Status of Global VCS market

The world is currently facing the threat of climate change, caused mainly by the accumulation of greenhouse gases (GHGs) in the atmosphere. The voluntary carbon market (VCM) aims to provide a solution to this problem by allowing companies, governments, and individuals to offset their GHG emissions by investing in climate change mitigation projects that prevent or remove GHG emissions from the atmosphere. This blog article provides an overview of the status of the global carbon market and the trends shaping its development.

Definition of Voluntary Carbon Markets (VCMs)

Voluntary carbon markets refer to the generation and retirement of carbon credits through voluntary transactions, rather than being mandated by regulations. Projects need to be independently validated and meet a set of standards to verify their climate impact. Carbon credits represent one tonne of CO2e that has either been prevented from being emitted or removed from the atmosphere. Once certified, carbon credits can be traded and ultimately sold to individuals or corporates who wish to compensate for their emissions by retiring carbon credits and making claims towards their climate targets.

Status of Voluntary Carbon Markets Globally

The demand for voluntary carbon markets is increasing steadily and expected to grow 15x by 2030, driven by an increasing number of corporate net-zero commitments and increasing availability of point-of-sale offsetting. New markets are also developing in Asia, the Middle East, and Latin America, expanding beyond traditional demand centers in Europe and North America.

The emergence of new project types and shifting buyer priorities for some project types is another trend shaping voluntary carbon markets. Newer technology-based removal projects, such as direct air carbon capture and storage (DACCS), are complementing traditional nature-based methods.

In terms of the regions that are leading in the voluntary carbon market, North America and Europe dominate the market, accounting for 95% of voluntary transactions. The Asia-Pacific region is emerging as a key market, with demand expected to grow rapidly in the coming years.

In addition, the voluntary carbon market has received criticism for the lack of transparency, additionality, and impact of projects. Critics argue that some projects do not provide a meaningful impact on climate change, and the standards used to validate the projects are not robust enough. Efforts are underway to address these criticisms and improve the credibility of the voluntary carbon market.

The voluntary carbon market provides an opportunity for companies, governments, and individuals to offset their GHG emissions and contribute to climate change mitigation. However, the market faces criticism for its lack of transparency and impact. To ensure the credibility of the voluntary carbon market, efforts are underway to address these criticisms and improve the standards used to validate the projects. The trends shaping the voluntary carbon market, such as the emergence of new project types and the growth in demand in new markets, are promising signs that the market will continue to evolve and play a crucial role in addressing the threat of climate change.