Whitepaper

Carbon Markets Demystified: Compliance vs. Voluntary Approaches

ESG Services

Climate change demands a multifaceted solution, and carbon markets have emerged as a powerful tool. Carbon markets enable the purchase and sale of carbon credits. When a carbon credit is used to reduce, sequester, or avoid emissions, it is retired from the market, making it non-tradable. Multi-stakeholder independent bodies, like the Voluntary Carbon Market Integrity Initiative (VCMI) and the Integrity Council for the Voluntary Carbon Market (ICVCM), are working to build trust in the Voluntary Carbon Markets (VCM).  VCMs, with their inherent flexibility, have created a synergy between themselves and CCMs, enabling entities with ambitious sustainability goals to achieve beyond their mandates.

Key Takeaways

  • The Voluntary Carbon Markets provide a vital platform for climate action in countries lacking regulated emissions trading.
  • Voluntary carbon markets are critical for mobilizing finance for climate mitigation. 
  • The inherent complexities associated with limiting emissions in Compliance Carbon Markets often exclude out-of-scope sectors.

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