Default Risk Level from Voluntary Carbon Market—A Simple but Effective Assessment Method

Abstract

Although voluntary carbon offset market is an important solution to the climate crisis, there hides a variety of risks behind it because of lack of global registration system and measurement method. In this paper, we focused on the default risk from the original carbon supplier in voluntary carbon market, and built an evaluation indicator system according to several principles. Then analytic hierarchy process (AHP) and fuzzy comprehensive evaluation technology were used to construct evaluation model to measure default risk level which are simple but effective. Finally, a simulation case proved the evaluation indicator system and model proposed can not only work out the comprehensive risk level but also calculate risk level from different aspects, which is useful for stakeholders to make their decisions in voluntary carbon market.
Key words: Default risk level; Carbon credit trade; Voluntary carbon offset market; Comprehensive evaluation