The voluntary carbon market was meant to be a game changer — a $200 billion engine for private climate investment that would help companies offset their emissions while funding crucial environmental projects around the world.
That peak of inflated expectations has given way to a trough of disillusionment.
For three consecutive years, both transaction volumes and market values have plummeted. The total voluntary carbon market value fell 29%, to $535 million in 2024, as corporate buyers grew increasingly wary of purchasing credits that might not deliver the promised environmental benefits. Stories of phantom forests, inflated emission reductions, and projects that existed only on paper spooked the market.
Tom Montag, the Wall Street heavyweight who once ran Bank of America’s trading operations, believes he has a way to march the voluntary carbon markets up the slope of enlightenment, to conjure Gartner’s famous hype cycle one more time. His plan: bring bond market practices to the Wild West of carbon trading.
Montag leads Rubicon Carbon, the carbon credit platform launched with a $300 million commitment from TPG Rise Climate. Rubicon sources credits from projects around the world and bundles them into portfolios, called Rubicon Carbon Tonnes, for buyers seeking high quality offsets.
That diversification, along with a ratings schema, could address growing skepticism around avoidance credits, which make up the majority of available credits. Recent scrutiny over poor transparency and credibility has driven some carbon-avoidance projects prices down below $6 per ton. Rubicon’s portfolios include carbon removals, nature-based avoidance, and industrial avoidance credits — and the package is vetted and risk adjusted by Rubicon’s team.
“We believe in an all-of-the-above approach where high-quality credits are available across all categories, including reduction, avoidance, and removal” Montag told ImpactAlpha.
Rubicon made its debut with one of the largest single-buyer transactions ever, facilitating Microsoft’s purchase in May of 18 million tons of carbon removal credits generated by planting and reestablishing forests and vegetation.
More recently, Rubicon brokered a 100,000-ton sale of nature-based credits to ByteDance, the parent company of TikTok — proof that corporate buyers will engage the voluntary carbon market when they trust the quality of the credits and understand the risks.
Big investors are looking beyond the carbon market’s early challenges, building platforms for what they see as a long-term opportunity as it becomes clear that carbon will have to be removed, as well as avoided, to stave off catastrophic warming.
Earlier this month, La Caisse, the Canadian pension fund formerly called CDPQ, and Australian climate investor CEFC put up $250 million to launch Meldora to purchase and manage agricultural land in Australia that can generate high-quality carbon credits. Rio Tinto signed on as an anchor offtaker for the credits.
In addition to backing Rubicon, TPG Rise engineered the rollup of renewable natural gas company Element Markets and Bluesource, a developer, advisor and seller of nature-based carbon credits, to create Anew, an originator of carbon and environmental credits.
Wall Street playbook
Before Rubicon, Montag spent his career navigating the complexities of Wall Street, rising through the ranks at Goldman Sachs before taking up the helm of Bank of America’s Global Banking & Markets division during its tumultuous post-financial crisis recovery. In 2021, he made a calculated pivot, leaving the familiar world of traditional finance for the uncharted terrain of carbon markets.
It was a bet on what he saw as both a massive opportunity and a sector in desperate need of discipline — the kind Wall Street, for all its flaws, had spent decades perfecting.
The voluntary carbon market’s challenges are well-known. Unlike compliance markets with government oversight, the voluntary market remains largely unregulated, resulting in a proliferation of credits tied to projects that often fail to deliver the promised climate impact.
Montag’s solution centers on two key innovations that borrow heavily from his experience building the financial markets: diversification and credit ratings.
Instead of selling individual carbon credits from single projects — which is the current industry standard — Rubicon Carbon Tonnes include carbon removals, nature-based avoidance, and industrial avoidance credits. To ensure reliability, when projects fall short of their promised carbon reductions, Rubicon will quietly retire additional credits – taking them out of circulation — to make up the difference and ensure buyers receive the environmental impact they paid for.
The company’s newest product, the Rubicon Rated Tonne, goes a step further by featuring the industry’s first rated carbon portfolio. The ratings from BeZero Carbon, a third party carbon credit ratings agency, assess the likelihood a carbon credit will deliver one full ton of CO₂e avoided or removed. Rubicon got an “AAport” rating, suggesting “very high” confidence that each credit will deliver one ton of actual CO₂ avoidance or removal.
Montag says the approach can build buyer confidence and credibility in the market.
“In the financial world, many people say, ‘I’ll only buy a AA bond or a AAA bond,'” Montag said in an interview. “We wanted to bring that same discipline to carbon markets. If we can get buyers more comfortable with that terminology when evaluating carbon credits, we can help develop a real financial market where more people are investing.”
Proof points
The approach appears to be gaining traction. The Microsoft and ByteDance deals prove that major corporations remain willing to engage with carbon markets when they have confidence in product quality and a clear understanding of the risks involved.
“People love removals because the science is more pure — you don’t have to argue as much about counterfactuals,” Montag explained, referring to the often contentious debates over what would have happened without a particular carbon project.
The goal, he said, is to create something resembling the standardized financial products that institutional investors routinely trade:
“We’d love to see a tradable product – like our RRT– that lets people buy AA-rated pools without doing deep diligence on every tonne. That would make the market far more liquid.”
Education challenge
Transforming a market, Montag says, requires more than just better products — it demands changing how people think about carbon credits entirely.
“Most buyers don’t have financial backgrounds; they’re sustainability people. Ratings haven’t necessarily been part of the lexicon they use or how they do things, so part of it is just education – walking potential buyers through what the ratings mean and how our portfolios work.”
The stakes extend beyond market mechanics. Some companies are turning to “insetting” — funding emissions cuts inside their own supply chains through regenerative agriculture projects or lower-carbon materials. While Montag acknowledges these efforts are important, he argues they won’t get companies to net zero fast enough on their own.
“Carbon credits are critical. You can’t efficiently create enough ‘insets’ to cover all scope 3 emissions – maybe someday, but not today.”
His pitch borrows from basic finance: the time value of carbon. Just as money today is worth more than money tomorrow, Montag argues that offsetting emissions today delivers more environmental value than waiting decades for perfect solutions.
“I’ve been pushing this idea of the time value of carbon. If I ask, ‘Do you want $1 today or $1 in 20 years?’ you’d take it today. Investing in carbon credits today is more valuable than waiting until 2050. It compounds over time.”
