What are VCMs?

Voluntary Carbon Markets (VCMs) are markets where organizations and individuals can buy and sell carbon ‘credits’ on a voluntary basis. These credits represent a reduction or removal of greenhouse gas emissions, usually measured in metric tons of CO2 equivalent. Participants in VCMs use these credits to offset their own carbon emissions, aiming to reduce their environmental impact.

Credits are generated by carbon project developers. Projects can be Renewable Energy Projects (wind farms or solar power installations that displace fossil fuel-based energy), Forestry and Land Use Projects (reforestation, afforestation, and forest conservation) which absorb CO2 from the atmosphere, Carbon Capture and Storage projects (CCS: Technologies that capture CO2 emissions from sources like power plants and store them underground), or other projects that avoid, reduce, remove or abate emissions.

These projects undergo a process of validation and verification by third-party certifiers to ensure that they achieve real, measurable, and additional (beyond business-as-usual) emissions reductions.

Credits are verified and issued, and supply and demand is then regulated by brokers and traders in the VCM.

What are the arguments for VCMs?

Because some emissions will be hard to reduce or remove (for example in key industrial processes) in the next 50 years. Therefore, investing in projects which remove or prevent carbon emissions allows businesses to offset residual emissions in the transition to net zero.

As we work to develop new tools to eliminate carbon emissions, it is an effective and readily available way to compensate for the inevitable environmental impact of doing business today. The theory is that voluntarily attaching a price to their emissions, they create a financial incentive to develop a long-term plan to reduce their overall footprint.

While there have been recent scandals involving VCMs and the trustworthiness of these credits. However, new regulations from the VCMI, and the latest guidelines from the US mean that the claims businesses can make around credits is much clearer. On top of this, new technology allows us to measure and monitor carbon much better, not only promoting – but necessitating – market integrity.

What are the arguments against VCMs?

The argument against VCMs is that they are  an unregulated (hence 'Voluntary') market which is home to a complex web of competing standards that define quality. The risk is that too many standards means no standard at all, meaning that a lot of credits are 'junk', and don't actually reduce emissions

A series of scandals has damaged trust in the space. In 2023 more than 90% of rainforest offset credits of the leading VCM certifier Verra were revealed to have been “phantom”: with no real climate impact. In a stark conflict of interest, VCM certifiers and project owners were both certifying, and making money selling credits. They were marking their own homework, with predictable results.

Studies have also found double-counted credits, overestimated carbon savings, “protection” of sites that weren’t under threat, forcible evictions of local residents, fraud schemes and corruption.

Many carbon credits have been sold on the promise of being a cheap way to “cut” emissions without changing your operations. But for businesses the costs here are hidden: you end up paying with reputational risk.

Leafr’s position on VCMs:

While VCMs have potential for incentivising much-needed protection of forests, and supporting hard-to-abate industries (e.g. aviation or construction) to hit emissions targets, and good work is being done to restore trust, there remain many poor quality credits in the market that businesses should treat with caution.

Companies who are serious about decarbonisation should focus on reducing their own emissions instead of offsetting. For example, decarbonising supply chains or integrating emissions-monitoring technology. This requires expertise and planning but carry less risk in the long term. If you must buy offsets, stick to quality ones with durable carbon removal.

Just be sure to do the decarbonisation work up front.

Looking for an expert in the Voluntary Carbon Markets? Post a project, or book a call with the team.

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