What happens if a project fails to achieve the committed emission reduction targets?

Context and importance of complying with emission reduction targets

Under any carbon crediting mechanism, every registered project must include a specific, quantified commitment regarding the volume of greenhouse gas (GHG) emissions it expects to reduce within a defined crediting period. This target is documented in the Project Design Document (PDD) and is subject to the rigorous Measurement, Reporting, and Verification (MRV) process. Failure to achieve these committed targets directly affects the number of carbon credits a project can receive and can have broader consequences on finance, reputation, and the feasibility of future climate initiatives.

Consequences of failing to meet targets

Non-issuance of credits for the shortfall

Carbon credit standards such as The Gold Standard and the Verified Carbon Standard (VCS) operate on an “issuance upon verification” principle. Credits are issued only for verified emission reductions. For example, if a project commits to reducing 10,000 tCO₂ but the verified report shows only 6,000 tCO₂ was achieved, the project will receive 6,000 credits, and the 4,000 tCO₂ shortfall generates no credits.129 130

Loss of credibility with the market and investors

Repeatedly failing to meet projected targets increases perceived risk for investors, credit registries, and potential buyers. This can negatively impact a project’s ability to secure renewal for subsequent crediting periods, enter long-term Emission Reduction Purchase Agreements (ERPAs), or mobilize finance from climate funds or international development organizations.

Mandatory corrective action and reporting

Leading international standards require transparency regarding performance shortfalls. Project owners must clearly state the reasons for underperformance in the monitoring report, update MRV documentation to explain technical or operational factors affecting results, and propose corrective actions for the next monitoring period. In some contractual cases, if a project has an offtake agreement to deliver a specific volume of credits, it may also need to purchase and retire credits from the open market to fulfill its commitment to the buyer.

Illustrative example

A cement plant in Vietnam implements a waste heat recovery project with a target of reducing 50,000 tCO₂ per year. However, unforeseen technical issues cause the system to operate at only 60% of its expected efficiency during the first year. As a result, the actual verified emission reduction is only 30,000 tCO₂, and the project is issued 30,000 carbon credits for that year. The monitoring report must detail the technical failure, explain the reasons behind it, and outline a plan for repairs. If the plant had a contractual obligation to sell 35,000 credits to an investor, it might need to purchase 5,000 credits from the market to cover the shortfall.

Recommendations for SMEs

To mitigate such risks, Small and Medium-sized Enterprises (SMEs) should develop a realistic and detailed implementation and monitoring plan, set conservative and evidence-based emission reduction targets rather than overly ambitious ones, invest in a robust MRV system from the start to enable accurate progress tracking, and include technical and financial contingencies in the project plan to address potential operational risks.

References

129. Gold Standard. (n.d.). Monitoring report. Gold Standard for the Global Goals. https://globalgoals.goldstandard.org/t-perfcert-monitoring-report/
130. Verra. (2025, April 3). VCS Version 4 Archive Rules and Requirements. Verra. https://verra.org/programs/verified-carbon-standard/vcs-version-4-archive-rules-and-requirements/