Carbon credits seen as key to net zero but market risks loom

It could be the “silver bullet” despite persisting market constraints.

Venture capital funds and low-carbon technology developers found strong investor confidence in carbon credits, with 81% expecting them to play a critical role in achieving net zero targets.

Carbon credits are certificates issued for projects that remove carbon dioxide from the atmosphere or prevent emissions.

The study by Pinsent Masons and Censuswide found that 79% of investors in funds under $100m and 90% of those in funds over $1b said carbon credits will play an increasingly critical role in helping corporations meet net zero targets.

Respondents expect demand to reach up to 100 million metric tonnes of carbon dioxide by 2030, alongside unstable pricing, inconsistent verification frameworks, and legal uncertainty as key constraints.

Carbon credit projects require end-to-end monitoring from capture through transport and storage, often across multiple jurisdictions, which increases cost and slows deployment, particularly for engineered carbon removal projects that require long-term storage verification.

“Developers painted a much more mixed picture. Although 91% of early-stage companies agreed with the vast majority of investors, just 57% of Series E developers said they felt carbon credits would be a net zero silver bullet,” the study said.

Markets remain fragmented across jurisdictions, with 81% of respondents stating government incentives are essential to improve market confidence and accelerate investment.

Governments have begun to respond, particularly in Singapore, where it has committed $15m to the Global Green Growth Institute’s Carbon Transaction Facility, which supports carbon trading under Article 6 of the Paris Agreement.

Market participants said the combination of fragmented rules, uncertain pricing, and evolving regulation continues to limit confidence in cross-border carbon credit markets.