Articles in Refereed Journals
Innovation and Entrepreneurship Research
Innovation and Entrepreneurship Research
Fixing Carbon Credits Requires a New Financing Model
(2026). Fixing Carbon Credits Requires a New Financing Model PNAS Nexus, 5 (5).
Carbon-crediting mechanisms could play a critical role in achieving net zero, yet growing evidence shows that many offset projects lack environmental integrity. Achieving geological net zero requires balancing residual fossil fuel–based emissions with permanent carbon dioxide removal (CDR), making the scale-up of CDR essential. However, current discussions on improving carbon-crediting mechanisms have focused too narrowly on implementation challenges, such as refining standards or monitoring systems. We argue that scaling permanent carbon removal requires a new financing model to address market barriers. This financing model must reduce price volatility and raise credit prices to attract investment. We propose a tiered auction framework to build and scale markets for novel CDR technologies by (i) setting a permanent removal target, (ii) ensuring minimum quality standards, and (iii) running reverse auctions combined with first-of-a-kind finance.