Quality and integrity: The words that now decide prices in carbon markets

This article is a part of a series. Here is part 2.

What do integrity and quality really mean? I have my own interpretation, shaped by years of working in the carbon market. But I am equally certain that many of you reading this will have different views and experiences attached to these words. That, in itself, is already part of the story.

What is clear today is that change did not arrive suddenly. It started slowly, almost imperceptibly and then accelerated. As an Italian Tech podcast always puts it: “Change arrives quietly, and then suddenly overwhelms us all.” That description fits remarkably well with the evolution we are witnessing in the carbon market.

If you work in this space today, you cannot avoid talking about integrity and quality. These two words have moved decisively to the centre of the debate and are now part of the shared vocabulary across voluntary and compliance discussions, policy statements, corporate strategies, and investment criteria.

This convergence of language reflects a real shift. After years of fragmentation and criticism, there is broad agreement that credibility, environmental robustness, and governance are essential if carbon markets are to play a meaningful role in climate action and climate finance. At the same time, this raises a practical question: how clearly are integrity and quality actually defined today?

In response, the market has seen a rapid expansion of initiatives aimed at giving substance to these concepts. Methodological standards have evolved, rating agencies assess project-level risks, the Core Carbon Principles provide reference thresholds for integrity, and policy frameworks linked to Article 6 of the Paris Agreement introduce accounting and authorisation requirements.

These efforts have undeniably improved structure, transparency, and comparability. Yet they do not converge into a single definition of quality. Instead, they reflect different objectives and use cases, environmental integrity, investment risk, claim credibility, or national accounting consistency. Quality is therefore increasingly understood as contextual rather than absolute.

A credit suitable for voluntary contribution claims may not meet compliance or quasi-compliance requirements. A project with strong local integrity may still face limitations linked to authorisation, accounting, or eligibility under specific regimes. Integrity and quality, then, are not intrinsic labels attached to credits; they are outcomes produced by the interaction between project characteristics, governance frameworks, and intended use. This also explains why ten experts from different parts of the market would likely give ten different definitions of quality and integrity.

As integrity and quality have gained prominence, ratings have taken on a central role in how the market navigates uncertainty. Their purpose is to reduce information asymmetry by assessing risks related to additionality, permanence, governance, and delivery. In a fragmented and largely non-standardised market, spanning technologies, methodologies, and host-country contexts, this function is clearly valuable.

At the same time, the growing reliance on ratings has increased their market influence. Rating outcomes can materially affect whether a project attracts buyers, secures financing, or struggles to progress. Achieving consistent and comparable assessments across heterogeneous conditions is inherently complex, and ratings inevitably rely on methodological choices and judgment calls to bridge data gaps. This does not undermine their usefulness, but it reinforces the need to treat ratings as decision-support tools, rather than definitive verdicts on project viability or impact.

An interesting dynamic has also emerged in secondary markets, where credits are sometimes quoted purely by rating category, for example, “REDD+ AA-rated credits at price X” without reference to any more on standard or individual project characteristics. Whether this abstraction will prove effective over time remains an open question, but it signals how strongly ratings are shaping market behaviour.

There is a historical parallel worth reflecting on. In the early days of the carbon market, credibility was often signalled through affiliation and approval. Being recognised as compliant with a given initiative helped establish trust and facilitated resale when institutional confidence was limited. Today, ratings appear to play a similar role: instead of collective approval, credibility is increasingly expressed through external scoring. The question is whether this represents a repetition of an early market pattern or a genuine step forward.

This dynamic becomes particularly visible in price formation. Across several segments, large price gaps have emerged between credits perceived as higher-integrity and those seen as lower-integrity, sometimes even when projects rely on similar or identical methodologies.

In the improved cookstove segment, traditional projects developed under long-established methodologies have often traded below €5 per tonne. These credits are typically characterised by mature methodologies, large historical supply, and relatively low delivery costs. At the same time, cookstove projects positioned as higher-integrity, including those aligned with more stringent quality frameworks, have been priced well above €15 per tonne, and for e-cooking or pellet-based solutions even above €25 per tonne. The resulting gap is substantial and difficult to explain solely through incremental methodological differences or higher technology costs.

Indicative price range by project type and quality signal (personal elaboration)

A comparable pattern can be observed in REDD+ markets. Even where projects rely on the same underlying methodology, differences in external ratings have been associated with price spreads of €5 per tonne or more. In these cases, the premium appears to reflect differences in perceived risk, confidence, and buyer preference, rather than a binary distinction between viable and non-viable projects.

Ratings and Price: T1 includes ratings of AAA, AA or A, T2 includes ratings of BBB, BB or B, T3 includes ratings of C or D (Source Calix Global website)

Taken together, these examples suggest that the market is not pricing carbon credits solely on cost or methodology, but increasingly on signals of reassurance provided by ratings and integrity labels. While these signals can reflect meaningful differences in governance, transparency, and risk management, the scale of some observed price gaps raises a key question: do these premiums reflect proportional reductions in underlying risk, or are they partly driven by market sentiment in a still-evolving system?

This perspective also helps interpret how integrity and quality are treated in compliance contexts. In discussions around the EU 2040 climate target, the European Union has acknowledged a potential role for high-quality international carbon credits within strict limits. The use of this wording is not neutral. Adding “high quality” without introducing a new or independent definition appears less as an attempt to create additional criteria and more as a way to reassure the market and policymakers that the mistakes of the past will not be repeated. Importantly, quality is not defined as a simple label, but linked to system-level conditions such as alignment with Article 6, EU policy, robust accounting and corresponding adjustments, governance safeguards, and transparency requirements.

Singapore offers a concrete example of how similar principles are operationalised in practice. Singapore is widely regarded as one of the most advanced governments when it comes to carbon markets and the implementation of Article 6.2 of the Paris Agreement. Rather than defining quality internally or relying on a single official assessment, Singapore has chosen to outsource part of the quality evaluation process to multiple independent rating agencies. Under its International Carbon Credit framework, the National Environment Agency has appointed three providers to support the assessment and selection of eligible credits.

This approach does not delegate policy authority to rating agencies. Ratings are used as technical inputs alongside eligibility rules, accounting requirements, and governance safeguards. In this way, integrity and quality are treated as necessary conditions for participation, while responsibility for market oversight remains firmly with the regulator.

Alignment around integrity and quality is increasing, assessment tools are becoming more sophisticated, and policy interest in international mitigation is expanding. At the same time, definitions remain plural and closely linked to how markets are designed and used.

Frameworks, principles, and ratings can assess, signal, and compare quality, providing essential foundations for trust. They cannot, on their own, create demand, price certainty, or long-term investment signals. The challenge ahead is therefore not to identify a single, perfect definition of quality, but to connect integrity frameworks more clearly to use cases, demand signals, and market design. That connection, more than labels, will determine whether integrity can move from principle to scale. Ultimately, all of this only makes sense if carbon markets can attract real and stable demand, mobilise investment, and scale as a globally trusted instrument for climate action.

This article is also published on the author's blog. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.

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