The market for voluntary carbon credits has been on a roll.

In 2021, it grew to $2 billion, quadrupling in a year. Boston Consulting Group, a management consulting firm, expects it to be worth somewhere between $10 billion and $40 billion by 2030. Carbon credits offer an easy way for businesses to amp up their green credentials and funnel much-needed finance into environmental projects, often in developing nations.

But prices and volume have fallen since the start of the year. Nature-based carbon offsets are now trading at $1.84, having fallen 60% since the start of the year. A tough macroeconomic environment has been blamed, as well as increased public and media scrutiny.

The market has an inherent flaw: Carbon credits are being traded as commodities. Instead of building trust and helping scale emission offset and removal projects, this approach is having the opposite effect and enabling poor quality credits to tarnish the market.

Let me explain. In the commodities market, a ton of coffee might get traded, swapped and traded some more, but at the end of the value chain, someone takes delivery of that ton of coffee. That holds true for everything from oranges to wheat and oil. Scammers will eventually be caught out because someone will ultimately notice a missing barrel or bushel, or discover rocks painted to look like copper.

But a carbon credit representing a ton of carbon dioxide equivalent, or CO2e ¡ª the ¡°e¡± stands for equivalent, signaling it¡¯s a measure of all greenhouse gases ¡ª either not emitted or drawn down from the atmosphere and stored permanently, is never physically settled. Instead, buyers have to trust that the supplier tells the truth and is adequately monitoring their project.

There¡¯s another problem: Treated as commodities, all carbon credits are also equal and fungible. A ton is a ton is a ton. ¡°In reality, that couldn¡¯t be further from the truth,¡± Niklas Kaskeala, chairman of Compensate, a nonprofit foundation doing advocacy work to reform the carbon market, tells me. The quality of carbon offsets varies immensely, arising both from the project type ¡ª removal or avoidance, afforestation or providing clean cookstoves ¡ª and the way individual projects are managed. There are multiple risks:

Because the market is unregulated and completely voluntary, it¡¯s been able to get away with a lack of scrutiny. That¡¯s starting to change. The Integrity Council for the Voluntary Carbon Market, an independent regulator, has published its Core Carbon Principles benchmark, a set of 10 standards defining high-quality credits.

The ICVCM won¡¯t be assessing individual projects for how they align with the principles and associated assessment framework; instead, it will examine the integrity of the carbon-crediting programs and the different...