Driving Climate Progress: The Rise of the Voluntary Carbon Market

As the year draws to a close, it’s a natural time for reflection—not just on the past twelve months, but on the decades-long journey of climate action. The roots of climate awareness stretch back to the mid-20th century, when pioneering scientists like Guy Stewart Callendar and Charles David Keeling began uncovering how human activities influence the Earth’s climate. Though earlier theories and observations hinted at climate change, it was the 1950s and 1960s that laid the groundwork for the modern movement toward meaningful climate solutions.

Content:

• A look back: Climate Action since 1970
• Carbon Markets: Balancing Regulation and Voluntary Action
• Strengthening the Voluntary Carbon Market: Key Initiatives Driving Integrity and Innovation
• Conclusion

A look back

Climate Action since 1970

The first Earth Day, celebrated on April 22, 1970, marked a pivotal moment in raising environmental awareness both in the United States and globally. This event sparked a wave of environmental activism that would grow over the following decades. In 1988, the Intergovernmental Panel on Climate Change (IPCC) was formed by the United Nations to assess scientific knowledge on climate change, its impacts, and potential response strategies. The momentum continued in 1992 at the Earth Summit in Rio de Janeiro, where the United Nations Framework Convention on Climate Change (UNFCCC) was adopted. This marked the first global effort to formally address climate change and laid the groundwork for international cooperation. Building on this foundation, the Kyoto Protocol was introduced in 1997 as the first legally binding international treaty to reduce greenhouse gas emissions. It set specific targets for developed countries, signaling a significant step toward global climate action. Finally, in 2015, the Paris Agreement was adopted, representing a global consensus on the urgency of tackling climate change. The agreement established a framework to limit global warming to well below 2°C, with an ambitious goal of striving to keep it within 1.5°C.

The progression of climate action—from early scientific discoveries to major international agreements—demonstrates humanity's increasing awareness and commitment to tackling the urgent challenge of climate change. The Paris Agreement, which remains a cornerstone of global climate efforts, operates on a five-year cycle that encourages countries to adopt progressively ambitious climate actions. Notably, it was the first agreement to highlight the critical role of non-state actors, such as corporations, in achieving its goals. This recognition has spurred the creation of numerous frameworks and initiatives designed to guide and support corporate climate action. One key example is the Science Based Targets initiative (SBTi), which assists companies in setting emissions reduction targets aligned with the latest climate science.

Carbon Markets

Balancing Regulation and Voluntary Action

The increasing urgency to address climate change has led to the creation of carbon markets—powerful tools for reducing greenhouse gas (GHG) emissions. These markets fall into two categories: the compliance market and the Voluntary Carbon Market (VCM), each operating under distinct frameworks.

Compliance Market

The compliance, or mandatory, market emerged from the Kyoto Protocol, which set legally binding emission reduction targets for industrialized nations and specific sectors. This system allows companies to meet targets flexibly and cost-effectively through market-based mechanisms. Today, compliance markets are governed by national, regional, or international carbon reduction regimes and primarily focus on energy-intensive sectors such as power generation, oil refineries, and heavy industries. Nationally Determined Contributions (NDCs)—each country's climate commitments under the Paris Agreement—further guide these efforts, ensuring alignment with global climate goals.

Voluntary Carbon Market (VCM)

The Voluntary Carbon Market (VCM) operates independently of government mandates, enabling companies and individuals to voluntarily contribute to climate action. Emerging as a complement to compliance markets, the VCM promotes flexibility and innovation in reducing greenhouse gas (GHG) emissions.

Driven by corporate social responsibility and ethical commitments, the VCM relies on privately organized carbon crediting standards—such as the Verified Carbon Standard (VCS), Gold Standard, and Wald-Klimastandard to ensure the credibility of carbon credits. Notably, the lines between compliance and voluntary markets are beginning to blur. For example, the Gold Standard, launched in 2003 to enhance sustainable outcomes for the UN’s Clean Development Mechanism (CDM), reflects this overlap. Additionally, in some regions, voluntary credits can help meet compliance obligations, and discussions on further integration are ongoing.

As the world advances toward a net-zero future, both markets are essential: the compliance market enforces mandatory reductions, while the VCM fosters innovation and broader participation. For corporations, voluntary climate action is both a responsibility and an opportunity to lead in sustainability.

Strengthening the Voluntary Carbon Market

Key Initiatives Driving Integrity and Innovation

New initiatives and platforms are emerging to enhance the efficiency, transparency, and credibility of the Voluntary Carbon Market (VCM). Innovations such as blockchain technology are being explored to improve traceability, ensuring clear and immutable transaction records that build trust among stakeholders.

Here are three well-established initiatives shaping the VCM:

VCMI – Voluntary Carbon Markets Integrity Initiative

The VCMI is a global nonprofit focused on enhancing the credibility of the VCM. It provides clear guidance on the voluntary use of carbon credits and their meaningful integration into climate strategies. In 2022, VCMI launched the Claims Code of Practice, setting rigorous standards for transparency and credibility to help organizations make verifiable climate claims. Collaborating with sustainability bodies, the private sector, and Indigenous groups, VCMI has partnered with the United Nations Development Programme (UNDP) to support high-integrity carbon markets and improve access to climate finance in developing nations.

ICVCM – Integrity Council for the Voluntary Carbon Market

The ICVCM works to improve governance, transparency, and standardization in the VCM. It established the Core Carbon Principles (CCP)—a benchmark for high-integrity carbon credits focusing on transparency, additionality, and permanence. By ensuring credits meet stringent standards, ICVCM enables buyers to make informed decisions and drives alignment with the Paris Agreement's goals. With crediting programs under its review representing 98% of the market, ICVCM's role is globally significant and widely endorsed by governments and organizations.

ICROA – International Carbon Reduction and Offsetting Accreditation

Part of the International Emissions Trading Association (IETA), ICROA enhances the integrity of carbon credit use and emission reductions. Founded in 2008, it focuses on economy-wide decarbonization to achieve net-zero by 2050. ICROA’s Accreditation Program certifies VCM service providers against its Code of Best Practice, ensuring adherence to high environmental standards through annual independent audits. Additionally, ICROA serves as a platform for advocacy and innovation, driving thought leadership, policy development, and collaborations to address key challenges in the VCM.

Together, these initiatives are vital for improving trust, setting high standards, and fostering innovation within the Voluntary Carbon Market.

Conclusion

As the world faces the pressing challenge of climate change, both the compliance and Voluntary Carbon Markets play essential roles in driving meaningful climate action. While the compliance market enforces mandatory reductions, the Voluntary Carbon Market fosters innovation, flexibility, and broader participation from businesses and individuals. Initiatives like VCMI, ICVCM, and ICROA are critical in ensuring the integrity, transparency, and credibility of these markets, helping to build trust and drive progress.

Together, these markets and initiatives provide the tools and frameworks needed to accelerate global efforts toward a sustainable, net-zero future. By combining regulation, voluntary action, and innovation, we can make significant strides in addressing the climate crisis.