Former Bank of England governor Mark Carney has thrown his weight behind efforts to create a global carbon offset market, calling it an “imperative” to help reduce emissions.

A new pilot market for voluntary carbon offsets would be up and running within a year, Mr Carney said, and London was a likely location to host the new contract.

Mr Carney, along with Standard Chartered chief executive Bill Winters, recently co-founded the Task Force on Scaling Voluntary Carbon Markets, a private sector initiative backed by more than 40 companies and organisations, which is working on a blueprint for the new market.

“This is a necessary market in the transition to net zero,” Mr Carney told the FT Energy Transition Strategies Summit. “This is an imperative, which is why we are putting so many resources into it.”

He added: “This needs to be a $50-100bn per annum market.”

As the UN special envoy for climate finance, Mr Carney has advocated for policies that will align capital markets with climate change goals, such as more extensive climate risk disclosure for companies.

Demand for carbon offsets is expected to grow as more companies and countries strive to reach their net zero emissions targets, which will require using offsets to compensate for residual emissions they cannot eliminate.

However voluntary carbon offsets have been criticised by some environmental groups, who say the practice encourages ‘greenwashing’ by companies that are not serious about cutting emissions and want to appear to be taking action.

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Previous efforts to create a global system for carbon offsetting have come to an unhappy end. The UN clean development mechanism channelled hundreds of millions of dollars from developed countries to developing countries, often into projects that later turned out to be spurious.

The present voluntary carbon market is small and fragmented, with about $300m in trades a year. “There are issues with verification, and greenwashing potentially, as it stands [in the existing market],” Mr Carney acknowledged.

However, he argued, there was an urgent need for a new, credible global carbon market, one that had a liquid, exchange-traded contract at its core, trading as spot and futures.

That contract would also form the basis for an over-the-counter market that could reflect different types of carbon offsets.

The Task Force on Scaling Voluntary Carbon Markets recently published a report on what the new market might look like, and is gathering feedback as it finalises the blueprint. A pilot trading program is expected ahead of the next UN climate change conference in November in Glasgow next year.

“The demand for this is going to be huge, because we have this big shift. More and more companies — and it will be a tsunami by Glasgow — will have net zero emissions plans,” said Mr Carney.

“They will be looking to reduce emissions . . . but for a period of time, they will also need the ‘net’ in net zero, and they can only get that from a credible global market that needs to be developed.”

Under the 2015 Paris climate accord, most countries have committed to establishing a market mechanism for exchanging carbon credits but have so far been unable to agree on rules for how to do that.

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