THE European Union is quietly setting the direction for the future of the carbon markets, with two pieces of regulation clearing big hurdles in recent weeks. Watch closely, because these initiatives will reshape the industry.

Last week (Feb 20), the European Commission and the European Parliament struck a provisional deal to compile rules for certifying carbon-removal credits – the Carbon Removal Certification Framework (CRCF). “This is the first time in history that we have a policy which clearly defines quality carbon removal and seeks to quantify it,” Sebastian Manhart, senior policy advisor at removals marketplace Carbonfuture GmbH, told me. “Other nations will probably copy it.”

Carbon offsets are typically categorised either as avoidance credits – buy this, we won’t cut down this forest – or reduction credits – buy this, we’ll install some solar panels. In recent years, scandals ranging from human rights abuses to overstated climate benefits have raised questions over whether offsets are useful in the climate fight, or whether they just provide cover for corporations and individuals alike to continue their polluting behaviour. The market has shrunk as investors shy away from schemes of dubious quality.