Study warns carbon leakage may cut voluntary offset demand when paired with ETS
A new academic paper argues that carbon leakage can weaken demand for voluntary carbon credits when offsets are used together with compliance carbon markets. It also suggests that policies such as the EU's carbon border adjustment mechanism may help both types of markets.
A new academic paper argues that carbon leakage can reduce demand for voluntary carbon credits when offsets are used together with compliance carbon markets. This interaction is the study's central warning.
The paper also suggests that policies such as the EU's carbon border adjustment mechanism may support both voluntary and compliance markets. It adds to discussion about how carbon-pricing systems fit together.
If the paper's argument holds, companies that buy voluntary credits alongside compliance obligations could face weaker incentives to purchase offsets. Project developers and communities relying on voluntary carbon finance may see demand fluctuate. Policymakers designing carbon markets and border measures may weigh these interactions, though effects would depend on implementation and market responses.