Hong Kong is quickly becoming a hub for the global carbon market, the UN-endorsed mechanism to drive funding toward on-the-ground climate action. The Hong Kong Green Finance Association has led the charge in mobilising public and private actors to drive finance towards sustainability outcomes. And the Hong Kong Exchanges and Clearing’s new Core Climate exchange platform is a perfect example of the infrastructure needed to match sellers and producers of carbon credits in the carbon market. Carbon credits are an important part of the world’s decarbonisation journey as they help to fund carbon-capturing activities like reforestation, installation of renewable energy in developing countries, and the capture of methane from mining and industry. The carbon credit market is maturing quickly, and scrutiny and care are important to ensure integrity and certainty in the processes and projects that underlie it. In January, the UK newspaper The Guardian published an article claiming that 94 per cent of REDD+ credits (a type of offset that rewards forest owners for conserving, instead of cutting, their forests) do not represent genuine carbon emission reductions. The findings are based on the way Verra, the leading registry for certifying carbon credits, certifies projects. The article hangs its hat on one peer-reviewed study that evaluated the strength (or weakness) of each project’s baseline, or, in other words, how much deforestation would have taken place if the project never existed, which despite even the most rigorous and conservative methods, is an academic exercise. The ratings agency Sylvera, which deploys Lidar, or laser scanning technology to scrutinise the quality of carbon credit projects (essentially the Moody’s of the carbon world) says the picture is not nearly so bleak. According to Sylvera’s “State of Carbon Credits” 2022 report , published last November, 31 per cent of credits are high quality, 44 per cent are of mixed quality, and 25 per cent are low. Critics of a market-based approach to managing carbon, including The Guardian and organisations like Greenpeace and Carbon Market Watch, are working hard to discredit carbon credits in just about any way they can. This includes attacking projects on technical grounds (i.e. how they calculate baseline figures, additionality and leakage, in an effort to say that projects are issuing “phantom credits”) with overstated claims. But what really motivates carbon market critics is corporate greenwashing . They believe that purchasing carbon credits allows companies to say they’re working towards carbon neutrality without actually lowering their emissions. This isn’t the reality, though, as over 4,500 corporations worldwide have registered their specific decarbonisation plans and pledges. All of them have detailed their path to lowering their own emissions as quickly as possible, only using credits in the near and medium term to bring their carbon balance to net zero until clean energy sources become more pervasive. Voluntarily putting carbon liability onto the business balance sheet is a big, unprecedented step for the corporate world, the importance of which can’t be overstated. Pricing carbon embraces a market solution that is core to the energy transition. And despite their limitations, carbon credits are currently the most efficient and effective way to get large sums of climate finance from developed countries to the communities on the front lines of combating tropical deforestation. This is critical for the local communities, indigenous groups and other vulnerable populations who live in and around forests in the developing world. These forests are already threatened, and enormous volumes of carbon are being emitted through a host of activities from illegal mining and logging to cattle ranching, the cultivation of illicit crops and unchecked expansion of palm and soy plantations. As a result of these projects, many communities are seeing investments in healthcare and education from carbon revenues. Another study cited by The Guardian actually states that REDD+ projects are holding the line against deforestation – in other words, where carbon credits finance payments to forest owners, little deforestation occurs. Finally, considering the very modest advances in international climate negotiations, lack of political will and leadership from key countries and the alarming scientific reports from the UN, public climate funding efforts have been abysmal. And they will most likely not increase substantially any time soon given the global geopolitical context . The “breakthrough agreement” from COP27 in Sharm el-Sheikh, Egypt to establish a loss and damage fund for vulnerable countries is a noble gesture. However, until proven otherwise, it’s only a gesture and from the same actors who have never fulfilled their climate commitments. COP27 loss and damage deal: throwing money at climate change is not enough Other promising mechanisms, such as the Green Climate Fund, require a three-year “readiness” period before countries can even apply for funding. We don’t have this much time – we lose 10 million hectares (roughly the size of Portugal) every year. Now is the time to secure these forests. Carbon credits that preserve forests, accelerate the clean energy transition and capture and store carbon are an important part of the suite of net-zero solutions. After decades of failure to mobilise adequate climate finance, it is imperative that governments, NGOs, civil society and the private sector take an all-hands-on-deck approach and work together in good faith to take action on climate change. As for Hong Kong, it is ideally situated to provide the finance expertise and connection to China to build the future carbon marketplace. Charles Bedford is an adjunct professor at Hong Kong University of Science and Technology teaching climate finance