Voluntary Carbon Market

The voluntary carbon market is quite different from the compliance markets under the Kyoto Protocol and the new market which will develop under the Paris Accord. Instead of being driven by the need of governments and companies to comply with regulation the voluntary carbon markets have evolved from social corporate responsibility and there is no hard and fast rule by which one can easily price carbon credits or undertake quality assurance. Most voluntary carbon credits are sold to organizations and companies that are not part of any national emissions trading scheme and who want to go carbon neutral or if they are part of a scheme they simply want to offset their corporate GHG emissions, including travel, in addition to those emissions that they produce from say power or manufacturing facilities that are covered by an ETS. In fact, the price for voluntary carbon credits has ranged anywhere from US$0.10 cents to $100 USD per tonne which is a massive range. Typically, however, the lower the volume and the lower the price. In addition, there are no exchanges with sufficient liquidity where VERs can be sold which makes the market much more complex.

Countries have begun to enact their emissions reduction goals under the Paris Agreement, many of which plan to implement domestic carbon pricing schemes and/or trade emissions reductions across borders— if they have not done so already. Yet, the Paris Agreement contains few hard-and-fast rules about international carbon trading, so as negotiators aim to develop this structure and guidelines before 2020 the voluntary markets continue to grow. In fact, the voluntary carbon markets can exist quite easily alongside compliance markets.

The difference between compliance and voluntary carbon markets

To explain this difference in simple terms for a country like New Zealand — while a power company, an oil & gas company, a manufacturing company, or a forestry company would enter the New Zealand Emissions Trading Scheme and buy and sell NZUs – New Zealand Units a company that simply wanted to measure, management and mitigate their own emissions and go carbon neutral would buy VERs – verified emission reductions, either from New Zealand or internationally.

For the most recent assessment globally of voluntary carbon-market, please check out here the Forest Trends 2018 publication on “Voluntary Carbon Market Insights.”

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