De-risking carbon markets: Managing legal uncertainty in the treatment of carbon credits

Dear clients and friends, We are excited to share a new report co-authored by Herzog Fox & Neeman’s Environment and Climate Change practice and BeZero Carbon, exploring one of the biggest barriers to growth in the voluntary carbon market: the legal uncertainty surrounding the private law treatment of verified carbon credits. As equity and debt financing increasingly support advance market commitments, confidence in the legal treatment of VCCs becomes essential. Yet today’s fragmented legal landscape introduces commercial and operational risks that hinder market growth. Amid the legal fragmentation and the post-issuance risks associated with it, robust risk management of foundational project elements becomes increasingly critical to build confidence, ensure stability, and unlock the full potential of carbon markets. Our report highlights:

• Why legal clarity on ownership, transfer, security and insolvency treatment is fundamental for commercial transactions involving VCCs.
• How the UNIDROIT Project and other legal initiatives are advancing legal harmonization—and what challenges remain.
• How advance market participants such as investors, off-takers and financiers are likely to manage post-issuance legal risk.
• Why pre-issuance risk management tools—like ratings and insurance— play a central role in bolstering market integrity.
• What lies ahead for market participants navigating legal uncertainty.

  For the full report >> click here