April 20, 2026 · On March 10, 2026, the Department of Environment and Natural Resources (DENR) signed a readiness roadmap signalling the Philippines’ intent to enter the voluntary forest carbon market, joining other Southeast Asian nations pursuing the same goal.
Carbon markets are widely viewed as a cost-effective way to finance biodiversity conservation. However, a new study published in Nature Reviews Biodiversity reveals that fundamental design flaws still prevent carbon markets from effectively protecting biodiversity and ecological systems. This study is the latest in a growing body of research that highlights the challenges and failures of carbon markets across the world.
The big picture
The Philippines plans to enter the voluntary forest carbon market, which will provide monetary incentive for nature-based initiatives and allow companies and individuals to offset their carbon emissions.
Carbon markets involve the trading or selling of carbon credits generated by activities that reduce greenhouse gas emissions. There are two major types of carbon markets: compliance and voluntary. Compliance carbon markets are heavily regulated by law; the world’s first and largest, the EU Emissions Trading System (EU ETS), has been operating since 2005 and reduces approximately 40% of the European Union’s total greenhouse gas emissions.
Voluntary carbon markets (VCMs) are less regulated, as companies and individuals may choose whether to participate.
In a voluntary forest carbon market, the carbon credits are widely issued based on the Reducing Emissions from Deforestation and Forest Degradation (REDD+) framework. However, REDD+ is a recommended framework; not a verifier. This means that most reforestation projects that provide carbon credits for companies looking to offset emissions are not necessarily vetted by a particular institution. Instead, the standards are dictated by national policies.
A paper published by the Carbon Knowledge Hub suggests that there is “strong interest in Southeast Asia’s nature-based carbon credits, particularly from international buyers,” but the region has yet to maximize this potential.
So what?
Despite the promise of reducing emissions, it is important to acknowledge that voluntary carbon markets are susceptible to failure mainly due to the lack of regulation.
A study by the Sasin School of Management in Bangkok, Thailand, identifies a lack of transparency as one of the main reasons for VCM failure. There is difficulty in assessing the “legitimacy of claimed emission reductions,” as well as a lack of consistency in the certification of these emission reductions, which makes it easy to manipulate emissions savings for financial gain.
As the Philippine roadmap specifies investment in forest carbon, it is also necessary to consider the environmental and social impact. The study by Nature explores the negative effects of carbon markets on the environment and biodiversity. Researchers attribute this to contradictory mechanisms, which support carbon markets but are “often not well aligned with the ecological requirements of biodiversity conservation.”
Additionally, in areas where land tenure is weak, it is easy for companies and individuals to resort to “green land grabbing,” which threatens the livelihood and rights of indigenous people, local communities.
What now?
Carbon projects already exist in the Philippines, even without a market in place: In 2023, the Philippines generated its first verified nature-based carbon credits with the MinTrees project, led by Kennemer Eco Solutions in Mindanao. Farmers were encouraged to plant cacao under the shade of trees to combat increased temperatures and increase biodiversity; in turn, they would receive financial benefits through generated carbon credits.
A year later, ecoCarbon Capital began Project Caraga, a joint nature-based initiative between the Philippines and Singapore to generate carbon credits through the restoration of tropical rainforests and promotion of sustainable land management in Caraga Region. The project prioritizes the involvement of indigenous communities, “ensuring their rights and enhancing [their] socio-economic conditions.”
While it seems like a path has been laid out, there is still a lot of work to be done to ensure that Philippine voluntary carbon markets meet and maintain high-quality standards. The lack of a clear national policy for carbon markets remains one of the biggest challenges. This contributes to data gaps on ongoing carbon credit initiatives: who is involved, and what existing agreements are in place.
“Right now, we are trying to come up with a system. As we develop the MRV, we would also like to develop our database for all these projects,” said DENR Undersecretary Annaliza Teh at the inaugural Philippine Decarbonization Forum. (Read: Notes from the Philippine Decarbonization Forum: ‘Credible climate action requires credible data’)
It also remains to be seen how the current roadmap, which includes the Indigenous Peoples’ Rights Act (IPRA of 1997), will exactly be implemented to protect the rights of local indigenous groups. On top of creating a legal framework for defining carbon rights, the DENR also intends to establish a benefit-sharing mechanism that works within existing laws, rules, and regulations rather than following international standards. (Read: DENR, SEC, business leaders weigh in on carbon market readiness)
Finally, there is the need to harmonize carbon frameworks and cooperation between ASEAN countries to unlock better financing. (Read: ASEAN needs to harmonize its carbon frameworks. Where do we begin?)
Dig Deeper:
Challenges in Forest Carbon Governance: Insights From Southeast Asia
Enabling Conditions in The Philippines
Philippines Weighs High-Stakes Carbon Pricing and Common Market Pitfalls
UNDP report on the Philippines’ Roadmap to Readiness
