Poster #65 - Beyond Bad Actors: Path Dependence, Governance Lock-In, and Reform in Voluntary Carbon Markets

• In Event: Saturday Poster Luncheon

Abstract

Voluntary carbon markets (VCMs) have become an increasingly important instrument in corporate climate strategy, especially for firms facing hard-to-abate emissions and slow asset turnover. However, despite its design as an innovative climate mitigation tool, the VCM has been plagued by quality controversies that persist despite several reforms. Yet debates about the VCM have been dominated by project-level concerns such as additionality failures, weak verification, over-crediting, and questionable co-benefits. While these critiques are important, they often treat poor VCM outcomes as isolated failures caused by weak oversight or a small set of bad actors. This paper argues instead that many recurring integrity problems in the VCM are better understood as the product of path-dependent governance dynamics. Early institutional choices can create routines, expectations, and incentives that become progressively harder to reverse, even when criticism intensifies and reform efforts multiply. Drawing on theories of increasing returns and organizational routines, the paper develops a governance-centered account of how self-reinforcing dynamics emerge in the VCM. It identifies three nested feedback loops: first, the early standardization of familiar templates and methodologies; second, growing auditor and verifier familiarity with those established approaches; and third, reputational grading systems that, rather than resetting the market, may stabilize existing categories and practices. Together, these mechanisms can lower transaction costs for incumbent credit types, reinforce their legitimacy, and make market actors more likely to reproduce established patterns than shift toward more demanding alternatives such as removals. Empirically, the paper combines registry data from the Berkeley Voluntary Registry Offsets Database (2005–2025) with comparative process tracing of two case pairs: cook-stove avoidance versus direct-air-capture removals, and early versus post-2016 REDD+ protocols. The analysis links governance choices embedded in rulebooks and verification routines to broader market outcomes. It shows how governance lock-in can sustain the dominance of high-volume avoidance credits while constraining the expansion of higher-integrity but more difficult credit categories. By reframing integrity problems as endogenous to market design rather than as episodic implementation failures, the paper makes a public policy contribution in three ways. First, it explains why repeated reform efforts often fail to produce transformative change. Second, it highlights how governance architecture shapes corporate mitigation behavior and the credibility of climate claims. Third, it identifies actionable reform levers, including time-limited methodology sunset clauses, integrity-indexed registry fees, and coordinated buyer-side demand shifts toward higher-integrity credits. Taken together, the paper argues that improving the VCM requires not only better standards but also institutional reforms capable of disrupting entrenched governance routines.

Author

• Idowu Kunlere, University of Delaware
  Presenting Author