MOTHER CARBON

MOTHER InsightsPerspectives

MOTHER Perspectives · No. 001 ·

The missing bridge: ex post crediting and the pre-issuance financing gap in carbon markets

AbstractCarbon credits are issued after mitigation outcomes are verified, whereas the projects that generate them incur most of their costs beforehand. This Perspective examines the resulting temporal mismatch, reviews evidence on delivery and integrity outcomes, and considers the conditions under which pre-issuance finance may be extended without compromising the integrity of issued credits.

Keywords carbon credits; ex post issuance; pre-issuance finance; offtake; carbon dioxide removal; CORSIA

Prepared by MOTHER Carbon Research · Perspective · Seven sections, seven figures

A bridge across a river at night, built out from both banks but missing its middle span. On one bank, trees, a small plant and a crate marked 1 t. On the other, credit certificates and a building.1 t

On this page

  1. Introduction
  2. The temporal mismatch
  3. Delivery risk
  4. Integrity risk
  5. Public and regulatory instruments
  6. Objections to pre-issuance finance
  7. Conclusion

Section 1: Introduction

In most crediting systems, a carbon credit is an ex post instrument. It certifies that a reduction or removal of one tonne of carbon dioxide equivalent has occurred under an approved methodology and has been verified within a crediting system. The expenditure that produces such an outcome, however, is typically incurred before it.

Land tenure must be secured, equipment procured, facilities constructed and personnel retained. Biological, industrial or engineered processes must then operate for long enough to generate verifiable outcomes.

This Perspective examines the consequences of that sequencing. It argues that the market’s principal instrument recognises outcomes after they occur, whereas the activities that produce them require capital beforehand, and that financing arrangements designed to bridge this mismatch must be assessed against both delivery risk and integrity risk.

Section 2: The temporal mismatch

In an analysis of 5,138 projects, the World Federation of Exchanges reports a mean lag of 2.45 years between credit vintage and issuance (WFE 2025; Figure 1). This lag is additional to the development period preceding the first monitored outcome.

Figure 1. Sequence of expenditure, mitigation and issuance

  1. DevelopmentExpenditureLand, equipment, personnel
  2. OperationMitigationReduction or removal
  3. CreditingIssuanceAfter verification
2.45 years mean lag, vintage to issuance
Note: volume-weighted mean lag from credit vintage year to issuance year across 5,138 projects; excludes the development period. Source: WFE (2025).

Forward demand is nonetheless considerable. MSCI records approximately US$12.3 billion in offtake agreements in 2025, exceeding investment of US$9.7 billion for the first time. Of the combined US$22.0 billion, approximately US$15.6 billion represented committed capital not yet deployed, and debt financing is characterised as not yet having reached scale (MSCI 2026; Figure 2).

These figures indicate a constraint: an agreement to purchase future credits does not, of itself, provide the capital required for construction. Unless it is accompanied by prepayment, or can be used to secure lending, an offtake contract may leave the project’s financing requirement during construction unaddressed.

Figure 2. Carbon-market investment and offtake, 2025

US$ billion

  • Investment and offtake combined22.0
  • Offtake agreements12.3
  • Investment9.7
  • Of the combined total: committed, not yet deployed15.6
Note: the committed figure is a status within the combined total, not an additional sum; the executive summary of the same report gives US$13.5 billion for this category. Source: MSCI (2026).

Section 3: Delivery risk

Early-stage projects may cease before delivering contracted volumes. Running Tide, an ocean-based carbon removal company with contracted corporate purchasers, announced its closure in June 2024; its chief executive cited insufficient demand to support large-scale removal (Trellis 2024). The case illustrates the exposure of early-stage pathways when demand, financing and technical development do not progress in step.

In other cases, early reported output differs substantially from stated design capacity. The Mammoth direct air capture facility in Iceland has a stated design capacity of up to 36,000 tonnes per year (Puro.earth n.d.). Registry data indicated 105 tonnes removed as of May 2025 (QCI 2025); the operator subsequently reported 675 tonnes removed in the first half of 2026 (Bloomberg 2026; Figure 3).

Figure 3. Stated design capacity and reported output, Mammoth facility, Iceland

Each square represents 100 tonnes; the full grid represents 18,000 tonnes.

675 tonnes reported removed, January to June 2026

Earlier observation 105 tonnes as of May 2025, according to registry data.

Note: the grid represents half of stated annual capture capacity (36,000 tonnes). Design capacity, capture and net removal are distinct measures and are not directly comparable. Sources: Puro.earth; QCI (2025); Bloomberg (2026).

Early operating performance is an imperfect guide to lifetime output, and the reported trajectory is one of improvement. Nameplate capacity should not, however, be treated as delivered removal.

As of 6 November 2026, approximately 50.6 million tonnes of durable carbon removal had been contracted and 1.7 million tonnes delivered (CDR.fyi 2026; Figure 4).

Figure 4. Durable carbon removal: contracted and delivered volumes

Each box represents 1 per cent of cumulative contracted volume.

1.7 million tonnes delivered

50.6 million tonnes contracted

Note: cumulative figures as of 6 November 2026; contracted volumes span multiple delivery years. Source: CDR.fyi (2026).

The difference represents a delivery pipeline with staggered contractual dates and does not, in itself, indicate that outstanding volumes will not be delivered. It does indicate that contracted and delivered quantities should be reported and assessed separately.

Section 4: Integrity risk

A second category of risk arises where outcomes are credited without adequate evidence. In a systematic assessment of 2,346 projects across selected methodologies, representing approximately one billion credits, Probst et al. estimate that fewer than 16 per cent of the credits examined correspond to real emission reductions, with substantial variation by project type (Probst et al. 2024; Figure 5).

Figure 5. Estimated share of claimed reductions realised, by project type

Per cent of credited reductions

  • HFC-23 destruction68%
  • Avoided deforestation25%
  • SF6 destruction16%
  • Improved cookstoves11%

<16% pooled, 2,346 projects

Note: synthesis of 14 studies covering selected methodologies and approximately one billion credits. Vertical mark indicates 16 per cent. Source: Probst et al. (2024).

These findings pertain to the methodologies assessed and should not be generalised to all crediting approaches. They do, however, indicate the potential magnitude of divergence between credited and realised outcomes. At the level of an individual project, Verra’s review of the Kariba REDD+ project in Zimbabwe identified approximately 15.2 million excess credits, of which more than 10.3 million had already been retired (Verra 2025).

The two categories of risk carry distinct environmental consequences. A project that does not proceed for want of finance forgoes its intended mitigation. A project credited beyond its demonstrated outcome records mitigation that has not occurred. Neither is resolved by increasing the volume of capital alone.

Section 5: Public and regulatory instruments

Public finance has, in certain cases, assumed a substantial share of project cost and risk. The Brevik carbon capture project in Norway forms part of the Longship programme, towards which the Norwegian state committed approximately NOK 22 billion of an estimated NOK 34 billion, including ten years of operation, (Government of Norway 2025).

Compliance demand presents a complementary case. Under the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), aeroplane operators require eligible emissions units whose supply depends on host-country authorisation. The International Air Transport Association estimates demand exceeding 200 million units for the 2024 to 2026 compliance period, against approximately 72 million units covered by authorisations as of August 2026 (IATA 2026; Figure 6).

Figure 6. CORSIA First Phase: estimated demand and authorised supply of eligible units

Million units

Note: industry association estimates. Source: IATA (2026).

Regulation may thus establish demand without establishing the authorised supply required to meet it; these data do not show whether financing constraints contribute to the shortfall.

Section 6: Objections to pre-issuance finance

A common objection to financing projects before delivery has substance. Advance capital exposes lenders and purchasers to technological failure, counterparty weakness, measurement error and, in some instances, misrepresentation.

It does not follow that projects must be self-financed until outcomes are verified. Infrastructure is routinely financed before it produces the output for which it is built. Lenders assess contracts, construction and operating risk, security, repayment capacity and downside scenarios; guarantees, insurance, public support and structured obligations allocate risks that cannot be eliminated.

There is no evident reason why carbon projects should be exempt from that discipline, or excluded from it on the ground that their output is denominated in tonnes rather than in electricity, materials or transport capacity. The relevant distinction is between the credit and its financing. A credit should represent an outcome that satisfies applicable verification requirements; financing may precede that outcome, provided its risks are identified and allocated to parties able to bear them.

Section 7: Conclusion

Much of the debate in carbon markets has concentrated on whether a credited tonne is real. Less attention has been given to how the activity responsible for that tonne is financed through to delivery. The two questions are interdependent.

One implication concerns disclosure. Project documentation, and the capital commitments associated with it, may usefully distinguish three categories: outcomes measured and verified; outcomes estimated through models and counterfactual baselines; and outcomes that remain contractual undertakings (Figure 7).

Figure 7. A three-part evidentiary classification
MeasuredOutcomes quantified and verified ex post
ModelledCounterfactual baselines and projections
CommittedContractual undertakings not yet performed

Such a classification could allow financing decisions to reflect physical progress while reducing the risk that prospective outcomes are represented as completed mitigation.

For any project, the relevant questions are what has been measured, what has been modelled and what remains committed but undelivered.

MOTHER Carbon. Fostering Earth.

A venture of aeons labs.

MOTHER does not provide, arrange or recommend financing, and takes no investment or credit view on the companies or projects discussed.

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