Increasingly, organizations are purchasing credits in the voluntary carbon market (VCM) to fulfill part of their climate commitments. Yet little research exists on buyers’ purchase behaviors—the attributes of credit quality that they regard as most important and are most willing to pay for. Such information can elevate VCM quality by guiding suppliers’ carbon credit development priorities, buyers’ decision making, and third parties’ standards and interventions.

In November 2022, to better understand buyer preferences, BCG, with support from the Environmental Defense Fund (EDF), surveyed nearly 500 company leaders whose duties included making voluntary carbon credit purchases for their companies. The survey used conjoint analysis to quantify respondents’ preference and willingness to pay (WTP) for key credit quality attributes. Conjoint analysis simulates actual purchase decisions—in which respondents must make tradeoffs between different attributes—instead of directly asking how important an attribute is. This approach makes it possible to identify and quantify the attributes that respondents prefer and are willing to pay for, and it mitigates the risk that respondents will rate all attributes as very important.

The survey showed that buyers across market segments are willing to pay significantly more for credits of demonstrably high quality. This finding indicates that the VCM is not a “race to the bottom” focused on purchasing the cheapest credits. Buyers expressed their highest WTP for credits with higher greenhouse gas (GHG) impact scores from third parties, and they were unwilling to consider credits with lower scores. This finding highlights the importance of giving buyers simple, reliable heuristics for evaluating the quality of credits, especially in view of the many dimensions of quality that companies must assess and companies’ lack of resources for assessing them.

Respondents indicated that, of various quality dimensions that they consider when purchasing credits, the ability to prove impact is most important. In particular, they prioritize project and program transparency and measurement, reporting, and verification (MRV) over other dimensions of quality. Buyers clearly are looking for quality on dimensions that will help them defend their purchase decisions as the VCM faces scrutiny from many stakeholders.

Respondents identified project or program type, co-benefits, and location as the next-most important quality dimensions after GHG impact. Of the two broad types of projects and programs—reductions and removals—respondents across segments preferred removals and were to a large extent willing to pay for them. In choosing among reduction projects and programs, lower-maturity respondents preferred renewable energy solutions; however, recent decline in the cost of renewables, which may put them on par cost-wise with fossil fuels, likely makes these credits lower in quality than other reduction credits. In contrast, higher-maturity segments tended to prefer nature-based solutions (NBS). Although some NBS project types have attracted criticism, other NBS project or program types have the potential to elevate quality in the VCM.

Other dimensions that can help elevate VCM quality have been gaining more stakeholder attention recently, although buyer preference and WTP vary for each. Most respondents said that they preferred and were willing to pay for jurisdictional REDD+ (JREDD+) credits, a sign of the potential that programs using jurisdictional-level approaches and impact quantification may have to attract buyers and elevate quality. Benefit sharing, on the other hand, attracted lower WTP marks, suggesting that respondents considered it a nice-to-have option, rather than an essential, and that there is a lack of transparency about this key attribute.

The survey findings have several important implications for the VCM and for VCM stakeholders. First, project developers should tailor their strategies and product portfolios to capture value and drive high-quality credit volumes to meet growing demand. Buyers should shape their future budgets with quality and price increases in mind, while learning procurement best practices from peers and leading VCM buyers. And third parties such as NGOs, standard setters, and rating agencies should continue educating and guiding buyers on credit quality and elevating standards, focusing their efforts where WTP is lowest.

 
The authors wish to thank Pedro Martins Barata, Jordan Faires, Luis Fernández Intriago, Alex Hanafi, Darcy Jones, and Rainer Romero-Canyas of EDF for their invaluable role in shaping the research and the report.
 
We would also like to thank Ruth Chen and Ryan Song at BCG, and Suzi Kerr, Breanna Lujan, Erica Morehouse, and Amy Morse at EDF for their contributions.