What are voluntary carbon markets and why are they important?
The Voluntary Carbon Market (VCM) is a trading system in which businesses, governments, and individuals can buy and sell carbon credits to reduce their greenhouse gas emissions beyond what is required by regulations. Unlike compliance markets where companies must stay within legally set emission caps, participation in the VCM is entirely voluntary.
Reminder: The VCM is not a substitute for reducing a company’s own emissions through decarbonisation measures.
Climate projects that reduce, avoid, or remove CO₂ from the atmosphere generate carbon credits.
Typically, one credit typically equals one tonne of CO₂ kept out of or removed from the atmosphere. Once purchased and retired, a credit cannot be sold or double-counted. These credits are generated by projects that actively reduce, avoid, or sequester greenhouse gases, such as initiatives involving reforestation, methane capture, renewable energy projects or sustainable farming.
Why does this matter?
For corporate leaders, the VCM complements comprehensive decarbonisation strategies by addressing emissions that cannot yet be eliminated operationally, while supporting verified climate projects beyond the value chain.
For governments, it mobilises private investment in climate solutions on a scale that public budget alone cannot match, thereby supporting national climate targets and Paris Agreement commitments.
For philanthropic organisations and civil society, high-integrity credits, especially those from nature-based solutions (NbS), come from projects that deliver additional benefits, such as biodiversity, community livelihoods, and ecosystem resilience and restoration.
What are the current best practices in the VCM?
The VCM sector is booming. An increasing number of organisations are investing billions in carbon projects to take credible climate action. However, the market is also becoming increasingly complex, with different frameworks depending on the region. Demand for trustworthy carbon credits is growing, particularly those from nature-based and carbon removal projects (e.g., afforestation, or grassland management to help soils in grasslands store more organic carbon). However, uncertainty around regulations and what counts as “high-quality” credits still causes challenges. New standards or accounting frameworks, quality frameworks and digital tools for tracking projects are helping to improve trust and transparency.
Staying up-to-date is key
Given the rapidly evolving carbon credit landscape, companies should take a proactive and forward-looking approach to their carbon management strategy.
This means keeping up to date with regulations and best practices and developing internal expertise to navigate carbon markets effectively. Companies should conduct thorough due diligence on projects to understand risks, ensure high quality and integrity of climate projects and diversify their carbon credit portfolio to spread exposure. They should focus on impactful, verified projects that go beyond financial transactions. The ultimate goal must always be to deliver measurable climate benefits while supporting sustainable development.