April 7, 2023

Four Things Needed to Help Scale the Voluntary Carbon Market (VCM); The Evolution of the Voluntary Carbon Market

Four Things Needed to Help Scale the Voluntary Carbon Market (VCM)

On March 29th, a group of climate leaders from different organizations and backgrounds gathered to discuss and debate the challenges facing nature-based solutions and the voluntary carbon market. Everyone in the room shared a common goal - to improve climate outcomes. Here are some key takeaways from the discussion:

  • Reputational risk is stalling investment: Concerns over greenwashing and the potential for negative press has resulted in fewer public pledges and investments, leaving progress in the hands of few stakeholders who are willing to take calculated risks, despite uncertainties. 
  • Regulation & guidance isn’t clear and actionable: There is a need for collaboration and investment in the development of methodologies, certification standards, and carbon credit ratings to help guide the market towards its desired direction.
  • Carbon accounting is in its infancy: Carbon accounting has the potential to measure the impact of an organization’s activities in terms of emission liabilities and assets, clarify who can claim reduction or removal activities, and simplify the measurement of carbon projects with different durations. 
  • It is hard to balance near-term action and long-term investments:  The VCM faces a debate on whether to prioritize taking action or improving regulation and accounting methods, with a call to support innovative companies that improve standards and regulations. Businesses must start by understanding their emissions by source, aligning themselves with mitigation strategies, and avoiding offsetting mechanisms for emissions that can be reduced today.

Invert Insights: 

The voluntary carbon market plays a crucial role in mitigating the effects of climate change and it is clear that to strengthen this market and achieve better climate outcomes, it is essential to manage these various aspects of the market effectively. Promoting high-quality projects and the efforts from market participants to deliver real mitigation results is an effective way to educate, increase market transparency, and raise consumer awareness. We must continue advancing projects that help us combat nature degradation and remove carbon emissions while improving regulation and accounting methods. 

The Evolution of the Voluntary Carbon Market 

The International Emissions Trading Association (IETA) has published a new paper, The Evolving Voluntary Carbon Market, highlighting the VCM’s central role in progressing toward net zero. Key market trends are identified, including uncertainties around the VCM's role, its relationship with country actions under the Paris Agreement, consolidation or proliferation of crediting approaches, and governance and regulation. The paper also reiterates the importance of avoiding new emissions, reducing internal emissions, and offsetting residual emissions using carbon credits.

Invert Insights:

Evolving the voluntary carbon market will ensure that it continues to contribute to mitigating climate change and meet the increasing demand for carbon credits. The VCM must evolve as science and regulations evolve to maintain its credibility and guide organizations toward carbon neutrality and ultimately, net zero. While governance and regulation are necessary to provide scrutiny, they should allow the VCM's flexibility and ability to deliver its purpose. 

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