Voluntary carbon market
Also called: VCM · Topic: Environment and Sustainable Development · NCERT: Beyond NCERT
Meaning
In a voluntary carbon market (VCM), companies and individuals buy carbon credits by choice. No law forces them to buy. One carbon credit equals one tonne of CO2-equivalent reduced, avoided or removed. Buyers use credits to offset their own emissions, meaning they cancel them out on paper. A credit is only genuine if it passes four tests:
- Additionality: the cut would not have happened anyway.
- Permanence: the cut is not reversed later.
- No leakage: emissions do not simply shift elsewhere.
- No double counting: the same cut is not claimed twice.
Example
An airline buys credits from a forest-protection project to claim "carbon-neutral" flights. Standards such as Verra, Gold Standard and ICVCM's Core Carbon Principles certify such credits. Some REDD+ forest credits faced integrity scandals because the claimed cuts were doubtful. India's Carbon Credit Trading Scheme 2023 also has an offset mechanism under which projects can earn credits voluntarily.
Don't confuse with
- Compliance carbon market: created by law, and covered firms must surrender allowances or credits for their emissions.
- Green credit: a unit for voluntary green actions under India's Green Credit Rules 2023. It is not a carbon credit.
Related concepts
- Internalisation of externalities
- Carbon pricing
- Green tax
- Social cost of carbon
- Internal carbon price
- Fossil fuel subsidies
- Cap-and-trade
- Carbon market
- Compliance carbon market
- Carbon credit