The voluntary carbon markets allow companies that are not regulated under any of the compliance markets to buy carbon credits or sell them. They can trade these credits or retire them in order to offset a portion of their greenhouse gas emissions.
Each credit represents the equivalent of one metric ton of reduced, avoided or removed CO2 or other greenhouse gases. Credits are created by carbon projects that validate and verify them with the help of one of the main standards. When a credit is retired, it becomes an offset. It is moved to a register for retired credits, or retirements, and it is no longer tradable.
Voluntary carbon credits are diverse and significantly more fluid when compared to the credits of the compliance markets. Companies and individuals can freely trade with them, however not all credits are created equal. Their prices and associated co-benefits can vary widely depending on the type of project, developer, and the year it was created.
Here’s a schematic of the basic structure of the voluntary carbon market that we released in our first Carbon Developer Ecosystem Report in 2021.