What is VCM?

Voluntary carbon markets (“VCMs”) are markets where entities buy carbon credits for voluntary use (e.g., to offset carbon emissions and support a claim about their climate performance with traceable results). This is in contrast with ensuring compliance on account of an obligation.

How does it help?

Carbon credits under the VCMs are most often issued in relation to climate change mitigation activities or projects. The projects are designed to mitigate climate change through emission reduction. This includes by investing in renewable energy, preventing deforestation, or through carbon removal and sequestration, such as planting trees or technology-based carbon capture mechanisms.

Given the newness and the recent attention received on this subject (VCMs), many of the challenges and potential vulnerabilities identified with respect to VCMs relate to market integrity.


The International Organisation of Securities Commission (“IOSCO”) had issued a report on a set of “Good Practices” to promote the integrity and orderly functioning of the VCMs[1]. IOSCO had launched a 90-day public consultation at COP28 on the same (“Consultation Report”)[2] that expired in February 2024.

The Good Practices intend to achieve sound market structures and enhance financial integrity in the VCMs such that trading in carbon is in an orderly and transparent way.

The Consultation Report is based on a discussion paper issued by IOSCO in November 2022[3]. This earlier discussion paper laid out the key considerations for regulators on areas that need to be considered by regulators of various jurisdictions on potential vulnerabilities in VCMs.

Who is this relevant for?

Regulators, governmental authorities, and market participants.

What does the Consultation Report cover?

  • Seeks market feedback on the proposed set of Good Practices.
  • Highlights the Key Considerations and initiatives addressing the Key Considerations.

What are the set of Good Practices?

What are the set of Key Considerations?

These Good Practices serve as a starting point for jurisdictions to develop their regulatory frameworks for VCMs, with appropriate consideration for variations in legal frameworks and market conditions. The aim is to encourage the global development of sound and efficient VCMs.

Industry bodies like [4]International Swaps and Derivatives Association, [5]Futures Industry Association, and [6]Global Financial Markets Association have submitted their comments on the Consultation Report.

The Consultation Report on VCMs is a landmark document that underscores the critical role of financial markets in addressing climate change. Through its comprehensive analysis and forward-looking recommendations, the report sets the stage for the evolution of robust, transparent, and effective voluntary carbon markets. As these markets continue to grow, implementing IOSCO’s recommendations will be pivotal in ensuring they are a credible tool in the global effort to achieve a sustainable and low-carbon economy.

[1] The report covers the challenges that are faced in the process of creation of Voluntary Carbon Credits, their issuance and trading.

A carbon credit is a transferable instrument, representing an emission reduction or removal of one tonne of CO2 or CO2 equivalent (CO2e).

As defined by the Integrity Council for the Voluntary Carbon Market (ICVCM), a carbon credit is “a tradable financial instrument that is issued by a carbon crediting program. A carbon credit represents a greenhouse gas emission reduction to, or removal from, the atmosphere equivalent to one tonne of carbon dioxide equivalent, calculated as the difference in emissions from a baseline scenario to a project scenario. Carbon credits are uniquely serialized, issued, tracked and retired or administratively cancelled by means of an electronic registry operated by an administrative body, such as a carbon-crediting program.”






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