LONDON (THOMSON REUTERS FOUNDATION) - Reshaping patchy and largely ineffective carbon offset markets with much tougher standards will be key to helping companies and countries meet a recent avalanche of net-zero emissions commitments, climate finance analysts said on Thursday (July 8).

Offsets could play a major role in protecting nature and biodiversity in tropical countries where they are fast disappearing and could provide an alternative income for those now earning a living from destructive jobs like logging, backers said.

Making offset markets work will be "essential" to holding global warming to 1.5 deg C above pre-industrial times, the more ambitious goal of the Paris Agreement, said Mr Mark Carney, the United Nations' special envoy for climate action and finance.

A task force he set up launched a report at an online event on Thursday, setting out steps to create a "high-integrity voluntary market for the trading of carbon credits", including building strong governance measures to curb greenwashing.

Greenwashing refers to companies putting out misleading claims about environmental practices or performance to seem more sustainable than they really are.

But some green groups warned that expanding offset markets would tempt companies to neglect cutting emissions in their operations, and said planned verification and trading systems could be open to abuse.

They called for laws requiring emissions cuts - rather than relying on voluntary market-based systems - and said caps on the amount of offsetting permitted should be put in place.

"We find offsets are used far more broadly instead of curbing emissions, as this is much cheaper," Mr Frederic Hache, a former investment banker and executive director of the Green Finance Observatory, told a separate event.

Greenpeace International executive director Jennifer Morgan this week called offsetting "one of the most sophisticated, cynical and pervasive forms of greenwashing", saying it was not effectively reducing emissions.

But Mr Andreas Merkl of the Finance for Biodiversity Initiative said a rise in net-zero commitments made a global offset market unavoidable, and what was now crucial was ensuring tough, transparent standards were put in place as it is built.

"There is going to be a carbon market... because you can't get to net zero any other way, so it's important to get this right," he said, calling such markets the "only politically feasible choice" for now.

About 70 per cent of the world's planet-heating emissions are now covered by commitments to reach net zero by the mid-century, as companies and countries pledge action on climate change.

But eliminating the use of fossil fuels, a change scientists say is crucial to keep the planet liveable, will take time.

Many companies want to buy offsets to meet their short-term climate goals and to compensate for emissions reductions they will struggle to achieve even in the long term.

Those offsets might include investments in emissions-curbing projects such as protecting tropical forests, restoring degraded land, reducing greenhouse gases from agriculture or sucking carbon dioxide from the air with technology.

About 90 per cent of the carbon offsetting projects would be in the developing world, with richer countries buying most of the credits, channelling needed cash to poorer nations, said Mr Carney, a former Bank of England and Bank of Canada governor.

Mr Agustin Silvani, head of conservation finance at environmental group Conservation International, said such investment could produce "a revolution" in how people in nature-rich places earn a living, instead of by logging or other destructive practices.

But attempts at such offset markets over the last 30 years have largely failed, critics say, with emissions reductions from projects often hard to measure, not long-lived or simply not happening at all.

Mr Bill Winters, chief executive of Standard Chartered Bank and chair of Mr Carney's task force on scaling up carbon markets, said efforts to revitalise the markets must address the "inadequacies" that have held them back.

In particular, he and others said, those who could profit from the markets should not sit on the bodies running them. They called for strong mechanisms to verify emissions reductions, compare projects and ensure they would not have happened anyway.

Mr Merkl of the Finance for Biodiversity Initiative said for new offset markets to be credible, they also needed transparency, with the public able to see who is selling and buying credits and at what price, as well as a way to deal with grievances.

Without those, "everything else fails", he said.

"Offsets are not inherently good or evil. They are a tool to get to net zero (and) it's a tool that's only as good as the design," he added.

The task force said earlier this year that the carbon offset market would need to grow at least fifteenfold to meet the Paris accord goals and could be worth US$5 billion to US$50 billion (S$6.77 to S$67.7 billion) by 2030.

Four global banks said this week they will next month launch a pilot platform to buy and sell voluntary carbon credits, the latest sign of growing interest in the carbon offset market.