Off with the Offset: The Reshaping of Voluntary Carbon Market Post-Paris Agreement

Abstract: The 2015 Paris Agreement presented a fundamental disruption to the fabric of international carbon markets, while at the same time it has been increasing voluntary demand for carbon credits. As a result, voluntary carbon market (VCM) actors, particularly those producing and distributing carbon credits, are facing an intriguing dilemma. They are faced with increasing public scrutiny regarding the legitimacy of the carbon credits they produce and distribute, while at the same time are demanded to produce and distribute more carbon credits than ever. This thesis therefore aims to investigate the market reshaping processes that are taking place within Sweden's VCM amidst changes brought forth by the Paris Agreement. To accomplish this, a qualitative study using semi-structured interviews with a purposive sampling approach was conducted to capture an aggregate understanding of how the supply-side actors are making sense of the market. The researchers then interpreted and analyzed the data to identify the market-shaping processes happening in VCM by synthesizing social emergence theory and institutional work paradigm as the main theoretical framework. The findings suggest that the Paris Agreement has disrupted VCM's mature market state, where norms and mainstream solutions that were set in the past have been negotiated, contested, and contradicted, and new rules and processes are being developed. This thesis argues that VCM has entered an emerging state, where market actors are establishing their unique selling propositions, testing the feasibility of their solutions, and advocating for new dominant market norms. Particularly, two streams of competing market norms were observed: 1) aligning voluntary carbon offsetting practices to fit the Paris Agreement framework, and; 2) moving away from carbon offsetting toward a new voluntary market mechanism that rewards climate action. This thesis extends the limited but growing academic literature on VCM as separate from the compliance carbon market, particularly from the perspective of supply-side market actors, and the market work undertaken in VCM. It also yields valuable insights into the changing landscape of VCM and provides practical implications for market actors in the competitive environment of VCM in Sweden.