What is the voluntary carbon market?
The voluntary carbon market consists of carbon offset trades that are not required by regulation. It can be divided into two parts: the ‘over-the-counter’ offset market, and the Chicago Climate Exchange which is a voluntary but legally binding cap and trade system.
If you buy an offset, you are effectively paying someone else to reduce or avoid emissions on your behalf, so as to prevent a net increase in global emissions.
Why do participants trade in the voluntary market?
According to a survey of voluntary offset suppliers by New Carbon Finance and Ecosystem Marketplace, the three most important motivations for voluntary offset purchases in 2008 were:
1) corporate social responsibility
2) public relations/ branding
3) Offset purchases are easier than direct emissions reduction
Who buys voluntary offsets?
In 2008, according to New Carbon Finance and Ecosystem Marketplace, two thirds of voluntary offsets were purchased by private companies, with purchasing for investment or resale the largest overall motivation, at 35 per cent.
The percentage of businesses purchasing credits for retirement dropped to 29 per cent in 2008, from 50 per cent in 2007.
NGOs purchased only 1 per cent of transaction volume, while individuals seeking to offset their personal carbon footprints shrank to 2 per cent, from 5 per cent in the previous year.
