Voluntary carbon markets

Share this:

Unlike compliance carbon markets which are regulated by the Paris Agreement, voluntary carbon markets have a wider range of development and don’t fall under so many rules, making the transitions easier. Thus, the voluntary carbon market includes all carbon offset transactions that are not purchased with the intention of complying with an active regulated carbon market. Voluntary demand for carbon offsets comes from companies and individuals who take responsibility for offsetting their own emissions. On the market, they are known as voluntary buyers. They are mostly companies that want to reach their goals set in their Corporate Social Responsibility and position as environmentally conscious entities.

These voluntary buyers don’t need to own certificates regulated by the Paris Agreement, this aspect giving birth to private initiatives that have set their own certification mechanisms. From these private initiatives, the Verified Carbon Standard (VCS) and Gold Standard stand out as pioneers. These standards have their own regulations regarding the implementation of activities dedicated to emission reduction. While some focus on the climate impact of the projects, others, with a much broader approach, take into account the social and environmental components.

Studies have shown that “since the voluntary carbon market came into operation, approximately 1.2 billion tonnes of CO2e have been transferred. This is equivalent to the average annual emissions in Japan. Although the demand for certificates from the voluntary carbon market had dropped, in 2018 it reached a historical peak of almost 100 MtCO2e.” (carbon-mechanisms.de)

Challenges and overlaps in compliance and voluntary carbon markets

At certain points, the delimitation between compliance carbon markets and voluntary carbon markets is not as clear since some countries have allowed the use of certificates bought from private schemes to meet obligations. This is the case with the Carbon Offsetting and Reduction Scheme for International Aviation, or CORSIA. The aviation sector has set up an industry-wide scheme that uses voluntary certificates to offset its greenhouse gas emissions.

Although compliance markets are considered to work on a larger scale, as countries and not just companies or individuals are part of them, voluntary markets are much more flexible, allowing the use of methodologies, regulations, finance, and monitoring. Some of these elements have influenced compliance carbon markets as well.

Voluntary carbon markets encounter the same challenges as regulated carbon markets, the most important one being the double counting of emissions reduction. ”For example, if a company helps to reduce emissions in a country, which contributes to that country meeting its national climate target, then the company has not actually “increased” overall reductions in emissions. Rather, it has financed reductions which the host country had committed to deliver already.” (carbonmarketwatch.org)

Overall, the carbon market system needs to evolve to accelerate the zero-carbon transition, rather than just offsetting. In order to achieve the Paris Agreement goal, sustained efforts should be undertaken worldwide and that means a commitment not just from developed countries, but from developing ones too with the active involvement of companies and individuals besides governments.