and environmental impacts.

Project developer

The project developer chooses a methodology that suits their purposes. If no such methodology exists, they can create a methodology and go through the approval process.

Verifier

Verification bodies such as Bureau Veritas, and others, undertake inspections of projects once results are available of their carbon mitigation or removal effect. Using the methodologies applied to the project they assess and eventually approve the credits produced by the project in order for them to be sold as Carbon Credits.

Broker

Brokers buy carbon credits from the registries or standards bodies and sell these to their clients. Why do these middlemen exist? Well both to advise their clients on projects that suit their commitments but also to gain them access to the carbon markets. They profit from selling the credits at an increased cost or margin, often by buying credits in bulk or even sometimes from becoming project developers themselves.