Editor’s note: This is the last post in the five-part series, ‘Market instruments explained’, where we examine the prospects and risks of market instruments in corporate emissions accounting. In the series, we cover key debates around chain-of-custody models, commodity certificates, multi-statement GHG inventories and transition targets. By bringing together perspectives from standard-setters, companies and civil society, we aim to bring more clarity to this complex but increasingly central topic.

Market-based instruments (MBIs) are becoming increasingly important in corporate climate strategies. The term covers a diverse set of tools, including commodity certificates, energy attribute certificates and contractual purchasing arrangements, that use market and pricing mechanisms to help companies address climate-related challenges. In some cases, these instruments may help channel finance to lower-emissions production, create demand signals for key sectoral transitions and enable companies to account for interventions that are difficult to recognise through conventional physical inventories alone.

However, the potential value of these instruments depends fundamentally on how they are designed, governed and used. Without robust guardrails, they risk creating misleading impressions of progress, weakening incentives for direct value chain decarbonisation and supporting incremental measures that delay the deployment of genuinely transformative technologies. 

The critical question is therefore not whether MBIs should be accepted in principle, but under what conditions they can credibly contribute to real-world decarbonisation.

Across our five-part blog series 'Market Instruments Explained', we have explored the opportunities and risks associated with different types of MBIs in corporate GHG accounting. The following key findings and recommendations aim to support a more nuanced and constructive debate on their role in corporate GHG inventories and target-setting frameworks.

Key takeaways

• The nuances matter to avoid polarised debates: Discussions on the eligibility and conditions for using market-based instruments must consider the differences between approaches and cannot be generalised. For example, debates about whether ‘credit mass balance’ or ‘book-and-claim’ should be included in any, particularly GHG reporting statement or target-setting approach, are likely to become polarised and lead to poor outcomes, since these umbrella terms refer to a family of very different approaches. 
• The ISO categorisations of mass balance do not provide sufficient nuance: The two types of mass balance outlined by ISO 22095-2:2026, the ‘rolling average percentage method’ and the ‘credit mass balance model’, remain umbrella terms that could include a very wide number of different approaches. 
• Book-and-claim has a legitimate role, but its credibility depends on why it is being used: Book-and-claim is not simply a weaker version of mass balance; it serves a distinct function where physical traceability is infeasible or where low-carbon technologies are not yet physically accessible to buyers. Positioning it as inherently less credible because it lacks physical connectivity overlooks its distinct role and could legitimise weaker mass balance approaches. The credibility of book-and-claim depends on why it is being used. Different use cases, such as addressing traceability constraints or supporting the scale-up of emerging technologies, may require different rules and safeguards. Without this differentiation, book-and-claim can mislead stakeholders about progress, reduce incentives for direct supply chain transformation and create serious risks of double counting and misattribution
• Robust governance and controlled application matters for scaling up the use of MBIs. While MBIs may offer promising potential to address legitimate challenges in some parts of the economy, their governance is inherently complex. The more these systems expand across different commodities, technologies and use cases, the harder it becomes to ensure consistent rules, robust oversight and credible claims. There is a risk of becoming overly optimistic about their theoretical potential without sufficient attention to the practical difficulties of governing them at scale. 
• MBIs can be highly relevant for non-GHG transition indicators: Non-GHG transition indicators provide more tangible and decision-useful ways of assessing whether companies are progressing on the real sectoral transitions required for net zero. While much of the debate focuses on how MBIs could be used within companies’ GHG inventories, market instruments can also be integrated into non-GHG transition indicators, and this may be a more transparent way to use some instruments.

Recommendations

• The GHG Protocol is well placed to develop a standardised framework for sufficiently nuanced terminology. To determine the appropriate use of mass balance in GHG accounting, standard setters need to use more specific terminology that differentiates between distinct system design options. GHG Protocol Action and Market Instruments working group could provide a standardised framework for more specific terminology on various MBI approaches and principles for their use.
• The GHG Protocol, SBTi and ISO should root the rules for using different MBIs in specific contexts. The credibility of using MBIs depends heavily  on the use case and context. For book-and-claim in particular, different use cases may require different safeguards to substantiate that rationale. This may be better determined through sector-level guidance. This inevitably requires prioritisation and recognition that market-based instruments can only be effectively governed for a handful of the most important use cases initially, rather than across hundreds of commodities and emission sources.
• The GHG Protocol, SBTi and ISO should define a narrow set of applications for a controlled scale-up of MBIs. The trade-offs between potential benefits and integrity risks need to be assessed carefully. Rather than opening the door to a proliferation of certification schemes across a wide range of commodities, a more controlled approach may be to begin with a narrowly defined set of applications that are most relevant for real-economy decarbonisation and where the case for impact is strongest. A more selective approach would make it easier to develop appropriate guardrails, test governance arrangements and avoid creating a fragmented landscape of claims that cannot be effectively overseen.
• The GHG Protocol has a critical role to standardise and mainstream the use of non-GHG transition indicators, including the use of MBIs. In a multi-statement GHG report (see section 4), non-GHG transition indicators should be prioritised as a mandatory reporting element alongside the physical inventory. Arguments that non-GHG indicators lie outside the GHG Protocol’s scope reflect a narrow and outdated view of its purpose. Given the limitations of traditional GHG inventories in capturing the full climate impact of corporate actions, expanding the framework to include transition indicators represents a necessary evolution to fulfil its purpose rather than a departure. While transition indicators are inherently sector-specific, the GHG Protocol has a critical role to play in supporting their consistent application. This could include a) defining standardised indicators for key cross-sector commodities (e.g. electricity, major industrial materials); b) establishing criteria for identifying and reporting sector-specific indicators, including thresholds for when companies must disclose them; and c) providing guidance on the appropriate use of market instruments within these indicators.