The Offset Retirement Gap: Uncovering the Misalignment Between Supply and Demand in the Voluntary Carbon Market

Carbon credits are issued to offset emissions—but according to CarbonPlan data, only 53.4% issued since 2004 have actually been retired. This striking gap between offset issuance and retirement raises a fundamental question: what drives demand in the voluntary carbon market (VCM)? Addressing this “retirement gap,” in a market shaped by price distortions and strategic behavior, requires a more nuanced proxy for demand. This thesis uses the ratio of issuances to retirements in place of price to analyze how project-level characteristics drive or impede credit utilization. Merging transaction and project-level data from CarbonPlan, this study applies logistic, fixed-effect panel, and beta regression models to analyze how project type, registry affiliation, geography, and vintage influence the likelihood and extent of credit demand by market participants. The findings of these models challenge conventional assumptions about buyer preferences in the VCM (Blasch and Farsi 2014; Chen 2021). Project-level characteristics such as region, technology type, and registry affiliation show statistically significant power in predicting demand patterns, suggesting that these attributes are not consistently prioritized by market participants when credits are retired. However, limited explanatory power indicates that instead of broader structural factors— exogenous economic shocks, policy environments, narrative pressures, and corporate climate attitudes—appear to shape credit utilization more meaningfully. This thesis therefore suggests that the VCM does not function as a straightforward marketplace where project quality alone dictates demand. In doing so, these findings help characterize the persistent mismatch between issuance and retirement and reveal the limitations of using project attributes alone to predict market behavior, ultimately underscoring the need for stronger standards, clearer market signals, and more consistent oversight to ensure carbon offset markets are effective tools for climate mitigation.