Last updated:
May 24, 2024

Voluntary Carbon Market (VCM)

What is the Voluntary Carbon Market (VCM)?

The Voluntary Carbon Market (VCM) is a mechanism that enables organisations and individuals to purchase carbon credits to neutralise their emissions. Participants in the VCM choose to buy carbon credits as part of their sustainability strategies, demonstrating commitment to climate action and corporate social responsibility. These carbon credits are generated from projects that either reduce, avoid, or remove emissions from the atmosphere, through activities such as reforestation, biochar, blue carbon, and enhanced weathering.

Projected growth of the VCM

How is the VCM different from the compliance market?

The VCM operates separately from the compliance carbon market, which is mandated by government regulations. Compliance markets are part of regulatory schemes like the EU Emissions Trading System, where industries with high emissions are legally required to manage and neutralise their carbon output. In contrast, the VCM is based on voluntary participation and typically attracts companies aiming to meet national net zero targets, enhance their brand image, or prepare for upcoming regulations.

What do sustainability leaders need to be aware of when dealing with the VCM?

While the VCM offers significant opportunities for companies to advance their sustainability goals, it has faced criticism, notably concerns over the quality of carbon credits and the risk of greenwashing. To mitigate these issues, sustainability leaders should prioritise transparency and rigour in their carbon credit selections. This includes choosing projects that ensure additionality, benefit from third-party verification, and offer clear, traceable impacts.

It is also important to be aware of potential regulatory changes that could affect the VCM's landscape and align strategies with the most robust standards and best practices to avoid reputational risks associated with poor-quality credits.

Why is the VCM important for companies looking to meet net zero targets?

For companies committed to achieving net zero emissions, the VCM plays a crucial role. It provides access to a diverse range of carbon credit projects globally, which can be crucial for companies that cannot eliminate all their emissions through direct reductions alone. By using the VCM, companies can neutralise their residual emissions, contributing to their net zero goals while supporting sustainable development projects around the world.

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