Carbon credit prices have been under pressure for several years, but the long-term outlook for the voluntary carbon market (VCM) could be very different.

Patch’s A Buyer’s Guide to Carbon Credits points to a potential turning point. The report argues that demand for high-quality carbon credits could eventually outpace available supply, creating upward pressure on prices as companies move closer to net-zero targets.

The market has already experienced a major correction. But the forces that could drive the next phase are beginning to look different.

For buyers, the question may soon shift from how cheaply they can purchase carbon credits to whether they can secure enough high-quality credits at all.

Why Carbon Credit Prices Collapsed After the VCM Boom

The voluntary carbon market experienced explosive growth in 2021. According to Patch, the market quadrupled year over year that year, reaching about $2 billion. At the time, forecasts suggested the VCM could grow to between $10 billion and $40 billion by 2030.

Instead, demand weakened sharply.

• Carbon credit purchases and retirements fell to around 155 million credits in 2022 from 161 million in 2021, a decline of roughly 4%.

Unlocking the Triggers 

Concerns over credit quality were a major factor. High-profile investigations into some Verra REDD+ projects raised questions about whether certain credits delivered the climate benefits claimed by project developers.

The collapse of the crypto market added another layer of pressure. Crypto investors had poured significant capital into carbon credits during the market’s boom, and their retreat contributed to weaker demand.

Nature-based credits were especially vulnerable. Patch noted that the supply of REDD+ credits fell by 32%, yet buyers remained hesitant. Average prices for nature-based credits subsequently dropped below $2.

Note: In this market, three primary types of offsets are traded – NGEO, GEO (General Emissions Offsets), and CGEO (Certified Global Emissions Offsets).

The correction exposed a fundamental weakness in the VCM. Much of the demand was behavioral and highly sensitive to price, market sentiment, and concerns over corporate climate claims.

But Patch argues that this is unlikely to define the market forever.

• FIND: LIVE CARBON PRICES

Carbon Credit Supply Could Fall Behind Future Demand

One of the most important findings in Patch’s report is the growing gap between investment in future carbon-credit supply and current market sales.

The report cites Trove Research, which estimated that capital investment in carbon-credit projects was about five times greater than overall carbon-credit sales.

In 2022, the primary market, based on retired credits, was worth approximately $1.5 billion. Capital investment in projects, meanwhile, reached around $7.5 billion.

That imbalance is significant.

It suggests that investors and project developers were committing substantial capital to creating future carbon-credit supply despite relatively weak demand at the time.

The bigger question is whether that future supply will be enough.

Patch cited Trove Research projections showing that demand could exceed supply by 2030 even under lower-demand scenarios. Under a pathway consistent with limiting warming to 1.5°C, the imbalance could emerge earlier.

This could create a very different market environment from the one that produced today’s low prices.

If demand accelerates faster than new projects can deliver credible credits, buyers could find themselves competing for a limited supply.

Carbon Credit Demand Could Become Less Price-Sensitive

Patch separates carbon-credit demand into two broad categories: behavioral demand and fundamental demand.

Behavioral demand tends to respond quickly to market conditions. Companies may reduce purchases when credit prices rise, economic conditions deteriorate, or concerns about the credibility of offsets increase.

Fundamental demand is more structural.

It comes from companies that have made public climate commitments and eventually need to address emissions that cannot be eliminated through internal reductions alone.

That distinction could become increasingly important as corporate net-zero deadlines approach.

The cost of eliminating the final portion of emissions can be considerably higher than reducing emissions through easier efficiency or clean-energy measures. This is particularly relevant for difficult-to-abate sectors such as aviation, shipping and heavy industry.

As a result, carbon credits could become less discretionary.

Could Carbon Credit Prices Reach $150 by 2035?

Companies may eventually have fewer options for addressing residual emissions, making their demand less sensitive to price.

Patch cited EY Net Zero Centre projections that put carbon prices between $80 and $150 by 2035 across different climate scenarios.

That is far above the prices currently seen across much of the voluntary market.

The key point is not that every carbon credit will reach those levels. Rather, it illustrates how dramatically prices could change if structural climate demand begins to outweigh short-term buyer sentiment.

• READ MORE: What Types of Projects Generate Carbon Credits?

High-Quality Carbon Credits Are Already Commanding a Premium

Recent data from Sylvera offers an important update to Patch’s longer-term outlook.

The latest figures suggest that buyers are already becoming more selective about where they spend their carbon budgets.

• In Q2 2026, carbon credit retirements reached 38.55 million, down 10% from the same quarter a year earlier. First-half retirements stood at 89.27 million, also below the previous year’s level.

On the surface, declining retirement volumes could suggest that demand remains weak.

However, pricing tells a more complicated story.

• MUST READ: Carbon Credit Prices Reward Quality More Than Ever, but MIT Study Questions Market Pricing 

Buyers Are Shifting Toward Better Credits

Sylvera’s Q1 2026 data showed that average carbon credit prices increased to $5.69 from $5.60 despite an 8% decline in retirement volumes. Investment-grade BBB+ credits commanded an average price of $20.10, up from $18.10.

The pattern is important because it shows that the market is not moving uniformly.

Buyers may be purchasing fewer credits overall while allocating more money toward credits they consider higher quality.

Sylvera’s 2025 data reinforces the trend. Carbon credit retirements declined 4.5% to 168 million, but the market’s total value increased 6% to $1.04 billion.

High-quality BB+ credits also increased their share of retirements from 44% to 50% and accounted for 70% of total spending.

The market is therefore becoming increasingly differentiated.

Lower-quality or oversupplied credits can remain cheap, while scarce credits that meet stronger integrity expectations can command substantial premiums.

Why Buyers May Need to Lock In Carbon Credits Early

Patch’s analysis makes a strong case for buyers to think beyond today’s spot prices.

Long-term carbon-credit purchase agreements can provide companies with greater certainty around future volumes and pricing. At the same time, they give project developers the revenue visibility needed to secure financing and expand their operations.

This could be particularly important for carbon removal.

New removal projects often require significant upfront investment and can take years to develop. If corporate demand accelerates before enough projects reach commercial scale, buyers could face a shortage of available supply.

Early purchasing can therefore serve two purposes.

It can protect buyers from potential future price increases while also helping developers build the supply needed to meet future demand.

However, locking in supply does not mean simply buying the cheapest credits available.

The market’s experience over the past several years has demonstrated why quality matters. Questions around additionality, permanence, measurement, verification, and project-level risks can significantly affect the long-term value of a credit.

The objective should be to secure credible supply at a price that remains attractive against potentially higher future costs.

The Carbon Market Is Splitting Into Two Price Tiers

Patch’s report was produced during a period when the VCM was dealing with a major credibility and demand crisis. The latest market data suggests that the market is not disappearing. Instead, it is becoming more selective.

Overall demand remains uneven, but spending is increasingly concentrated in higher-quality credits.

That could eventually produce a two-tier market.

Lower-quality and oversupplied credits could continue trading at relatively low prices. Meanwhile, high-integrity reduction and removal credits could become increasingly expensive as buyers compete for limited supply.

This distinction is critical for companies planning long-term climate strategies.

Patch’s central argument remains compelling: companies that wait until carbon-credit demand becomes urgent could face tighter availability and higher prices.

Those that secure credible long-term supply earlier may have greater control over both cost and access.

The voluntary carbon market has already shown how quickly prices and buyer sentiment can change.

The next major shift could come from the opposite direction. As corporate climate commitments become more difficult to defer and emissions reductions become increasingly expensive at the margin, fundamental demand could begin to dominate behavioral demand.

The bottom line is, if that happens, the biggest risk for carbon-credit buyers may no longer be paying too much.

It could be not having enough high-quality credits to buy.

• ALSO READ: Carbon Market 2026: Supply Squeeze Pushes Premium Carbon Credit Prices Up, Sylvera Finds

The post Is the Cheap Carbon Credit Era Coming to an End? appeared first on Carbon Credits.

The UK has recognized India’s Carbon Credit Trading Scheme (CCTS) as a qualifying carbon pricing scheme under its upcoming Carbon Border Adjustment Mechanism (CBAM). The move could reduce the carbon cost faced by Indian exporters when the UK’s CBAM begins on January 1, 2027.

Under UK rules, qualifying carbon prices already paid on emissions embodied in imported goods may be taken into account when calculating the importer’s CBAM liability. This is designed to prevent the same emissions from being priced twice.

India’s CCTS now appears on the UK’s official list of qualifying overseas carbon pricing schemes. The list also includes the EU Emissions Trading System, China’s national ETS, Japan’s GX-ETS, Korea’s ETS, Singapore’s carbon tax and South Africa’s carbon tax.

The recognition is important for Indian companies selling carbon-intensive goods into the UK. However, it does not mean every Indian carbon credit will automatically reduce a CBAM bill. Importers must meet detailed UK rules on emissions data, carbon pricing and independent verification.

UK’s Carbon Border Tax Arrives in 2027

The UK CBAM will begin on January 1, 2027, covering imports of selected carbon-intensive products from the aluminium, cement, fertiliser, hydrogen, and iron and steel sectors.

The policy is designed to ensure that imported goods face a carbon cost broadly comparable with products made by UK manufacturers. One of its main goals is to reduce carbon leakage, where production moves to countries with weaker climate policies.

UK importers will generally need to register when they expect to import at least £50,000 of CBAM goods within the next 30 days. The threshold can also be assessed using imports during the previous 12 months. This means the system will mainly affect businesses with significant trade in covered products.

The UK government has also created a system for claiming Carbon Price Relief. This allows importers to reduce their CBAM liability where the relevant goods have already been subject to an eligible carbon price overseas.

India’s CCTS Can Reduce UK Carbon Costs

India’s inclusion on the UK’s qualifying list is important because its national carbon market is now moving into operation. Under the CCTS, India is developing a compliance mechanism for energy-intensive industries.

The government sets greenhouse gas emissions-intensity targets for covered businesses. Companies that perform better than their targets can receive Carbon Credit Certificates, while those that fall short may need certificates to meet their obligations.

The scheme also includes an offset mechanism for eligible projects outside the obligated industrial sector. This framework covers activities that can generate emissions reductions or removals in areas such as energy, industry, agriculture, forestry, waste, transport and carbon capture, utilization and storage.

However, this distinction is critical for exporters. The UK’s CBAM relief is linked to qualifying carbon prices applied to the embodied emissions in imported goods. Simply purchasing a voluntary carbon credit does not automatically create a CBAM deduction.

The UK requires evidence showing that the relevant emissions were subject to a qualifying pricing scheme.

Carbon Data and Verification Will Make or Break Relief

The UK has placed strong emphasis on verification. To claim Carbon Price Relief, an importer must obtain a carbon pricing verification form from the relevant installation, factory, or supply chain.

The form must then be completed by an independent verifier that meets the UK’s requirements. Without the required documentation and verification, the importer cannot claim the relief. The amount of relief also depends on the actual carbon price and the emissions covered by that price.

Importers must calculate the effective carbon price and determine how much of the embodied emissions were subject to an eligible scheme. Any foreign currency relief must then be converted into pounds using UK-published exchange rates.

This makes accurate carbon accounting increasingly important for Indian exporters. Companies will need reliable data on how much CO2 they emit, how those emissions are measured and what carbon costs they have actually paid.

India Is Building a National Carbon Market

The UK’s decision comes as India moves from designing its carbon market toward implementation. India has established rules and procedures for its CCTS and is developing the systems needed to measure, report, and verify emissions and carbon projects.

The Bureau of Energy Efficiency (BEE) has also been working on the accreditation of independent carbon verification agencies. The agencies will play a key role in checking emissions and project claims under the Indian market.

The CCTS is part of India’s wider shift away from its earlier Perform, Achieve and Trade approach toward a national carbon market.

The timing is significant. India is developing its domestic carbon pricing system at almost the same time the UK is preparing to impose a carbon cost on certain imports. That creates a direct connection between domestic climate policy and international trade.

SEE MORE: India’s Carbon Market Portal Goes Live as Carbon Credit Trading Nears

Metals Could Face the Biggest Impact

The recognition could be particularly important for India’s steel and aluminium industries. Both sectors are covered by India’s carbon market framework and the UK CBAM. That gives producers in these industries a potential way to reduce their UK border carbon liability where qualifying domestic carbon prices have been paid, and the UK requirements are met.

The issue is becoming more important as trade between the two countries expands.

The UK-India Comprehensive Economic and Trade Agreement entered into force on July 15, 2026. UK government data shows that total trade between the two countries was worth about £48 billion in 2025.

The agreement provides tariff reductions across a wide range of products, with 99% of Indian goods entering the UK eventually benefiting from zero or reduced tariffs. But lower tariffs do not remove carbon-related costs.

For carbon-intensive products, exporters will have to consider both traditional trade costs and the new cost of embedded emissions under CBAM. Recognizing India’s carbon pricing system could help limit that additional burden.

Carbon Data Is Becoming Part of the Export Toolkit

The wider significance of the UK’s decision goes beyond the immediate tax benefit. Carbon information is increasingly becoming part of international trade. Exporters of covered products will need to understand:

• the emissions generated during production,
• how those emissions were calculated, and
• whether a qualifying carbon price was paid.

The UK CBAM framework effectively turns this information into part of the import process.

For Indian manufacturers, that could encourage better emissions monitoring and reporting. It could also push companies to invest in cleaner production methods, because lower emissions can translate into lower carbon costs at the border.

This could create a growing competitive advantage for producers that can demonstrate lower emissions and strong carbon-accounting systems.

UK and EU Carbon Borders Point to a New Trade Era

The UK is not alone in linking carbon pricing with international trade. The European Union’s CBAM also allows a carbon price paid in the country of production to be taken into account when determining the border charge, provided it meets the EU’s rules.

The UK has adopted a similar principle while creating its own calculation and verification framework. This suggests a wider trend: national carbon markets are becoming increasingly connected to global trade rules.

For exporters, carbon pricing is no longer only a domestic policy issue. It can affect whether products remain competitive in foreign markets.

The UK’s recognition of India’s CCTS is a relatively small regulatory step, but it could have a wider effect.

It gives Indian exporters in covered sectors a clearer path to claim relief where they have already paid an eligible domestic carbon price. At the same time, it gives India’s emerging carbon market an international dimension. Also, the decision reduces one important risk: double carbon pricing on the same emissions.

For Indian exporters, managing emissions is increasingly more than an environmental responsibility. It is also becoming an important part of managing trade costs and staying competitive in global markets.

• READ MORE: EU Expands CBAM: A Review Shows It Urges Other Countries to Use Carbon Pricing

The post UK Recognizes India’s Carbon Scheme Under CBAM, Easing Exporters’ Carbon Costs appeared first on Carbon Credits.

Gold Standard has launched a new methodology that allows qualifying green hydrogen projects to generate carbon credits when they replace more carbon-intensive hydrogen production. The methodology covers hydrogen made through water electrolysis using renewable electricity. It can support both new projects and upgrades at existing industrial sites.

The new framework gives hydrogen developers another way to attract carbon finance. It also sets strict rules for renewable power, additionality, water use, and emissions accounting.

The move comes as global hydrogen demand grows, while low-emissions production remains small. The International Energy Agency (IEA) reports that global hydrogen demand exceeded 100 million tonnes in 2025. Meanwhile, low-emissions hydrogen production stayed around 1 million tonnes.

Gold Standard Targets Hydrogen’s Fossil Footprint

Gold Standard’s Green Hydrogen Production methodology applies to projects that make hydrogen through electrolysis and use renewable electricity. The rules cover both greenfield projects, which build new green hydrogen plants, and brownfield projects, which add electrolysers to existing industrial facilities and replace fossil-based hydrogen.

Eligible projects can serve existing industrial users that previously relied on hydrogen made from coal, oil, or natural gas. The methodology can also cover new uses where green hydrogen replaces a more polluting fuel.

Credits depend on the amount of qualifying green hydrogen actually produced and used. A project, therefore, cannot claim credits simply because it has an electrolyzer or uses renewable power.

Every Kilogram of Hydrogen Must Be Accounted For

Gold Standard puts a strong emphasis on direct measurement. Projects must measure the electricity used and the amount of hydrogen produced. They must also show where the hydrogen goes and confirm that the end use qualifies for credit.

The methodology requires continuous measurement of hydrogen production using equipment such as mass flow meters or precision load cells. Projects must also track hydrogen delivered or sold to eligible users.

If developers cannot prove that a certain volume went to a qualifying end use, that volume cannot generate credits. This approach helps reduce the risk of overstating emissions reductions.

Green Hydrogen Must Prove Its Power Is Truly Renewable

The methodology also sets detailed rules for renewable electricity. Projects can use renewable power from sources such as solar, wind, and geothermal energy. They must prove where the power comes from and show a clear link between renewable generation and hydrogen production.

Simply buying unbundled renewable energy certificates, or RECs, does not qualify.

Gold Standard states that unbundled RECs and guarantees of origin can’t count as renewable electricity. This is because they lack a direct link to the electricity used by the hydrogen plant.

Off-site renewable projects can provide power with a power purchase agreement (PPA); however, they need to meet extra requirements.

For example, the renewable project generally must begin commercial operation within 24 months of the hydrogen facility’s start date. Gold Standard can extend that period by up to 12 months, giving a maximum of 36 months in documented cases outside the developer’s control.

The methodology also moves toward hourly matching between renewable generation and hydrogen production as tracking systems become available.

Grid Power Gets a Strict 10% Limit

Some grid electricity is allowed, but only in limited amounts. A project can use grid power when renewable supply is not enough, but grid electricity cannot exceed 10% of total annual electricity use.

Gold Standard also applies different emissions rules based on the grid’s carbon intensity. If the grid emissions factor is below 0.2 tonnes of CO2e per MWh, related hydrogen can still qualify as green under the methodology.

If the grid factor reaches or exceeds 0.2 tCO2e/MWh, the project must count the actual emissions linked to that grid electricity. These rules lower the risk of a project using lots of fossil-heavy grid power. This way, it can’t falsely claim credits for zero-emission hydrogen.

• RELEVANT: Moeve, Masdar, and Enalter Partner on Southern Europe’s Largest Green Hydrogen Project

Carbon Finance Must Make a Real Difference

Gold Standard also requires developers to show that carbon finance helps make the project possible. The methodology looks at financial conditions, common practices, legal requirements, and lock-in risks.

Projects must also complete an ongoing assessment of their financial needs. This matters because green hydrogen projects may receive subsidies, tax benefits, or other government support.

The rules aim to prevent credits from rewarding emissions reductions that would have happened anyway.

Gold Standard also applies a Downward Adjustment Factor (DAF) to the crediting baseline. The factor considers the host country’s official net-zero target and lowers the baseline over time. This makes the crediting system more conservative as national climate policies strengthen.

Water and Supply Chain Emissions Matter

Water use is another part of the methodology. Electrolysis needs water, which can create pressure in areas that already face water shortages. Gold Standard limits the share of local drinking water use to 5% and requires checks on water availability and hydrological risks.

The methodology also accounts for emissions from equipment used to produce green hydrogen. Developers must consider emissions linked to the manufacture and transport of electrolysers, solar panels, wind turbines, and battery systems during the first crediting period.

The rules also account for hydrogen leakage. Gold Standard uses a 100-year global warming potential of 14.4 for hydrogen when calculating those emissions. That makes the methodology broader than simply comparing green hydrogen with fossil hydrogen at the production plants.

Credits Require Proof of Real Fossil Fuel Displacement

The methodology focuses on actual changes in how hydrogen and energy are produced. Developers must prove that current industrial users have used fossil-based hydrogen for at least three years before they can switch to green hydrogen.

Some uses are excluded entirely. Projects can’t get credits for green hydrogen used in:

• enhanced oil recovery, 
• unconventional fossil fuel extraction or processing, and
• untargeted blending into natural gas networks.

For new hydrogen demand, developers must show that green hydrogen replaces a more emissions-intensive fuel or conventional hydrogen. These rules make the emissions benefit easier to measure and help strengthen the additionality case.

Hydrogen Demand Surges While Clean Supply Lags

The new methodology enters the market as hydrogen demand continues to rise. The IEA reports that global hydrogen demand topped 100 million tonnes in 2025. However, low-emission hydrogen production was only about 1 million tonnes. The agency says low-emissions production grew 20% in 2025, showing progress but also a large gap with overall demand.

Electrolysis capacity is also growing. The IEA reports that global electrolyser capacity doubled in 2025, exceeding 4 GW. Additionally, over 2.5 GW of new capacity is being built for operation in 2026.

However, the industry still faces high costs, limited infrastructure, and uncertain demand. Carbon finance could help some projects close part of the cost gap. Still, carbon credits alone are unlikely to make green hydrogen competitive in every market.

Green Hydrogen Gets a New Carbon Finance Route

Gold Standard’s new methodology gives green hydrogen developers a clearer path to carbon finance. The rules call for directly measuring hydrogen output. They also set strict renewable power needs. Lastly, projects must prove they replace more carbon-heavy hydrogen or fuels. 

If carbon finance can support more green hydrogen projects, the methodology could help expand low-carbon supply in industries such as refining, chemicals, ammonia, and steel. Yet, developers still need customers, renewable electricity, infrastructure, and financing.

Gold Standard’s framework does not guarantee a flood of new credits. It creates a stricter path for projects to prove that green hydrogen replaces real sources of emissions and delivers measurable climate benefits.

• READ MORE: $500M Wind-Powered Ships Could Transform Green Hydrogen Production

The post Gold Standard Launches Green Hydrogen Methodology to Generate Carbon Credits appeared first on Carbon Credits.

Wildfires have released an estimated 27 million metric tons of carbon dioxide (MtCO2) across Europe so far in 2026, with France accounting for a record amount of emissions, according to the European Union’s Copernicus Atmosphere Monitoring Service (CAMS).

The fires are creating a growing climate risk. They are not only releasing carbon stored in forests and other ecosystems. They can also weaken Europe’s ability to absorb emissions through its land and forests.

France has been one of the clearest examples. CAMS reported that French fires produced 0.89 million tons of carbon (Mt C) during July alone, the highest July level in its record. The previous July record was 0.64 Mt C in 2022.

France’s Fires Set a Record as Europe Burns

The scale of France’s fires reflects an unusually hot and dry summer across parts of Western Europe. CAMS uses satellite observations and its Global Fire Assimilation System to estimate emissions from fires in near real time. Its data showed that France had its highest annual fire emissions through the end of July in the available record.

The wider 2026 fire season has also been severe. EU data from the European Forest Fire Information System showed that 647,375 hectares had burned in the EU by September 2. This was due to 1,913 fires, each larger than 30 hectares.

The burned area in 2025 was lower than in the past, which was the EU’s worst year. Still, it was above the average of about 328,000 hectares from 2006 to 2025. This means the 27 MtCO2 emissions figure is part of a broader pattern of widespread fire activity rather than a single extreme event.

Climate Change Is Raising Fire Risk

Researchers say climate change is increasing the conditions that allow large fires to develop.

A World Weather Attribution study found that human-caused warming made extreme fire conditions in southwest France and central Spain more likely in 2026. The analysis linked the high fire risk to a combination of extreme heat, unusually low rainfall and severe soil moisture deficits.

In southwest France, conditions of similar severity are now expected about once every 20 years. In central Spain, they are expected roughly once every six years.

Researchers found that climate change has boosted extreme fire weather. In southwest France, such severe conditions are now at least twice as likely. In central Spain, they are at least 20 times more likely.

Land management can also affect fire behavior. Forest structure, vegetation, population patterns, and land use all influence how quickly fires spread. This means climate change is an important driver, but not the only one.

Europe’s Forest Carbon Sink Is Losing Strength

The wildfire problem matters to carbon markets because forests and other land ecosystems are a major part of Europe’s climate strategy.

The EU’s land-use, land-use change and forestry sector, known as LULUCF, removed a net 198 MtCO2e in 2023, equal to about 6% of EU greenhouse gas emissions. The European Environment Agency (EEA) noted that the sector’s carbon sink has weakened. The average annual sink from 2014 to 2023 is about 30% lower than in the previous decade.

Wildfires are one factor behind that decline. Fires can quickly release carbon stored in vegetation and soils, reducing the amount of carbon that land can absorb.

The EEA has warned that more frequent and severe disturbances, including wildfires and drought, are affecting Europe’s forest carbon stocks. That creates a challenge for Europe’s climate goals.

• The EU aims for a 310 MtCO2e net-removal target for the LULUCF sector by 2030. However, current national projections show that existing measures won’t meet this goal.

Wildfires Put Forest Carbon Credits to the Test

The growing fire risk has serious implications for nature-based carbon projects. Forest and reforestation initiatives depend on carbon remaining stored for decades.

However, a major wildfire can instantly destroy that stored carbon. When projects burn, carbon standards do not penalize individual corporate buyers. Instead, registries rely on “buffer pools”—shared insurance reserves of carbon credits that are permanently retired to cancel out the losses.

Real-world data shows that these safety nets are under severe strain from modern climate realities. Actuarial analyses of the California Air Resources Board (CARB) compliance program reveal that wildfires have triggered massive credit cancellations. For example, a single event—the Lionshead Fire—alone reversed 963,534 credits.

This is part of a much larger systemic threat. A landmark study by CarbonPlan and UC Berkeley found that California’s program set aside about 6.8 million credits. This amount covers wildfire risk for a century across its entire portfolio.

By 2024, cumulative losses from devastating fire seasons had blown past 10.7 million credits. The program effectively exhausted its hundred-year wildfire insurance pool decades ahead of schedule.

VCM registries face similar pressure. Premier international registries like Verra maintain global buffer accounts comprising tens of millions of tons of CO2.

When major projects fail, like the Colville Indian Reservation forest project in Washington, registries must freeze or cancel millions of credits. This helps keep corporate buyers protected.

Future Fire Risk Could Surge Nearly 200%

New research suggests that Europe’s wildfire problem could become significantly worse later this century without stronger climate action and fire management.

A study in Global Change Biology, led by the Potsdam Institute for Climate Impact Research, found that intense fire weather could raise Europe’s annual burned area by 39% by the end of the century in a low-emissions scenario. Under a high-emissions scenario, the increase could reach about 192%, or nearly three times current levels.

The researchers also found that better prevention, early detection, and firefighting could greatly reduce the increase. Improvements in fire management can cut burned area by 72% to 92%. This depends on the situation. Even so, stronger fire management would not fully offset the effects of severe climate change.

The study highlights an important point for carbon markets. Protecting forests cannot rely only on planting more trees. Projects also need to consider whether those forests can survive increasingly severe climate hazards.

Europe Faces a Tougher Fight to Protect Its Carbon Sinks

The 27 MtCO2 estimated from European wildfires in 2026 adds another layer to the region’s climate challenge. The immediate issue is the carbon released by fires. The longer-term concern is the loss of forests and other ecosystems that would otherwise remove CO2 from the atmosphere.

Europe’s land carbon sink remains an important tool for reaching climate neutrality, but the EEA says its capacity is already declining. For carbon markets, that means the focus must extend beyond how many credits a forest project can generate. The durability of those removals matters just as much.

More resilient forests, stronger fire prevention and better land management can help protect Europe’s carbon sinks. Yet, the latest research shows that these measures will have to work alongside major cuts in greenhouse gas emissions.

As extreme heat and drought increase fire risk, Europe faces a difficult cycle: climate change can make wildfires more severe, fires can release more stored carbon, and damaged forests can become weaker carbon sinks. Breaking that cycle will be critical to both the region’s climate targets and the future reliability of nature-based carbon removal.

• READ MORE: BTG Pactual Closes Record $1.24B Reforestation Fund as Forest Carbon Markets Enter the Big Leagues

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