With the climate crisis at the forefront of many people’s minds, the Voluntary Carbon Market (VCM) has become a crucial tool for companies seeking to offset their carbon emissions and contribute to a more sustainable future. This comprehensive guide aims to provide a thorough understanding of how the VCM operates, the urgent need for an efficient carbon market, and insights into how new technologies are transforming emissions trading. Below we unpack the mechanics of the voluntary carbon market, its potential for addressing the environmental challenges facing the world today, and the changes necessary to make that a reality.

What is the Voluntary Carbon Market?

The Voluntary Carbon Market (VCM) is a market where organisations can voluntarily purchase carbon credits to offset their greenhouse gas emissions. It operates on the principle of carbon neutrality (also known as a state of net-zero carbon dioxide emissions) and provides companies and individual actors with the opportunity to invest in projects that reduce or remove carbon emissions.

The VCM operates separately from mandatory compliance markets, such as the cap-and-trade systems implemented by governments. Participation in the voluntary market is based on voluntary actions and commitments to environmental sustainability.

“Becoming carbon neutral is a key goal for organisations concerned with sustainability and playing their part in addressing the climate crisis. By being carbon neutral you are essentially ensuring that your business doesn’t cause an increase in the amount of carbon in the atmosphere.”

How Does VCM Work?

The voluntary carbon market operates through a series of steps that involve the creation, certification, and trading of carbon credits or offsets. Carbon credits are a useful way to measure and trade in greenhouse gas (GHG) reductions. Each carbon credit represents one tonne of GHG emission reductions or removals from the atmosphere.1 By voluntarily purchasing carbon credits, companies actively reduce their carbon footprint and are supported in reaching net-zero emissions.

“As a global population, we need to achieve carbon neutrality by the mid-21st century if we are to avoid surpassing the Intergovernmental Panel on Climate Change (IPCC)’s recommended global temperature rise threshold of 1.5 degrees Celsius.2

Companies are facing growing pressure to achieve carbon neutrality through carbon reduction efforts. As a result, more companies are turning to the VCM to play their part in the climate crisis and achieve net-zero emissions. Listed below are some of the primary benefits of participating in the VCM:

Demonstrating Commitment: By taking part in the VCM companies can demonstrate their commitment to sustainability and climate action.

Enhance Reputation: Engaging in voluntary carbon offsetting can enhance a company’s reputation and attract environmentally-conscious consumers and investors.

Meet Net-Zero Targets: Participating in the VCM helps companies meet their own carbon reduction goals and align with global efforts to combat climate change.

“By the end of 2021, more than 2,000 companies across 70 countries and 50 industries approved emission reduction targets or committed to the Science Based Target initiative (SBTi), indicating their pledge to achieve net zero emissions by mid-century or earlier.3
“One in five of the world’s 2,000 largest publicly listed companies have committed to a ‘net-zero’ emissions target, as of 2021.4

Why are Companies Turning to the Voluntary Carbon Market?

Demonstrating Commitment: By taking part in the VCM companies can demonstrate their commitment to sustainability and climate action.

Enhance Reputation: Engaging in voluntary carbon offsetting can enhance a company’s reputation and attract environmentally-conscious consumers and investors.

Meet Net-Zero Targets: Participating in the VCM helps companies meet their own carbon reduction goals and align with global efforts to combat climate change.

“By the end of 2021, more than 2,000 companies across 70 countries and 50 industries approved emission reduction targets or committed to the Science Based Target initiative (SBTi), indicating their pledge to achieve net zero emissions by mid-century or earlier.3
“One in five of the world’s 2,000 largest publicly listed companies have committed to a ‘net-zero’ emissions target, as of 2021.4

1. What are carbon markets and why are they important? climatepromise.undp.org

2. Global Warming of 1.5 ºC ipcc.ch

3. Companies committed to cut emissions in line with climate science now represent $38 trillion of global economy sciencebasedtargets.org

4. Net-zero emissions targets adopted by one-fifth of world's largest companies www.reuters.com