How to bring money into the carbon credit market?

Financial resource is the life of the Carbon Projects

After more than a year working within the United Nations system, I have repeatedly encountered the financial constraints facing SDG-aligned projects, where ambitious normative commitments often outpace deployable capital. This experience has shaped my view of the carbon credit market as a critical extension of climate finance: one of the few mechanisms through which the United Nations can meaningfully influence capital allocation and future pricing without sovereign authority or balance-sheet capacity.

As a climate-linked global public good, the carbon credit market exhibits strong externalities and longtime horizons that resist purely national or market-driven governance. Instead, it relies on a “non-sovereign yet supranational” framework—anchored by UN-backed norms and standards—to coordinate across jurisdictions and actors. Unlike traditional development finance, carbon markets integrate rules, capital, and climate technology directly, translating scientific and policy consensus into financial incentives. In doing so, they offer a pragmatic pathway to address collective action failures through multi-stakeholder participation.

The market confidence is increasing according to the rule’s improvement

Historically, institutional capital participation in carbon credit markets has been limited, largely due to persistent concerns around credibility and environmental integrity. These concerns have contributed to pronounced volatility in both credit prices and market volumes over the past decade. In recent years, scrutiny has intensified as increasingly consistent questions have been raised across media, academic research, and legal proceedings regarding the environmental quality of carbon credits—specifically whether credits represent emission reductions or removals that are real, additional, and permanent. As a result, many buyers have reassessed their procurement strategies, in some cases reducing or exiting market exposure altogether, while others have faced high-profile criticism that has further complicated efforts to scale the market.

Despite these challenges, the past two years have shown clear signs of structural improvement. These include strengthened and clarified registry methodologies across multiple project types, growing acceptance of stakeholder-led standards such as the Core Carbon Principles, advances in monitoring, reporting, and verification (MRV) technologies, an expanding role for carbon credit rating agencies and insurance products, and the emergence of regulatory demand and guardrails, including mechanisms such as CORSIA and the EU Carbon Removal Certification Framework (CRCF). Collectively, these developments suggest an evolving market architecture that may help address long-standing credibility concerns and support more durable institutional participation going forward.

An impactful tool to help investors understand Carbon Market Risks

My project industry focus on helping investors in conventional market to understand carbon credit market risk framework. This is a comparable new market, because carbon credit market is a voluntary market by itself. Unlike the carbon allowance market in national ETS, carbon credit market hasn’t converged on globally harmonized criteria. Therefore, although carbon credit market has big potential to earn money, investors will turn back just in case there is instability and unpredictable risks. Our client company is a start-up, but their founder has abundant experiences in structuring financing transactions in the carbon markets on nature-based solutions. 

What I am expecting in this project is learning how to attract capital into the ambiguous policy market. Our project scope including three parts: conventional investment analysis in PE, infrastructure and Project Finance, carbon market special risks and how these risks may influence the conventional investors’ investment decision. I can’t wait to start the journey!