The voluntary carbon market is where companies, organisations and individuals buy carbon credits by choice rather than because a law requires it. Compliance markets, by contrast, are created by government rules.
It is one part of the wider topic covered in what is carbon offsetting, which also explains where offsets fall short. This page focuses on how the voluntary side is organised and how it differs from regulated carbon markets.
What the voluntary carbon market is
A carbon credit is a tradable unit that represents emission reductions or removals from a project. In the voluntary market, a buyer decides to purchase credits without a legal duty to do so. The reasons vary: a business may want to address emissions it cannot yet eliminate, or an individual may want to balance part of a flight or a household footprint.
Verra, which runs one of the best-known crediting programmes, explains the motivation this way: individuals, companies and organisations often cannot, in the short term, completely reduce their greenhouse gas emissions, so they buy credits on the voluntary market to offset the emissions that cannot yet be avoided. The same programme states that the voluntary carbon market is distinct from compliance markets, which are largely driven by government policies or legally binding agreements.
Because no regulator forces participation, the market relies on private standards, independent verification and public registries to give buyers confidence. That is why the question of quality, covered in more detail in the guide to how carbon credits work, matters more here than in a system with a fixed legal framework.
How compliance markets work
A compliance market exists because a government or treaty sets a limit and requires covered organisations to meet it. The best-known regional example is the European Union Emissions Trading System. The European Commission notes that the system was set up in 2005 and is now in its fourth phase (2021-2030). Its pages describe an emissions cap that limits emissions year after year, and a Union Registry that keeps track of ownership of allowances.
In that kind of system, the tradable item is usually an allowance issued under the legal cap, not a credit from a stand-alone project. Participants must hold enough allowances to cover their emissions, so the demand is created by the rule itself.
International aviation provides another regulated example. The International Civil Aviation Organization describes the Carbon Offsetting and Reduction Scheme for International Aviation, known as CORSIA, as the first global market-based scheme that applies to a sector. It complements other efforts within aviation, such as technological innovations, operational improvements and sustainable aviation fuels. CORSIA uses offsetting units, but the obligation to use them comes from the scheme, not from a company’s own choice.
The main differences between the two
The two market types overlap at the edges, but their core logic differs. The table summarises the usual contrast.
| Feature | Voluntary market | Compliance market |
|---|---|---|
| Why participants buy | Choice, such as a climate commitment | A legal or treaty obligation |
| What is traded | Credits issued by crediting programmes | Allowances under a cap, and in some systems approved credits |
| Who sets the rules | Private standards and registries, plus independent integrity bodies | Governments or international bodies |
| Source of demand | Voluntary climate goals | The regulatory limit itself |
The contrast follows how Verra describes voluntary markets and how the European Commission describes the EU system.
The boundary is not rigid. Verra notes that in some compliance markets, entities can purchase and use carbon credits generated by carbon projects to comply with the respective regulations. The European Commission’s pages also include a section on the use of international credits. So a credit created under a voluntary programme can sometimes be relevant to a regulated scheme, depending on the rules of that scheme.
Who sets quality rules in the voluntary market
With no single regulator, quality comes from several layers. First are the crediting programmes, which publish methodologies, require validation and verification, and keep registries. Verra describes its programme as the largest greenhouse gas crediting programme in the world and says its projects have reduced or removed more than one billion tons of carbon and other greenhouse gases. Other programmes take different approaches; the guide to carbon offset standards compares them.
A second layer is the Integrity Council for the Voluntary Carbon Market. According to its own materials, the Core Carbon Principles label is designed to set and maintain a global threshold standard for quality in the voluntary carbon market, making it easier for buyers to tell apart credits that represent real and verifiable climate impact. The principles cover governance, emissions impact and sustainable impact, including requirements such as additionality and permanence.
The Integrity Council also works alongside regulated schemes. On its assessment status page it explains that programmes already approved for CORSIA need only provide evidence that they meet the relevant additional criteria in its assessment framework. That is one example of the voluntary and compliance worlds being connected through shared quality tests.
Limits and cautions for buyers and readers
A credit being available on the voluntary market does not by itself say anything about its quality. Differences in project type, methodology, monitoring and risk of reversal can all affect what a credit represents. A reader assessing a claim should look at what the credit is, which programme issued it, and whether it is tracked in a public registry.
Several recurring questions apply to any purchase:
- Is the underlying emission reduction or removal additional, meaning it would not have happened without credit revenue?
- If the benefit can be reversed, for example by a forest fire, what protects against that?
- Is the same reduction counted only once, avoiding double issuance, double claiming and double use?
- Is the credit retired in a registry so nobody else can use it?
These questions mirror the principles the Integrity Council publishes. Its text says additional reductions are those that would not have occurred in the absence of the incentive created by carbon credit revenues, and that double counting covers double issuance, double claiming and double use.
Anyone using credits as part of a public climate claim should also check the advertising and consumer protection rules where they operate, because the wording of a claim can carry legal risk even when the underlying credit is sound. This page is general information and not financial, investment or legal advice, and it does not recommend any project, broker or programme.
Frequently asked questions
Is the voluntary carbon market regulated?
It is not governed by one legal cap the way a compliance system is. It is shaped by private standards, registries and integrity bodies, and general rules such as consumer and advertising law can still apply to claims made about credits.
Can voluntary credits be used in compliance markets?
Sometimes. Verra notes that in some compliance markets, entities can use carbon credits from carbon projects to comply with the rules. Whether a particular credit qualifies depends on the rules of the scheme in question.
What is the difference between a credit and an allowance?
An allowance is issued under a legal cap and gives the right to emit a set amount. A credit comes from a project that reduces or removes emissions and is issued by a crediting programme. Some systems allow limited use of credits alongside allowances.
Who checks that voluntary credits are real?
Independent validation and verification bodies check projects under a programme’s rules, a registry tracks issuance and retirement, and groups such as the Integrity Council assess programmes against published principles.
