The voluntary market, is a free market for carbon credits in which anyone can participate in theory (although in practice there are many barriers). Carbon credits represent a tonne of CO2 which has been avoided being emitted or that has absorbed/stored thus prevented from entering the atmosphere and warming the planet. As a result, each carbon credit in the voluntary sector can trace its beginning to a specific carbon project, for example a reforestation program.
How are projects registered? The gate keepers for carbon credits in the voluntary market are the carbon registries (Verra and Gold Standard being the two biggest) they decide whether a project is granted carbon credits, and they are the sole keepers of their carbon registry ledger, which lists every carbon credit that they have issued and their status issued/retired.
Here is a list of some of the best know carbon registries
What is are the most important factors for projects seeking to be registered?
The key concept with carbon projects in the voluntary sector is the concept of additionality. Additionality boils down to a single question, would this project be economically viable without the issuance of carbon credits? To give an example, previously large grid-scale renewable energy projects would have been elgilble for carbon credits. However the precipitous fall in the cost of renewable energy such as wind and solar, has meant that many projects are economically viable without the addition of carbon credits. As a result many of the carbon registries such as Verra are no longer approving renewable energy projects
Methodology: in order for a project to generate carbon credits it must follow one of the accepted methodologies of the carbon registry the project would like to list on. There are a wide variety of methodologies in existence and more being developed, everything from methodologies for CO2 stored in concrete, to biochar.
What the barriers to trading carbon credits?
There are a number of barriers, firstly traditionally if you wish to hold your carbon credits you must posses a registry account in order to take possession of them. Setting up an account is a time consuming process.
Second if you wish to trade carbon credits from different registries, you have to have accounts with each one. The best way to imagine this for example is if you wanted to hold USD, Euro’s and Pounds you would need to open a separate unconnected bank account in each jurisdiction.