Voluntary carbon markets worldwide - Statistics & Facts
The global voluntary carbon market (VCM) had been thriving, with its value rising to roughly two billion U.S. dollars in 2022. However, the value of transactions more than halved the following year amid a string of high-profile scandals over the credibility of certain carbon offset credits. A growing number of companies have been investing in VCM in recent years to offset their emissions and achieve their GHG reduction targets, but distrust in the market is growing. With the VCM now facing numerous challenges and increased scrutiny, can it ride out the storm and help meet climate goals, or will the market die out?
Although nature-based projects are the most popular types, engineered carbon dioxide removal (CDR) solutions are growing in popularity, with various major companies investing heavily in these technologies. Microsoft, in particular, is a key driver of CDR technology growth, with the U.S. tech giant purchasing millions of CDR credits to offset its carbon emissions in recent years.
To rebuild trust and put the VCM back on track, urgent reforms will need to be implemented, such as increasing federal regulation and assessing and ensuring the quality of carbon credits.
What is the voluntary carbon market?
VCMs trade in carbon credits that are generated through various carbon offset projects that are mainly located in the global south. These credits, which are equivalent to one metric ton of carbon dioxide (tCO2) reduced or removed from the atmosphere, can be purchased by companies, non-profit organizations, or individuals on a voluntary basis. Once their benefit has taken place, these credits are “retired” and must then be taken off the market. The four major voluntary offset project registries are Verra (VCS), Gold Standard (GS), American Carbon Registry (ACR), and Climate Action Reserve (CAR). Verra is the largest carbon credit program by far, having issued more than one billion credits to date. As of 2023, a total of 4.1 billion carbon credits had been issued worldwide, while 891 million had been retired.The most popular VCM project types
Carbon credits go toward several types of carbon offsetting projects that either reduce or remove CO2 from the atmosphere through nature-based or engineered solutions. These range from renewable energy and household device projects to those involved in energy efficiency and waste disposal. The most common VCM carbon credits on the market, however, come from forestry and land use projects. REDD+ projects, which aim to curb climate change by stopping the destruction of forests, make up the majority of transactions in this category. They are also one of the cheapest options to offset emissions, with credit prices averaging 7.9 USD/tCO2 in 2023.Although nature-based projects are the most popular types, engineered carbon dioxide removal (CDR) solutions are growing in popularity, with various major companies investing heavily in these technologies. Microsoft, in particular, is a key driver of CDR technology growth, with the U.S. tech giant purchasing millions of CDR credits to offset its carbon emissions in recent years.
Controversies surrounding carbon offsets
Unlike compliance-based carbon markets, such as the EU ETS, VCMs are not regulated by governments and therefore often lack transparency. This has led to growing scrutiny within the market over the quality of carbon credits, particularly in regards to REDD+ projects, with claims that emission reductions from these schemes have been largely overstated. Such claims have caused VCM transaction volumes to plummet in recent years. Public perception and negative press coverage are seen as the most important challenges facing the VCM, followed by the quality of carbon credits. If integrity issues within the sector are resolved, the value of the global voluntary carbon offset market is forecast to reach more than one trillion U.S. dollars per annum by 2050. However, should integrity issues remain unresolved, the value of the market would reach just 34 billion U.S. dollars that same year.To rebuild trust and put the VCM back on track, urgent reforms will need to be implemented, such as increasing federal regulation and assessing and ensuring the quality of carbon credits.
