Carbon credits and COP30: my interview in Il Sole 24 Ore

Italy's leading financial newspaper Il Sole 24 Ore interviewed me two days before the opening of COP30 in Belém to explain what carbon credits are, which criteria they must meet to be eligible and where the market is heading. The article is by Sara Deganello.

→ Read the full article in Il Sole 24 Ore

What a carbon credit is — and what it is not

A carbon credit is a certificate of CO2-equivalent reduction or removal, recognised to a specific project. But not every project that reduces or removes emissions is automatically eligible.

To be certified, a credit must meet precise criteria: the reduction or removal must be permanent, real and measurable. The project must demonstrate regulatory additionality — it cannot simply respond to an existing legal obligation — and economic additionality: the sale of the environmental benefit must be its fundamental economic foundation. One credit equals one tonne of CO2-equivalent avoided or removed from the atmosphere.

The internationally recognised standards for reliability and quality are maintained by the International Emissions Trading Association.

The market logic behind the mechanism

Carbon credits originate from the Kyoto Protocol of 1997, which entered into force in 2005. The underlying idea was to optimise resources by rewarding, among all available technologies, the solution with the lowest marginal cost of CO2 abatement — starting with simple, low-cost projects and letting growing demand progressively make more advanced and expensive technologies economically viable.

It is market logic applied to decarbonisation: efficient, scalable and adaptive. That is the logic worth preserving

Projects: from nature to technology

Projects that generate credits fall into two broad families. Nature-based solutions — deforestation prevention, wetland conservation, reforestation, ecosystem restoration — represent low marginal cost approaches. Technology-based solutions — sustainable fuels, renewable energy, electric mobility, carbon capture and storage, biochar — carry higher costs but greater scaling potential.

In both cases one fundamental rule applies: the project must not rely on state subsidies as a precondition for its environmental benefit. The benefit cannot be counted twice.

From Kyoto to Article 6: an evolving framework

With the Paris Agreement of 2015, the framework expanded significantly. Article 6 extended cooperation mechanisms to all signatory countries — no longer limited to those with binding targets as under Kyoto — opening the way to a more inclusive and structured international carbon market.

At COP29 in Baku, more precise rules were approved for Article 6 implementation. From COP30 in Belém, we expect further progress — a reference framework usable by all countries to establish bilateral cooperation agreements on climate action.

The context is further strengthened by the recent EU Environment Council decision expanding the use of credits by member states to meet decarbonisation targets: a 5% quota for Europe plus an additional 5% per country, relative to 1990 levels.

A structurally short market: demand 14 times higher than supply

The market implications of this scenario are significant. Global potential demand for carbon credits is currently 14 times higher than existing supply. This is not a market in equilibrium — it is a structurally short market heading towards a substantial price increase.

Current estimates forecast that the price per credit could exceed $150 by the 2030–2040 decade. On one hand, this will allow more expensive technologies to enter the mechanism, making economically viable solutions that are currently marginal. On the other, it will represent a growing cost for companies that have not prepared in time.

What this means for companies

Businesses that are building a structured strategy around carbon credits today — identifying the right projects, securing forward contracts, integrating credits into long-term planning — will find themselves in a significant competitive advantage compared to those who arrive late to this market at much higher prices.

Carbon credits are not a simple compensation tool. They are a strategic lever — for those who know how to use them before the market makes them inaccessible.