What the carbon market ‘revival’ means for CSOs

With integrity initiatives finally starting to bear fruit, innovations gaining traction and the EU allowing the use of carbon credits in its 2040 climate target, it appears the carbon market is enjoying a revival. What does that mean for CSOs and their ability to use carbon offsets?

Two years ago, CSO Futures wondered if carbon offsets had become a risk for Chief Sustainability Officers. Several controversies around the stated vs actual carbon absorption potential of certain projects had rocked confidence in the voluntary carbon market’s impact; countries could not agree on a framework for the use of carbon credits under Article 6 of the Paris Agreement; and innovative methodologies and integrity initiatives were still nascent.

But the tides seem to be turning: funding activity and carbon credit prices started to pick up in 2024, and Q1 2025 data shows that demand for credits labelled as ‘high integrity’ is soaring – pushing prices to a 65% premium on average. And at a recent conference in Singapore, carbon players expressed confidence that the market would be buoyant within five years.

In the last two years, many companies have also changed their approach to carbon offsetting: some, like Interface, decided to stop purchasing carbon credits altogether, redirecting this budget towards carbon reduction activities. Others, like Microsoft, have doubled down on carbon credit investment, prioritising innovative projects such as engineered carbon dioxide removals (CDR) or regenerative agriculture.

For Chief Sustainability Officers that are yet to make a decision on whether to adjust the way their company uses carbon credits, there are a few important elements to take into account.

Carbon neutrality is on the way out

The days when companies could claim that their products were ‘carbon neutral’ simply because they had offset their footprint through (cheap) carbon credits are coming to an end. The level of scrutiny from both governments – with the introduction of anti-greenwashing regulations – and consumers is skyrocketing.

In California for example, companies buying credits on the voluntary carbon market (and make claims based on these purchases) are now required to disclose the name of the carbon offset seller, the carbon credit registry or programme, project ID number, offset project type and methodology used to estimate emissions reductions/removal benefits, as well as whether independent third-party verification is included.

In the EU, the Corporate Sustainability Reporting Directive (CSRD) also mandates firms to disclose whether and how they use carbon credits towards their climate targets – and although the scope of the law is being revised as part of the Omnibus package, this requirement will most likely be maintained. At the same time, the Empowering Consumers Directive prohibits unsupported green claims, including those of ‘carbon neutrality’ based only on the purchase of offsets (though the complementary directive meant to mandate companies to provide evidence of their claims has been withdrawn by the European Commission). 

But even before these laws come into force, consumers have grown more aware about issues in the carbon market and are scrutinising data from companies’ sustainability reports and challenging their offset-based claims – including in court.

Guidelines on the responsible use of carbon offsets

Several frameworks are now available to guide companies seeking to use carbon credits in a responsible way. At the end of 2023, the Voluntary Carbon Market Integrity Initiative (VCMI) launched its Claims Code of Practice, laying out basic criteria to be able to make high-integrity claims. These include disclosing GHG emissions, having a near-term climate target approved by the Science Based Targets Initiative (SBTi), demonstrating progress against this target, and advocating publicly for Paris Agreement-aligned regulations.

These foundational conditions aim to guarantee that companies that purchase carbon credits do so to complement, not replace, carbon reduction activities. 

But how much of a company’s carbon footprint can be offset in this way? This is the topic of an ongoing debate in the sustainability community: the draft update of the SBTi’s Corporate Net Zero Standard removes companies’ obligation to reduce at least 90% of their Scope 3 emissions, potentially allowing them to offset more than 10% of “residual emissions” through carbon credits and removals.

This flexibility was introduced in response to the supply chain data and decarbonisation challenges firms are facing, but is seen by some as a backtrack in corporate climate ambition. To maintain momentum, VCMI has created a ‘Scope 3 Action Code of Practice’, supporting companies in measuring and disclosing the gap between a Paris Agreement-aligned Scope 3 reduction pathway and the decarbonisation they are actually achieving. The organisation proposes a 15-year strategy to get Scope 3 reductions back on track – with high-quality carbon credits to offset some of the gap in the meantime.

Availability of high-integrity carbon credits on the rise

Both VCMI and the SBTi require companies using carbon credits to purchase them from high-integrity sources – and what makes a high-integrity carbon credit is now more clearly defined than ever.

The main contributor to this development is the Integrity Council for the Voluntary Carbon Market (ICVCM), which launched its Core Carbon Principles (CCP) in July 2023 and has since been busy assessing carbon credit methodologies against this set of quality criteria.

As of July 16, 2025, the Council has approved 23 carbon credit methodologies for the CCP label – and rejected 22.

With each ICVCM decision, the line between what constitutes an impactful, high-quality carbon credit and the rest becomes clearer. For example, renewable energy credits – the cheapest but once most popular category in the carbon market – have been excluded from the CCP scheme for their lack of additionality.

Meanwhile, the Council is sifting through numerous methodologies to issue forest-based carbon credits, which have often been the most controversial. Three REDD+ methodologies have been approved to date, and many standard developers are choosing not to submit their methodologies until they have been updated and strengthened – meaning that older, less impactful carbon credits are being phased out of the market.

The few CCP-labelled credits that are already available are selling at a significant price premium, suggesting the market is starting to align price with credit quality – a much-needed adjustment.

Carbon removals gaining traction

At the same time as traditional carbon credits are getting an integrity overhaul, a new type of credit is entering the market: carbon removals. The EU’s Carbon Removal Certification Framework defines removals as quantifiable and additional removal of CO2 from the atmosphere, combined with long-term storage of at least 100 years.

This includes nature-based methodologies like the ones prioritised by the Symbiosis Coalition, as well as engineered removals such as biochar or direct air removal. These innovations, particularly popular among tech companies seeking to offset their growing AI-fuelled carbon footprints, are selling at much higher prices than other credits. 

They also have their own certification standards and registries, including Isometrics and Puro.earth – which have been submitted to ICVCM for CCP approval and are now waiting for a decision.

“We only work on methodologies that are scalable and environmentally safe, but also provide this high permanence and low risk of reversal,” Antti Vihavainen, Co-Founder and Vice Chairman of Puro.earth, tells CSO Futures. 

Though there’s much more demand than supply of carbon removal credits, he admits that both supply and demand have been “patchy”, largely due to the high cost of these credits. However, he believes the market – particularly for biochar removals, one of the least expensive CDR categories at around US$150 per tonne – is close to a “tipping point”, with investment and scalability both increasing rapidly.

Several signs point to an improvement in the integrity of the carbon market, and although it is still early days for a full revival, more guidance than ever is available to help CSOs navigate this rapidly changing space – and use carbon credits and removals to serve their climate strategies in the most impactful way.