Beyond performative transparency: digital technology, governance conditions, and the legitimacy crisis of the Voluntary Carbon Market

Abstract

Faced with a credibility crisis, the Voluntary Carbon Market (VCM) increasingly relies on satellite monitoring, blockchain registries, and digital MRV to strengthen transparency and rebuild trust. This paper questions that approach. Information economics holds that signals distinguish quality only when costly to falsify, but digital verification lowers the cost of producing verifiable records for genuine and fraudulent projects alike, so more transparency does not automatically mean more credibility. The paper argues that trustworthy market signals depend on three governance conditions holding at once, data governance independent of commercial interests, enforceable liability for misreporting, and genuine buyer demand for quality. Using a Most Similar Systems Design (MSSD), it compares the international VCM under the Integrity Council, the EU ETS, and China's relaunched Certified Emission Reduction (CCER) mechanism, with within-case analysis through process tracing. All three cases use comparable digital tools, and in all three the party being verified pays for verification, so technology and payment structure function as controls and the real variation lies in governance conditions. First, the key discretion over how many credits are issued lies in setting the counterfactual, which cannot be directly measured, so improving measurement accuracy does not resolve the core problem. Second, liability constrains this discretion, and its presence shows through whether an auditable ledger exists, that is, whether the gap between what should have been sanctioned and what actually was can be calculated. When the three conditions fail to hold together, more abundant and continuous data still produces performative transparency rather than structural integrity.