How Big Is the Voluntary Carbon Market?

The voluntary carbon market has grown significantly over the past decade, but its size depends on how the market is measured. Credit issuance, credit retirements, market value, and investment in carbon projects represent different parts of the market. Looking at retirements and market value provides a clearer picture of actual buyer demand.

In 2025, buyers retired about 202 million tonnes of carbon credits, according to MSCI Carbon Markets. More than 10,200 projects were registered across the 18 major carbon credit registries tracked by MSCI at the end of the year. Those projects issued about 294 million tonnes of CO₂e credits in 2025.

MSCI estimates that the primary global carbon credit market was worth just over $1.4 billion in 2025, based on the volume of credits retired and the estimated price paid when they were purchased. The figure was broadly unchanged from the previous year and marked the fourth consecutive year at around this level.

Credit quality is also becoming a stronger driver of market value. MSCI’s average global carbon credit price index fell to $3.50 per tonne of CO₂e in 2025 from $4.30 in 2024. At the same time, higher-rated credits performed better: the MSCI Rated BBB and Above Index rose from $5.60 to $6.80 per tonne.

The market could expand significantly if demand broadens and buyers place greater value on high-integrity credits. MSCI’s modeling suggests the global carbon credit market could reach between $5 billion and $20 billion by 2030, measured in 2025 prices. The range reflects different assumptions about future demand and the availability of high-quality credits.

What is the Difference Between the Voluntary Carbon Market and the Compliance Market? 

The compliance market is regulated by national, regional, or international carbon reduction regimes. These markets operate under a cap-and-trade system where only a certain amount of ‘allowances’ (basically a permit that ‘allows’ you to emit GHGs) are created. This then limits the amount of GHGs that a country or industry can emit. The cap represents a finite supply of allowances.

Compliance carbon markets can include emissions trading systems, where regulated entities trade allowances, as well as other forms of mandatory carbon pricing such as carbon taxes.

Emissions trading has expanded considerably in recent years. According to the International Carbon Action Partnership (ICAP), 41 emissions trading systems were in force worldwide in 2026, covering about 26% of global greenhouse gas emissions. Japan, India, and Vietnam also launched new national-level systems in 2026.

In an emissions trading system, the regulator determines the supply of allowances under the system’s rules. Regulated entities can trade those allowances to meet their obligations.

If an industry can achieve its mandated targets or, better yet, if they emit less than its allowance, it can sell the extra credits to someone else. The ability to trade surplus credits can financially motivate participants to reduce their overall emissions.

Examples of compliance carbon markets include the European Union emissions trading system, the California emissions trading system, the Australian emissions trading system, the British Columbia emissions trading system, and the New Zealand emissions trading system.

Looking beyond emissions trading, the World Bank reports that 87 direct carbon-pricing policies were implemented worldwide in 2026. Together, these policies cover nearly 30% of global greenhouse gas emissions and generated more than $107 billion in public revenue in 2025.

The voluntary carbon market is driven primarily by voluntary demand rather than mandatory emissions obligations. However, voluntary and compliance carbon markets can increasingly interact through specific rules, crediting mechanisms, and international frameworks.

Instead of a cap-and-trade system, the VCM uses a project-based system in which there is no finite supply of allowances.

Within the VCM, more carbon credits can be created through the development of environmental projects. Companies can buy these credits to offset unavoidable emissions and reach their targets. The credits can come from a broad range of emissions-reduction and removal projects.

Voluntary vs. Compliance Market

Carbon Taxes and Emissions Trading Systems

Not all compliance carbon pricing works through emissions trading. Under a carbon tax, a government sets a price on greenhouse gas emissions or the carbon content of fuels.

Under an emissions trading system, regulators establish a system of tradable units and allow market participants to trade them. The two approaches can both put a price on emissions, but they use different policy designs.

The boundary between voluntary and compliance carbon markets is becoming more important as governments develop their own carbon-crediting systems and allow certain credits to interact with regulated markets. This does not mean that all voluntary credits are eligible for compliance use. Eligibility depends on the rules of the relevant jurisdiction or program.

International carbon market cooperation is also expanding under Article 6 of the Paris Agreement. It provides frameworks for countries to cooperate through internationally transferred mitigation outcomes and a UN-supervised crediting mechanism.

The simplest way to distinguish the two markets is this: voluntary carbon markets are primarily driven by voluntary buyer demand, while compliance markets are created by regulatory obligations.

But the two systems can overlap when governments allow specific carbon credits to be used within regulated frameworks. Understanding that distinction is essential because a carbon credit is not automatically equivalent to a compliance allowance.

What Type of Environmental Projects are Found in the VCM? 

The VCM offers a wide variety of environmental projects to interested investors. The goal of all of these projects is to reduce or remove GHG emissions or carbon dioxide from the atmosphere.

Voluntary carbon market projects can reduce greenhouse gas emissions, avoid emissions that might otherwise occur, or remove carbon dioxide from the atmosphere. Projects can include renewable energy, methane capture, clean cooking, forest conservation, reforestation, agricultural practices, biochar, and engineered carbon removal technologies.

The distinction between emissions reductions and carbon removals is increasingly important in today’s market. Reduction projects prevent or reduce greenhouse gas emissions, while removal projects take carbon dioxide from the atmosphere and store it in forests, soils, geological formations, or other long-term carbon sinks.

Community-based projects typically produce smaller volumes of carbon credits but also generate more additional socio-economic and environmental co-benefits.⁵

A co-benefit can include anything from saving endangered animals from extinction to improving local water quality or creating sustainable jobs. Project developers often align co-benefits with the UN’s Sustainable Development Goals (SDGs) as these co-benefits can help to increase the overall value of a credit.

Large industrial projects are capable of producing larger volumes of carbon credits but don’t always generate strong co-benefits. As a result, credits from these large projects may trade at a discount compared to the projects that achieve SDGs.

What Is Additionality?

Additionality is a key quality criterion used in many carbon-crediting methodologies. It asks whether the emissions reduction or removal would have happened without the incentive provided by the carbon-credit project. If an activity would have occurred anyway, issuing credits for it may not represent an additional climate benefit.

Additionality is only one part of carbon credit quality. Buyers should also consider how emissions reductions or removals are quantified, how long carbon is stored, whether emissions are displaced or leaked elsewhere, whether credits are independently verified, and whether the same climate benefit could be counted more than once.

What Is Permanence?

Permanence refers to how long a carbon removal or emissions reduction remains effective. This is especially important for projects that store carbon in forests, soils, or other biological systems, where carbon can be released again through wildfire, drought, disease, land-use change, or other events. High-integrity carbon-crediting systems need mechanisms to manage and compensate for these reversal risks.

What Is Leakage?

Leakage occurs when an emissions reduction in one location causes emissions to increase elsewhere. For example, protecting a forest in one area could shift deforestation activity to another area if the underlying drivers are not addressed. Carbon-credit methodologies use different approaches to identify and manage these risks.

Avoiding Double Counting

A carbon reduction or removal should not be counted more than once. Double counting can occur through multiple forms, including double issuance, double claiming, or double use of the same credit. Carbon-credit registries and other tracking systems help identify and record credits so they can be traced from issuance through retirement.

The different types of projects can be grouped into these two major categories:

Emissions Reduction and Avoidance

• Renewable energy
• Methane capture
• Waste and landfill-gas management
• Clean cooking
• Energy efficiency
• Industrial emissions reduction
• Forest conservation and avoided deforestation
• Improved agricultural practices

Carbon Removal

• Afforestation and reforestation
• Soil and land-based carbon removal
• Biochar
• Direct air capture
• Mineralization
• Enhanced weathering
• Other engineered carbon-removal technologies

Carbon removals are still a relatively small part of the voluntary carbon market, but demand is increasing. MSCI estimates that about 10% of the carbon credits retired in 2025 were associated with emissions removals, while the remaining 90% came from emissions-reduction activities. Nearly all removal-based retirements were sourced from nature-based projects.

Nature-Based vs. Engineered Carbon Removal

Carbon-removal projects can be broadly divided into nature-based and engineered approaches. Nature-based removals include activities such as reforestation, afforestation, improved land management, and other projects that increase biological carbon storage. Engineered approaches use technologies or industrial processes to capture carbon dioxide and store it in durable forms or geological formations.

The two categories differ in cost, measurement challenges, permanence, scalability, and risk of carbon reversal. Buyers should evaluate the specific project and methodology rather than assuming that one category is automatically higher quality than another.

Who participates in the VCM?

There are several key participants that are actively part of the VCM. These participants include:

• Project developers. Project developers work to produce the carbon credits that other sectors or industries will buy.
• Consumers. This group includes private companies, NGOs, governments, universities, and individuals that purchase carbon credits from producers.
• Retail traders. Traders purchase credits in bulk from suppliers, bundle the credits in portfolios, and then sell them to the end buyer, usually for a commission.
• Brokers. A broker will buy carbon credits from a trader and market them to a consumer. A broker will typically charge a commission. It is common for a broker to also act as a trader.
• Third-party verifiers. These are organizations, typically NGOs, that verify that a project meets its stated objectives and volume of emissions.

What is the pricing for VCM vs the compliance markets?

The pricing of carbon credits in the VCM is not as straightforward as it is in the compliance market. This is due to the many types of environmental projects that are available. Prices vary widely according to the category of the project (e.g. renewable energy vs. forestry) and even within a particular category. You can follow live carbon prices right here.

Several other variables also contribute to how a carbon credit is priced, including:

• Size of project. Larger projects that produce higher volumes of carbon credits often have a lower price. Smaller projects are often more expensive to implement but produce fewer carbon credits.
• Location of offset. Where does the environmental project take place? Locations where there is conflict and higher risk may make the project more expensive.
• Vintage. What year did the emission reduction occur? Older projects are typically priced lower.
• Quality. The standard in which the project was certified can affect the price.
• Co-benefits. A co-benefit is any positive impact that is produced by the project above and beyond GHG emissions. For instance, if a project creates jobs for local communities or increases biodiversity, these are types of co-benefits.

According to a 2020 report by the World Bank, carbon prices on the VCM start at less than US$1/ton CO2e and increase to US$119/ton CO2e. And the price for almost half of emissions are at less than US$10/tCO2e.⁶

Rabobank, a Dutch multinational banking financial services company, reports that renewable energy projects have the lowest average prices at US$ 1.4/ton CO2e while projects in forestry and land use are on the higher end of the scale at US$ 4.3/ton CO2e^.7

Pricing can also be affected by the co-benefits generated by the project. Projects that meet the UN’s SDGs can help to increase the value of the carbon credits.

Larger scale projects that don’t generate as many co-benefits or don’t meet the additional SDGs may trade at a discount.

To meet the temperature goals outlined in the Paris Agreement, the High-Level Commission on Carbon Prices stated that prices of at least US$40-80/tCO2 were necessary by 2020 and US$50 to $100/tCO2e by 2030.⁸ The OECD estimates a price of US$147 is needed by 2030 to reach net-zero emissions by 2050.⁹ 

In the compliance market, the current weighted carbon price is $34.99.¹⁰ This is higher than the VCM pricing but still below the High-Level Commission threshold.

The bottom line when looking at both the VCM and compliance markets is that the current carbon prices are too low to meet targets.

Where do these Credits Trade?

There is currently no centralized voluntary carbon market.¹¹ Instead, project developers, or companies can sell their credits directly to buyers or through a broker. Project developers can also sell their credits to a retailer who can then resell the credits to a buyer. All voluntary credits must be verified by an independent third party and must adhere to existing standards.

Voluntary Demand Scenarios

There is incredible demand projected for the voluntary market. According to the Taskforce on Scaling Voluntary Markets, the market will grow to around 15-fold from 0.1 to 1.5-2 GtCO2 of carbon credits per year in 2030.

And that will sacle up to a maximum of 100-fold by 2050 (7-13 GtCO2 of carbon credits per year).

Producing this incredible scale of carbon elimination will be a massive challenge. And it will provide many nations and corporations with incredible opportunities. As the taskforce mentions in their 2021 report,

“This underlines the need for emissions reduction to be implemented as urgently as possible, and likely at a faster pace than identified in the NGFS scenarios.”

Who verifies the Variable Carbon Market Credits? 

When purchasing carbon offset credits, consumers should only consider offsets that are third-party verified.

There are a number of standards that use different methodologies for measuring and verifying carbon emission reduction. These standards provide a robust verification process to ensure the credibility of emission reduction projects. The most widely used standard include:

• Verra (The Verified Carbon Standard)
• Plan Vivo
• The Gold Standard
• The American Carbon Registry
• Climate Action Reserve
• The Verified Carbon Standard Program

Click Here to read more detail on who verifies carbon credits.

Can regular Mom-and-Pop Investors Invest in Voluntary Credits?

The VCM is open to anyone who wants to participate. From businesses to governments, non-profits, universities, and even individual investors.

If you are taking a long flight or vacationing on a luxury yacht and you want to absolve your environmental sins, you can buy carbon credits to offset your emissions. In fact, many airlines are making it easy for individuals to offset their flights. They list the amount of CO2 emitted by the flight and then give customers the opportunity to fly net-zero for a price which is offered at checkout.

The Bottom Line

Voluntary carbon credits are here to stay. More and more companies and individuals are feeling the need to do their part to reduce their carbon footprint. And, for companies that want to achieve carbon neutrality, the VCM is often a necessary tool.

References

¹ Climate Neutral Group. What Exactly is 1 Tonne of CO2? Accessed Aug 4, 2021
² Carbon Offset Guide. Voluntary Offset Program. Accessed Aug 3, 2021
³ Carbon Offset Guide. Mandatory & Voluntary Offset Markets. Accessed Aug 3, 2021
⁴ UN Climate Change. Emissions Trading. Accessed Aug 3, 2021
⁵ S&P Global. Voluntary Carbon Markets. Accessed Aug 3, 2021
⁶ World Bank. State and Trends of Carbon Pricing 2020. Accessed Aug 4, 2021
⁷ Rabobank. Can voluntary carbon markets change the game for climate change? Accessed Aug 5, 2021
⁸ World Bank. Report of the High-Level Commission on Carbon Prices. Accessed Aug 5, 2021
⁹ UN Environment Programme. Discussion Paper on Governmental Carbon-Pricing. Accessed Aug 5, 2021
¹⁰ Carbon Credit Capital. Value of Carbon Market Update 2021. Accessed Aug 5, 2021
¹¹ White & Case. Voluntary Carbon Markets:A Blueprint. Accessed Aug 5, 2021