Carbon markets have expanded rapidly, yet they still lack much of the transparency, comparability and price-discovery infrastructure associated with mature financial markets. Concerns over credit quality remain common, and many financial institutions remain cautious.
This challenge is especially significant in Asia-Pacific. Emerging carbon markets are developing alongside industrial decarbonisation projects in an export-oriented manufacturing economy increasingly exposed to cross-border carbon requirements.
These limitations are often attributed to inconsistent standards, insufficient liquidity or the early stage of market development. Those factors matter, but they do not address a more fundamental constraint: how carbon data is generated, governed and verified.
Carbon markets are financialising environmental outcomes faster than the supporting data infrastructure is being built. Yet much of the evidence beneath carbon credits is still produced through systems designed for periodic compliance reporting and project certification.
The question is not only whether a credit complies with a methodology. It is whether the supporting data can provide the trust required when an environmental claim becomes a tradable, investable or finance-linked asset.
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The question is not only whether a credit complies with a methodology. It is whether the supporting data can provide the trust required when an environmental claim becomes a tradable, investable or finance-linked asset.
From traditional MRV to financial-grade MRV
Measurement, reporting and verification (MRV) systems determine how emission reductions and removals are quantified and converted into environmental claims or credits. Traditional MRV was designed for regulatory reporting and periodic project certification. That design becomes limiting when credits are expected to behave like financial assets.
Established financial markets continuously record ownership and transactions, supported by standardised disclosure and reconciliation. Carbon markets increasingly adopt this transaction layer, but the evidence beneath many credits remains periodic and document-based.
The underlying mitigation activity may continue throughout the year, while the supporting evidence is assembled months later through monitoring reports and periodic verification. Between verification cycles, buyers and investors may have limited visibility into whether the activity is continuing, how conditions have changed and where risks may be emerging.
This creates a structural mismatch: carbon credits are expected to function as financial assets, while the systems generating the evidence remain largely compliance-oriented.
Financial-grade MRV does not mean that every data point must be independently verified in real time. It means that the data architecture can provide continuity, standardisation, traceability, auditability and risk visibility when environmental outcomes support commercial or financial use.
Standards bodies are beginning to digitise methodologies, submissions and verification workflows. These developments can improve efficiency, but they do not by themselves govern how evidence is generated, corrected and controlled before entering a methodology or registry process.
Getting to finance-grade MRV takes more than turning paper forms into digital ones. Carbon data needs to be handled like a tracked asset, with a clear record of where it came from, what changed, and how the final claim was calculated.
Carbon markets cannot be more trustworthy than the real-world data behind them.
Discussions about carbon markets often focus on methodologies, registries, issuance and trading platforms. These are important, but these are just the final steps that sit downstream of the activities that generate environmental outcomes.
What really matters is what happened first in the world: an industrial process became less carbon-intensive, methane was captured, a forest was protected, or carbon was removed and stored.
Consider a biomass-based steam project in Asia-Pacific, where renewable heat displaces fossil-fuel-based steam generation at an industrial facility. The credibility of the claimed reduction depends not only on the reported volume of steam, but on the relationship among biomass characteristics, fuel displacement, plant output, operating hours, meter performance and the applicable methodology.
A change in biomass moisture, boiler efficiency, production load or meter performance can alter the emissions outcome even when reported steam output appears unchanged.
The same principle applies across project types: the credibility of a claim depends on how accurately the underlying activity or environmental change is measured and translated into a quantified reduction or removal.
A registry can record the issuance, transfer and retirement of a credit. It cannot determine by itself whether the supporting data is complete, accurate and representative of the underlying project activity and environmental outcome.
Trust in carbon markets begins upstream – at the point where the underlying data is collected, governed and checked, not just where the credit is issued or traded.
The missing data layer
A practical MRV infrastructure must collect source data, organise and check it, track changes, connect source records to reported outcomes, and allow governed data to be reused across applications.
Sensors and digital systems can support this process, but the foundation is clear data governance: common standards, quality controls and defined responsibilities.
Our peer-reviewed research proposes one possible architecture using IoT, scalable data processing and blockchain-based integrity controls.
The figure below presents a simplified view of how real-world data can be managed, checked, and then used in environmental and financial applications.
A layered MRV data infrastructure connecting real-world evidence with data governance, assurance and cross-organisational applications. Source: Authors, drawing on Ding and Lu (2026).
For a manufacturer in Asia-Pacific, much of the same operational data may be required for product carbon footprints, customer reporting requirements, carbon-credit development and Carbon Border Adjustment Mechanism (CBAM) reporting.
If each of these uses depends on a separate spreadsheet or process, companies duplicate work and risk producing inconsistent claims from the same underlying activity.
Tokenised climate assets still need trustworthy data behind them
Blockchain can preserve records and help track transactions, but it cannot determine whether the original data was correct. For tokenised climate assets, trust has to go beyond the token itself – from the token to the claim, from the claim to the calculation, and from the calculation back to the real-world activity.
Tokenising a climate asset without reliable MRV merely creates a digital representation without necessarily strengthening the evidence behind it.
Frameworks and requirements like CBAM, product-level carbon reporting, supply chain traceability and Article 6 are raising expectations for data quality and transparency. MRV is becoming part of the system that connects real-world environmental action to markets and finance.
In the end, stronger carbon markets will depend not just on how many credits are issued, but on how trustworthy the data behind them is.
Yuan Lu is Chief Scientist at Foote Technology Ltd. and a Professor at Changzhou University. His work focuses on industrial decarbonisation, digital MRV, carbon data governance and environmental markets.
Jingyuan Ding is CEO at Foote Technology Ltd. and works on digital infrastructure for environmental data and assets.
Lu and Ding are co-authors of peer-reviewed research on decentralised MRV and carbon data governance.
The authors are affiliated with Foote Technology Ltd., which develops digital MRV and environmental data infrastructure. The views expressed in this article are their own and do not necessarily represent those of Changzhou University.
