Banks eye voluntary carbon markets as Carney’s taskforce gears up
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Banks eye voluntary carbon markets as Carney’s taskforce gears up

A year after launch, the Taskforce on Scaling Voluntary Carbon Markets is close to setting standards for a murky market. Board member Chris Leeds discusses the journey so far, the challenges ahead and the opportunities that standardization could create for banks.


Carbon offsets have always been controversial. Some dislike the idea of allowing polluters to pay their way out of the problem. Others are sceptical of the value and credibility of projects. Even proponents of the concept are put off by the lack of transparency and standardization in the market.

Yet as corporate net-zero commitments proliferate, carbon offsets are back in the spotlight. Given the scale of emissions reduction required to meet the targets set by the world’s largest companies, it seems certain that offsets will have to be part of the solution – at least in the short term.

Whether surging demand will be matched by adequate supply is an open question. Despite repeated efforts over the years to bring order and growth to the sector, the voluntary carbon markets remain restricted, diverse and difficult to navigate.

The price of offsets can vary wildly, from as little as $0.02 to $2,000. This in turn reflects the widely divergent types of projects on offer, from renewable energy to forest protection in the Amazon to carbon capture and storage (CCS).

Confidence in the market is not helped by regular media investigations questioning the additionality of offsets, raising the spectre of reputational risk for potential buyers. Banks are equally reluctant to get involved in either trading or financing projects in such a murky market.

Chris Leeds, Standard Chartered

“For any financing, you need some certainty over the value of the credits, which we don’t have as there is no transparency or liquidity in the voluntary carbon market,” says Chris Leeds, head of carbon markets development at Standard Chartered.

That is where the Taskforce on Scaling Voluntary Carbon Markets (TSVCM) comes in. Launched a year ago by Mark Carney, with Standard Chartered chief executive Bill Winters as chair, the idea of the initiative is to make carbon offsets more investible by standardizing the market.

“There was a feeling that things weren’t moving quickly enough at the international level and that this was something the private sector could do,” says Leeds, who serves as Winters’ point man on the taskforce.

Other TSVCM members include representatives from carbon offset standard setters Verra and Gold Standard, a clutch of big corporate and financial names and several climate non-governmental organizations (NGOs).

Other elements of the taskforce in its first year have included a consultative group covering an even wider range of organizations, from multilateral development banks to tech firms, as well as an advisory board made up predominantly of academics.

Feedback from insiders suggests that finding common ground among such a diverse group has been challenging. Leeds insists that this is a natural and, indeed, positive part of the TSVCM’s development.

For any financing, you need some certainty over the value of the credits, which we don’t have as there is no transparency or liquidity in the voluntary carbon market
Chris Leeds, Standard Chartered

“We have had 400 organizations and people involved in the consultations and in the taskforce,” he says. “It’s a very, very broad church, so it is unsurprising that we have had disagreements and they are healthy disagreements.

“I hope we’ve tried to bring as much of those disagreements out as possible, because we are striving for consensus.”

He is confident that this can be achieved, particularly now that the TSVCM’s governance body has been convened.

Along with Leeds himself, the new body is dominated by NGO representatives and academics, including many from emerging markets and even indigenous communities – answering criticism that the taskforce had hitherto been insufficiently diverse and skewed towards developed markets.


The biggest task for the governance body, which was announced on September 21, will be producing the core carbon principles, which are intended to provide a market standard for high-quality carbon offsets.

These will include credit eligibility guidelines for different project and methodology types, as well as an assessment framework for standard setters and eligibility principles for existing market participants, including suppliers.

The governance body will be advised by a technical expert group. Nevertheless, Leeds admits that establishing the core carbon principles will still be challenging, particularly with regard to historic carbon credits.

“We are going to look at the projects and the methodologies and make recommendations on how they can be improved if they don’t meet the thresholds,” he says. “We will probably also have to make some tough decisions about some of the methodologies and credits that are already out there.”

Other vexed issues will likely include how to account for what are known as co-benefits – positive outcomes from offset projects that go beyond carbon reduction. Many relate to nature and biodiversity, as in the case of forest protection and renewal, but they can also include economic or social benefits to local communities.

Clearly, the number one goal of a carbon project is to reduce carbon. But it should also do no harm and ideally be positive for local communities
Chris Leeds

Leeds suggests that many co-benefits should come as standard with the type of high-quality carbon offsets the TSCVM is looking to promote.

“Clearly, the number one goal of a carbon project is to reduce carbon,” he says. “But it should also do no harm and ideally be positive for local communities. Bringing benefits for women, alleviating poverty and improving access to clean water should arguably be part of any carbon project.”

One advantage of ensuring that projects include co-benefits could be to raise the price of offsets. As Leeds notes, this has historically been too low to support high-quality carbon projects, let alone change corporate behaviour. Offsets with co-benefits typically cost more than those without.

Indeed, one of the main aims of the TSVCM, and the core carbon principles, is to set a minimum price for offsets. The current price of around $7 per tonne of carbon, while it has doubled over the past year, is still well below the level required to maintain high-quality projects.

“Standardization is good because it creates a benchmark price and a benchmark quality,” says Leeds. “It is about creating a minimum threshold, which guarantees that all carbon credits will meet stringent criteria around additionality, local benefits, permanence etc.

“That will probably make them quite costly, which is a good thing, because we want to ensure that the right incentives are being created for companies to reduce their carbon emissions.”

Another challenge for the taskforce will be working out how to deal with different types of offsets. A big divide is opening up in the carbon markets between proponents of nature-based solutions and fans of CCS, which include some of the biggest names in Silicon Valley.

For the moment, the TSVCM is focused on nature-based solutions, according to Leeds. “That is the most obvious area for funding to go to,” he says. “Carbon emissions from deforestation and from nature more broadly are responsible for about a sixth of annual emissions, some 15 billion tonnes a year. That’s shocking and we need to stop it now.

“There are obviously other policy tools that we are looking to put in place, but putting a price on carbon will create the right signals and the right incentives for local people to start to decide whether they are better off turning the forest down into productive arable land or preserving it.”

Leeds notes, however, that the opportunities for nature-based solutions are limited. “Over time the supply of those projects will run out,” he says. “We will have put all the money that we can into those projects and hopefully we will have safeguarded forests and nature.

“Then as with any commodity, we will move along the cost curve to more expensive emissions reductions. And that’s where technologies like carbon capture and storage will come into their own.”


Achieving consensus on contentious issues will be much easier now that the TSVCM’s governance body has been formed, says Leeds. He also insists that, despite continuing strong input from civil society, pragmatism will be the keynote of its approach.

“We have some great involvement with eNGOs [environmental NGOs] and they are keeping everybody very honest,” he says. “But we want to create a market that’s going to be successful and that won’t be constrained so much that it can’t get off the ground.”

Further announcements on the timeline for the creation of the core carbon principles are expected at the United Nations COP26 climate conference in Glasgow in November.

The hope is that standardization will enable larger banks to start trading voluntary carbon credits. Many are already involved in regulated carbon markets, such as the European Union’s Emissions Trading System (EU ETS), but voluntary credits have so far remained the preserve of commodity traders and niche players.

We want to create a market that’s going to be successful and that won’t be constrained so much that it can’t get off the ground
Chris Leeds

Standard Chartered is a good example of a bank that is keen to get involved in carbon credit trading – it recently entered the EU ETS – but is wary of the voluntary side of the market. “We won’t trade voluntary carbon credits until we are confident that there is standardization, that the credits are high quality and that people are confident in that quality piece,” says Leeds.

Similarly, he adds, Standard Chartered has looked at financing offset projects but concluded that the lack of certainty around carbon markets means that “for the moment these projects are not bankable”.

He adds: “A liquid and transparent carbon market for high-quality standard carbon credits will help change that.”

Whether it will placate diehard critics of offsetting remains to be seen. Leeds is keen to stress that the message from the TSVCM is that carbon credits should not be seen as a get-out clause.

“We’re saying that the number one priority for companies should be reducing their own emissions and the emissions in their value chain, and encouraging their customers to reduce emissions,” he says. “But that’s not an easy thing to do immediately, which is why most of the targets for net zero are 30 years away.

“The carbon credit market is not about, as some people put it, buying indulgences. This is usually over and above what companies are already doing.”

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