Advancements in Voluntary Carbon Markets

Who gets to shape the future of a $50 billion dollar industry?

Banashree Thapa

Banashree Thapa

17 Dec, 2021

Advancements in Voluntary Carbon Markets

With increasing pressure on the private sector to actively participate in a “net-zero” future, the role of collaborative taskforces and coalitions in accelerating a high integrity voluntary carbon market (VCM) will be paramount. Here’s an update on some of the biggest drivers in the VCM.

As state and private actors hammered out the details on climate action at the recent COP26 conference, one thing became abundantly clear: the “race to zero” will must come with committed engagement from the private sector. Despite contributing heavily to carbon emissions, the private sector in 2018 contributed to a mere 18.5% of climate finance.

Since 1988, 100 coal and oil producing companies collectively emitted around 1 trillion tons of greenhouse gas emissions. This huge impact on the planet was never paid for by companies, however in light of climate science and the Paris Agreement, companies across different sectors are now committing to net-zero – pledging to reduce their emissions as close to zero as possible and to remove the rest.

What are voluntary carbon markets?

Voluntary carbon markets (VCMs) can help companies achieve net-zero by: (1) compensating for their emissions with carbon offsets as they pursue emission reduction strategies, which means carbon emissions are avoided or reduced by projects elsewhere (2) neutralising any remaining emissions through carbon removal, which means an equivalent amount of carbon is taken out of the atmosphere by technology or nature.

Whilst emission reduction strategies are fundamental to meeting the targets set out by the Intergovernmental Panel of Climate Change (IPCC), VCMs also offer a vital opportunity for investment in nature which must be protected and regenerated over the next decade. Strategies that tackle multiple challenges like carbon removal, biodiversity loss and climate inequality offer a best-case solution for the climate crisis. Nature based solutions have thus gained speedy popularity amongst the private sector, not just for sale of carbon credits but for the wide spectrum of benefits they provide.

Photo from Eden Reforestation Partners mangrove regeneration project

Photo from Eden Reforestation Partners mangrove regeneration project

By 2030, the carbon credit market is estimated to be worth upward of $50 billion. Despite this exciting outlook, a lack of oversight and standardisation could undermine confidence in VCMs and in turn, in nature-positive offsetting and removal projects. To realise the benefits of nature based solutions and create an inclusive, credible carbon market, guidelines, best-practice and standards for credits and trading are critical and can only be achieved through collective action.

In light of the centre-stage presence of the private sector in the current COP negotiations, we have laid out key highlights from task forces at the forefront of carbon markets, shaping the future of the carbon-conscious private sector and its alignment with goals for biodiversity.

Taskforce on Scaling Voluntary Carbon Markets (TSVCM)

The TSVCM is a private sector driven taskforce established by Mark Carney, The UN Special Envoy for Climate Action and Finance. Its goal was to set up a global blueprint for reliable and robust carbon credits. TSVCM today comprises 250 member organisations and represents diverse stakeholders composed of independent actors, including NGO and civil society representatives as well as commercial experts from the global carbon value chain.

Key takeaways:

  • Jan, 2021: TSVCM released its highly anticipated blueprint for scaling voluntary carbon markets that is set to drive up the financial capital flow towards VCM and natural climate solutions.

  • July, 2021: TSVCM released its Core Carbon Principles detailing quality standards for carbon credits to make sure that they have a measurable, meaningful impact on emissions.

  • Sept, 2021: TSVCM launched a governance body, the Integrity Council for Voluntary Carbon Markets, to establish a global benchmark for high quality carbon credits and carry forward its mission to scale high integrity voluntary carbon markets.

Voluntary Carbon Markets Integrity Initiative (VCMI)

Complementary to TSVCM, VCMI is an acclaimed task force working on ensuring integrity in the voluntary markets for the purchase and sale of carbon credits. It aims to create a carbon market that is backed by honest intentions for GHG reductions and provide opportunities for developing countries with access to carbon finance. Primarily sponsored by Britain and the philanthropic Children’s Investment Fund Foundation (CIFF), VCMI also has the backing of several governments including the United States.

Key takeaways:

  • July, 2021: VCMI released its consultation report to address criticisms surrounding the carbon credit market and to provide guidance for assessing carbon credits and the emissions reductions they represent. The report is being commended for its focus on inclusivity, bringing in indigenous peoples’ and subject matter experts along with their state and non-state actors to guide their working principles.

What is the Task Force on Climate-related Financial Disclosures (TCFD)?

In 2015, the Basel-based Financial Stability Board (FSB) created the TCFD to create a reporting framework on ‘effective disclosures’ of an organisations’ impact on global climate. By making a company’s climate-impacts more transparent, the TCFD seeks to foster better action, healthy information sharing, promote strategic planning and better decision-making processes on climate-positive actions.

The TCFD is chaired by Michael Bloomberg and is supported by around 1,700 organisations worldwide, which includes private and public actors. The taskforce itself comprises 32 members from G20 countries which includes providers of capital, insurers, large non-financial companies, accounting and consulting firms, and credit rating agencies.

Key takeaways:

  • June, 2017: the TCFD released climate-related financial disclosure recommendations designed to help companies provide better information to support informed capital allocation structured around four thematic areas: governance, strategy, risk management, and metrics and targets.

  • October, 2020: In addition to its 2017 report, the TCFD releases annual reports which address the progress and developments that companies have made since implementing the TFCD’s 2017 recommendations.

Note: As of 2023 november the TCFD will no longer be updated and will just remain as a resource for materials developed by the task force.

Taskforce on Nature-related Financial Disclosures (TNFD)

Building on the success of the TFCD, the Taskforce on Nature-related financial disclosures was established to inform institutions with the complete information on their environmental risks and opportunities.

Institutions are intrinsically dependent on nature for their financial inflow, but most institutions do not have the information on the financial risks that are linked to nature. TNFD works towards facilitating better information on how to incorporate nature-related risks and opportunities into companies’ strategic planning, risk management and asset allocation decisions.

The founding members of the taskforce include United Nations Environment Programme Finance Initiative (UNEP FI), United Nations Development Programme (UNDP), the World Wildlife Fund (WWF) and Global Canopy.

What’s next?

 In January 2024, TNFD announced that 320 organisations from over 46 countries have committed to start making nature-related disclosures based on TNFC recommendations. (source:

320 companies and financial institutions to start TNFD nature-related corporate reporting

)- can expand on the recommendation in 2023 more if you want this added in?

H2 – What is the Natural Climate Solutions Alliance: NCSA is a CEO-led multi-stakeholder group started by the World Economic Forum and the World Business Council for Sustainable Development (WBCSD) that assures Natural climate solutions (NCS) project developers with the financial guarantee of buyers for their carbon credits.

For NCS projects to qualify as carbon credits they need to be operational for several years. This impacts the ability of projects on the ground to finance their NCS campaigns. By ensuring project developers with the financial guarantee for their carbon credits, NCSA is increasing motivation among project developers for continuing and scaling up of NCS projects.

What’s next?

By the year 2025, the NCSA is set to secure corporate commitments to reach one gigaton of NCS emission reductions and removals per year.

What is the LEAF Coalition?

Lowering Emissions by Accelerating Forest Finance (LEAF) Coalition: A collaborative effort between the governments of the USA, United Kingdom and Norway and backed by the biggest names in private sector (such as Amazon, AirBnB, GSK, BCG, Nestlé, McKinsey & Co), the LEAF coalition is being hailed as one of the largest global effort to protect tropical forests.

Recognizing that preventing deforestation is one of the most efficient means of avoiding carbon emissions, but can be cost-inducing given the high cost of land-acquisitions, this public-private coalition is mobilising at least USD 1 billion toward forest protection in forest-rich countries to stop deforestation activities. It is being done by increasing the price paid for carbon credits from forest-protection projects, conserving large tracts of forestland through programs that involve all key stakeholders, including Indigenous peoples and local communities.

creature in tree

Finance for Biodiversity Pledge

 In 2023, 163 financial institutions representing 25 countries and over 21.7 trillion euros in assets signed the Finance for Biodiversity Pledge which was launched in September 2020

The signatories vow to stop business with companies that cause heavy environmental damage in their supply chains. At the same time, they pledge to conduct business with companies that support and protect ecosystems, and maintain mutual cooperation and knowledge sharing, calling companies to account, determining the impact of investments on biodiversity

What is The future of VCM?

Global leaders and nations have a singular goal of limiting the rise of global temperatures to 1.5 degrees Celsius.

However, this temperature was almost reached in the year 2023 so 1.5 degrees warming may no longer be possible unless dramatic change happens now. Therefore,

this will not only require nationally determined carbon reduction targets, but also systemic changes in the way the private sector operates and functions. A robust, effective voluntary market for carbon credits will be key for this transition.

Taskforces will be key in delivering a smoother roadmap for companies to transition into a climate-conscious business model while supporting financial and ecological stability in the process. As well as increasing private sector participation against climate change and playing a large role in emission reduction strategies, voluntary carbon markets will act as a stepping stone in the move towards regenerative business that aims to have a net positive impact on the planet.


Photo from Mai Ndombe forest protection project

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