The voluntary carbon market is a system where companies, organisations, and individuals choose—without legal obligation—to purchase carbon credits to offset their greenhouse gas (GHG) emissions. Unlike regulated markets mandated by governments, this market allows participants to act based on ethical, environmental, or branding motivations. Each carbon credit represents a reduction or removal of one metric ton of CO₂ or its equivalent from the atmosphere. The funds from these purchases support a wide range of environmental projects, such as reforestation, renewable energy, methane capture, and sustainable agriculture. These efforts contribute to reducing the overall carbon footprint and promoting climate resilience. By participating in the voluntary carbon market, entities can demonstrate climate leadership, improve sustainability credentials, and support the global transition to a low-carbon economy. This market plays a growing role in corporate climate strategies, especially as public demand for responsible environmental stewardship continues to rise.

Growth of the Voluntary Carbon Market

In 2021, the voluntary carbon offset market was valued at around $2 billion and is projected to expand significantly—reaching between $10 billion and $40 billion by 2030*. This rapid growth is fuelled by a global push for carbon neutrality, with more companies and organisations seeking to reduce their environmental impact. As awareness of climate change intensifies, the demand for high-quality carbon credits continues to rise. This opens the door for innovative, nature-based solutions such as industrial hemp farming, which offers scalable carbon sequestration potential. Sustainable agricultural practices like these not only help absorb large amounts of CO₂ but also create additional value through renewable products and ecological restoration. As the market evolves, such practices are becoming key contributors to credible and impactful climate strategies.

Market Functioning

The voluntary carbon market operates independently of government regulation, which has prompted the development of third-party certification systems to ensure credibility and impact. Non-governmental organisations (NGOs) have established widely recognised standards—such as the Verified Carbon Standard (VCS) and the Gold Standard—that set clear guidelines for climate effectiveness, transparency, and social and ecological benefits. These standards help build trust in the marketplace by verifying that carbon offset projects deliver real and measurable emissions reductions. Independent auditors assess each project to confirm that it meets the required criteria, ensuring legitimacy and accountability. This framework allows participants to confidently support initiatives that align with global climate goals while promoting sustainable development.

Differences with the Regulatory Market

Unlike the regulated carbon market, where companies are legally required to stay within emission limits set by governments, the voluntary carbon market operates on a more flexible, self-regulated basis. In the voluntary market, companies, organisations, and individuals choose to offset their greenhouse gas (GHG) emissions for reasons such as ethical responsibility, corporate social responsibility, or to enhance their public image. While the regulated market is driven by legal mandates and penalties for non-compliance, the voluntary market is based on the voluntary actions of participants who choose to contribute to climate change mitigation efforts. Both markets coexist, but the voluntary market focuses on promoting proactive environmental stewardship, offering flexibility for entities to act in alignment with their sustainability goals.

Challenges and Opportunities

Despite the rapid growth of the voluntary carbon market, it faces criticism regarding its effectiveness in truly mitigating climate change and the potential negative impacts on local communities. Critics argue that some projects may not achieve the claimed environmental benefits or could unintentionally harm local ecosystems and communities. However, research shows that companies participating in these markets often adopt more ambitious decarbonisation strategies, and the voluntary nature of the market encourages organisations to push beyond regulatory requirements.

In essence, the voluntary carbon market offers a valuable opportunity for businesses and individuals to play a proactive role in combating climate change while supporting sustainable and impactful projects. Its expected growth highlights a significant global shift toward greater environmental responsibility, with increasing recognition of the need for more sustainable practices and contributions to a healthier planet.

* Voluntary carbon markets set to become at least five times bigger by 2030 -Shell | Reuters