As climate challenges intensify, governments and businesses are confronted with the urgent task of cutting emissions and accelerating low-carbon transitions. To drive this shift, a range of mechanisms has emerged to assign economic value to emission reductions and carbon removal efforts. Among them, carbon trading has become central, divided into compliance and voluntary markets that together form the cornerstone of today’s carbon economy. Continue reading to explore this mechanism.
What are Carbon Trading Markets?
A carbon trading market is a system that assigns economic value to greenhouse gas emissions. Putting a price on each ton of CO₂ released creates financial incentives for organizations to cut emissions or invest in climate solutions. Broadly, these markets operate in two forms: compliance markets, regulated by law, and voluntary markets, driven by self-commitment.
Compliance Carbon Markets (CCM)
These are government-regulated and legally binding, with the EU Emissions Trading System (EU ETS) as the most prominent example. Launched in 2005, it covers major sectors and requires emitters to hold allowances for each ton of CO₂ released.
- Legally binding and overseen by governments or international bodies
- Covers sectors such as power generation, heavy industry, aviation, and maritime transport
- Companies can trade allowances: low emitters sell, high emitters buy
- Generates revenue to finance green transition initiatives
Voluntary Carbon Markets (VCM)
Voluntary carbon markets are driven by self-commitment rather than regulation. They enable companies and individuals to compensate for emissions they cannot yet eliminate by purchasing carbon credits.
- Decentralized and open to private actors
- Each carbon credit = 1 metric ton of CO₂ reduced or removed
- Supports projects like reforestation, renewable energy, and biochar carbon sequestration
- Encourages innovation beyond regulatory requirements and accelerates climate action
Brief Comparison between CCM & VCM
| Aspect | Compliance Carbon Market (CCM) | Voluntary Carbon Market (VCM) |
|---|---|---|
| Exchanged Commodity | Emission allowances administered under cap-and-trade systems. | Carbon offsets issued via project-based mechanisms. |
| Regulation | Governed by national, regional, or international frameworks (e.g., EU ETS, California Cap-and-Trade). | Operates outside mandatory schemes; guided by voluntary standards and protocols. |
| Price Characteristics | Generally higher; prices shaped by regulatory obligations and compliance demand. | Typically lower; influenced by project type, scale, location, co-benefits, and vintage. |
| Eligible Participants | Companies and governments have adopted emission limits established by the United Nations Convention on Climate change | Open to companies, governments, NGOs, and individuals seeking to compensate emissions. |
| Trading Venues | Traded within regulated systems where surplus allowances can be sold to entities in deficit. | No single centralized exchange; credits trade directly, via brokers, or specialized platforms. |
Who Can Participate in the Voluntary Carbon Market?
The accessibility of the voluntary carbon market is one of its most attractive features. Unlike compliance markets, which are restricted to certain industries and geographies, the VCM is open to a wide range of actors:
Corporations and Individuals
Businesses across sectors—such as technology, consumer goods, and aviation—purchase voluntary credits to complement internal reduction efforts. Similarly, individuals use offset platforms to address emissions from travel, energy, or lifestyle, reflecting growing climate responsibility at multiple scales.
Financial Institutions and Investors
Asset managers and investment funds are becoming active participants, not only buying credits to achieve their own sustainability targets but also investing in project developers.
Governments and Municipalities
Though primarily oriented toward compliance systems, local authorities sometimes purchase voluntary credits to reach community-level carbon neutrality pledges.
Non-governmental Organizations (NGOs)
Environmental NGOs often engage in the VCM by supporting or certifying projects, ensuring alignment with broader climate and biodiversity goals.
How the Carbon Credit Market Works
The carbon credit market operates as a system that monetizes the reduction or removal of greenhouse gas emissions. Each carbon credit generally represents one metric ton of CO₂ equivalent that has been either avoided or permanently sequestered. These credits are created through certified projects and then traded between different actors in the market. The process ensures accountability while providing financial incentives for emission reduction. Key steps in how the carbon credit market functions include:
01Project Development
02Certification and Verification
03Issuance of Credits
04Trading and Purchase
05Retirement of Credits
The Significance of the Voluntary Carbon Market
The VCM plays a pivotal role in accelerating the global transition toward net zero. Its significance extends beyond the mere transaction of carbon credits:
Fill Gaps Beyond Regulation
Compliance markets cannot cover all sectors or geographies simultaneously. Voluntary markets step in to channel resources into regions and industries not yet regulated, particularly emerging economies, ensuring that climate finance reaches the areas where it is most urgently needed. This reflects the “all hands on deck” spirit required to confront the climate crisis.
Encourage Innovation
Emerging carbon removal technologies such as direct air capture, enhanced weathering, or biochar carbon sequestration often secure their first financing through the voluntary market. By providing this bridge capital, the VCM accelerates the scaling of solutions that may later become embedded in compliance frameworks, highlighting its role as a catalyst for breakthrough mitigation tools.
Enhance Corporate Responsibility
Participation in voluntary markets allows companies to go beyond minimum regulatory requirements, reinforcing climate leadership and responding to growing investor and consumer scrutiny. Each credit purchased is more than a transaction—it is a signal of shared responsibility and a tangible contribution to collective climate action.
Deliver Co-Benefits
Many projects certified under voluntary standards generate wider environmental and social benefits, including biodiversity conservation, poverty alleviation, renewable energy deployment, or improvements in agricultural productivity. By fostering a high-integrity market, initiatives within the VCM ensure that every action contributes not just to carbon reduction but to the broader resilience of communities and ecosystems.
Why Biochar Carbon Removal Fits Perfectly into the VCM
Among various carbon removal solutions, biochar stands out as particularly suited to the voluntary carbon market. Produced from biomass through pyrolysis, it offers long-term carbon storage while delivering important ecological benefits. Several factors explain why biochar aligns so well with voluntary carbon trading:
Long-Term Carbon Sequestration
Additional Environmental Benefits
Scalability and Local Integration
High Transparency and Standardization
Long-Term Carbon Sequestration
Biochar is remarkably resistant to decomposition, ensuring that the carbon captured in biomass remains out of the atmosphere over extended timescales. This permanence makes biochar credits especially credible compared with short-term offset solutions.
Additional Environmental Benefits
In agricultural applications, biochar improves soil fertility, enhances water retention, and reduces dependence on chemical fertilizers. These ancillary benefits appeal to buyers seeking holistic sustainability outcomes.
Scalability and Local Integration
Biochar can be produced from locally available biomass feedstocks, reducing waste streams while creating new value chains for farmers and rural communities. Its decentralized nature supports distributed climate action in regions where compliance markets may not yet operate.
High Transparency and Standardization
Leading carbon standards, such as Puro.earth, have developed dedicated methodologies for biochar carbon removal. This clarity in measurement, reporting, and verification builds confidence for buyers in the voluntary space. Beston Group’s BST-50S biochar pyrolysis equipment has already been vetted by Puro.earth, enabling faster market entry and quicker access to carbon credits.
Partnering with Beston Group for Carbon Removal
The voluntary carbon market has become an essential tool for advancing global decarbonization, channeling finance into impactful climate solutions. Within this space, biochar carbon removal offers both permanence and co-benefits. Partnering with Beston Group enables organizations to access reliable biochar technology and certified credits, turning climate commitments into measurable action.
