Insider Brief
- The FII Institute report argues that artificial intelligence can improve the credibility, transparency and effectiveness of global carbon credit markets.
- AI tools can enhance carbon quantification, detect fraud, enable real-time monitoring and support more accurate pricing of carbon credits.
- Despite ongoing challenges including inconsistent regulations and greenwashing concerns, AI adoption could help carbon markets scale and better support corporate net-zero strategies.
Artificial intelligence could help restore credibility to the carbon credit system, according to a new white paper from the Future Investment Initiative (FII) Institute, in collaboration with Aramco and Arthur D. Little (ADL) . The report argues that AI tools can resolve long-standing concerns over carbon market transparency, pricing, and fraud—issues that have hindered the voluntary carbon offset market from reaching its full climate potential.
The paper, titled AI-Enabled Carbon Markets, lays out both the challenges plaguing today’s carbon credit system and a framework for how artificial intelligence could improve the quality and integrity of carbon accounting. With emissions pledges piling up across sectors and carbon offset use on the rise, the institute warns that AI is no longer optional — it’s essential.
The analysts write that AI could make hitting these environmental goals feasible, adding: “It is here that artificial intelligence (AI) emerges as a solution, with the power to boost comprehensiveness, consistency and integrity, possibly unlocking the potential of carbon credits to deliver emissions reduction.”
Market Opportunity, Growing Scrutiny
According to the institute, nearly half of the world’s largest public companies have made net-zero commitments, and 40% of those intend to use carbon credits as part of their strategy. However, the current market is marred by uncertainty and skepticism. Critics have flagged credits that fail to represent actual emissions reductions, accused major buyers of greenwashing, and called out pricing opacity across the board.
At its core, the report positions AI as a trust enabler. It contends that AI can make carbon markets more rigorous and measurable, helping organizations distinguish between high- and low-quality credits, identify fraud and assign prices that reflect real-world emissions impact.
Musaab M. Al Mulla, Aramco Vice President of Market Analysis and Sustainability, said: “We see the voluntary carbon markets as a unique and important lever in supporting a practical and orderly energy transition. However, for the market to reach its considerable potential to mitigate carbon emissions at scale, a number of key challenges will need to be addressed. This white paper showcases AI’s potential role in helping to make carbon markets more transparent and efficient. Integrating AI could support organizations in enhancing the reliability and accountability of their carbon emissions reduction efforts.”
Carlo Stella, Managing Partner and Global Practice Leader for the Sustainability Practice at Arthur D. Little, said: “AI’s role in carbon markets is essential for organizations aiming to achieve meaningful and measurable progress. This white paper highlights AI’s potential to improve accuracy in carbon reduction measures, a critical factor to improve confidence among adopters.”
Four Ways AI Can Help
The FII Institute outlines four major areas where AI could transform carbon credit markets:
1. Carbon Quantification:
AI models can ingest, for example, satellite data, historical land use, climate records and soil quality metrics to estimate the carbon-capturing potential of various projects, according to the report. This can help developers prioritize projects with the best chance of verified success. In agriculture, for example, AI systems are already being used to guide farmers toward practices that sequester carbon and issue tradable credits for verified removals.
2. Transparency:
Remote sensing, machine learning and AI-enhanced monitoring systems can provide real-time updates on carbon sinks such as forests, and detect discrepancies between expected and actual sequestration. Several startups are using AI to benchmark projects and automate emissions reporting, eliminating human error and inconsistent standards. One platform cited in the report aggregates data from more than 16,000 projects to provide live pricing based on performance and project attributes.
3. Integrity:
To prevent fraud, AI can flag inconsistencies between reported emissions and observed data. Some platforms already use AI to validate project claims and highlight suspicious behavior. This could stem the rise of credits based on overstated carbon benefits or inaccurately measured baselines — issues that have undermined market credibility in recent years.
4. Pricing:
Carbon credit prices vary widely, and many are set in opaque, over-the-counter transactions. AI can help buyers and sellers converge on fairer, more accurate valuations by processing historical trade data, economic indicators, and regulatory trends. Several platforms now offer AI-driven market intelligence to support more informed purchasing and pricing decisions.
Market Constraints Persist
Despite these potential benefits, the institute acknowledges that the carbon market remains fragmented, under-regulated and at times unreliable. Compliance schemes like the EU Emissions Trading System have moved away from allowing offsets, while new initiatives in Asia still face limited uptake, the analysts suggest. Meanwhile, concerns over greenwashing continue to surface, especially when high-profile companies are linked to credits that deliver few climate benefits.
The report also notes that projects claiming to protect forests have sometimes coincided with deforestation, and that certification standards vary widely. Certification bodies themselves have come under fire for approving questionable projects. These issues have dampened confidence in the system.
Governments are also complicating the market. Some nations, including Indonesia, are restricting the export of carbon credits to prioritize their own decarbonization goals. Others are changing the rules on which credits count toward national targets. The absence of global regulatory consistency makes cross-border trading difficult and risky.
Still, the regulatory environment may be improving. The FII Institute points to new guardrails such as the Core Carbon Principles issued by the Integrity Council for the Voluntary Carbon Market, and demand-side rules from the Voluntary Carbon Market Integrity Initiative. Together, these efforts aim to improve consistency in how credits are generated, verified and used.
Upcoming corporate disclosure mandates in Europe and under the International Sustainability Standards Board may also push companies to improve how they report carbon offsets, raising the bar for data accuracy and verification.
Strategic Use Cases for Companies
Beyond compliance, the report identifies several ways companies can use carbon credits to generate financial or operational benefits. For instance:
- Companies can buy credits to supplement emissions reduction efforts or offset historic emissions.
- Industrial firms can invest in carbon capture infrastructure and sell excess sequestration as high-quality credits.
- Some organizations are already creating new consumer offerings—such as travel packages bundled with offsets or “green gas” utilities—that use credits to differentiate products.
With incentives like the U.S. Section 45Q tax credit, companies could also earn $60 to $180 per ton of CO2 sequestered, depending on the technology, helping fund carbon capture infrastructure.
AI Alone Is Not Enough
The institute emphasizes that AI is a tool, not a panacea. Carbon markets will only improve if companies follow a broader emissions hierarchy: first preventing emissions, then reducing them, followed by insets (emissions reductions within a company’s supply chain), and finally offsets (external credits). Using AI to clean up the offset step should not distract from the more critical work of real emissions reductions.
Nonetheless, the report concludes that AI’s role is likely to grow, especially as stakeholders demand verifiable, high-integrity emissions data. A more transparent and functional carbon credit market could help close the gap between climate ambition and practical action—if organizations embrace the technologies now becoming available.
The FII Institute paints an optimistic future if carbon markets can mature. By some projections, voluntary carbon trading could grow to $50 billion by 2030. AI could help ensure that growth reflects genuine environmental value rather than speculative hype.
For that to happen, the institute suggests it may be time to establish a permanent global community of professionals focused on AI, carbon markets, and emissions transparency. This coalition would share best practices, build trust in new methods, and help drive the market toward greater accountability.
The analysts write: “Despite well-documented challenges, the outlook is bright; appetite for carbon credits is rising, advancing regulations promise to add rigor and structure, and AI is paving the way for a market that is reliable, ethical and robust. To bring this promising future to life, stakeholders across the value chain must keep up with the pace of technological change. To this end, now could be the time for a permanent community of professionals to take root and share knowledge and best practices as the potential transformative role of AI in carbon markets continues to grow with more practical use cases prevailing and clear outcomes with impact documented.”
Richard Attias, CEO of FII Institute, said: “Our collaboration with Aramco and Arthur D. Little reflects a shared goal of leveraging technology to enhance efficiency. This publication is a vital resource for any organization focused on making credible, impactful advances in carbon emissions reduction through AI-driven carbon markets.”
You can review the report here.
