The voluntary carbon market (VCM)

What is the voluntary carbon market?

The voluntary carbon market enables companies and private individuals to offset their carbon footprints voluntarily. After a carbon footprint is calculated, the emissions are offset with carbon credits that have been generated by carbon offset projects. This way, the same emissions that are released are saved elsewhere.

How does the voluntary carbon market work?

As the voluntary carbon market is not regulated, NGOs have developed their own certification mechanisms. The Verified Carbon Standard (VCS) and Gold Standard are two such pioneers. Standards like these determine how carbon offset projects are required to be structured and realised. Each standard has its own focal points: Some examine a project’s effect on the climate, whereas others also assess social and ecological aspects. All standards share generally applicable criteria that must be met. Every project is examined and verified by independent auditors in terms of its additionality, permanence, and avoidance of double counting.  

There are also combinations of the various standards. The characteristics and successes of a project are often mapped against the UN’s 17 Sustainable Development Goals. Credits generated by projects that are of high ecological and social value are especially attractive to the voluntary carbon market. 

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How large is the voluntary carbon market?

A total of around 1.5 billion tonnes of CO2 equivalents (CO2e) had been removed by the voluntary carbon market by April 2022 (Voluntary Registry Offsets Database Berkley, 2022). According to the EU’s 2021 report on the GHG emissions of all world countries, this is roughly equivalent to the average annual emissions of Russia.  

How does the voluntary carbon market differ from the regulated market? 

The voluntary carbon market exists alongside the compliance market, which serves the mandatory climate action obligations of industrialised nations. Governments, companies, and other institutions offset their emissions on the compliance market to comply with the agreed upon limits for their carbon emissions. This enables them to fulfil their obligations under the Kyoto Protocol.  

It is increasingly difficult to draw a clear line of separation between the voluntary and compliance markets. In some states, such as Colombia, it is now possible to purchase carbon credits from private certification systems to comply with mandatory climate action obligations.  

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