July 2, 2022Resources
Carbon markets refer to systems that allow companies, governments, and other organizations to buy and sell carbon credits as a means of offsetting or addressing their carbon emissions. These markets can be either compliance-based or voluntary.
Compliance carbon markets are established by governments as a means of achieving their carbon reduction targets. These markets operate on a mandatory basis, meaning that participating organizations are required by law to participate in the market and to meet certain carbon reduction targets.
One example of a compliance carbon market is the European Union's Emissions Trading System (EU ETS). Under the EU ETS, companies that emit large amounts of carbon dioxide (CO2) are required to purchase a certain number of carbon credits each year. These credits can be obtained through a variety of means, including purchasing them from other companies that have exceeded their carbon reduction targets, or by investing in renewable energy projects that result in a net reduction in carbon emissions.
Voluntary carbon markets are not established by governments and participation is voluntary. These markets allow companies, governments, and other organizations to offset their carbon emissions on a voluntary basis, either to meet their own sustainability goals or to demonstrate their commitment to reducing their carbon footprint.
One example of a voluntary carbon market is the Gold Standard, which is a top accreditation verifier for carbon credits that are generated through high-quality, sustainable development projects.
Overall, the key differences between compliance and voluntary carbon markets are:
Mandatory vs. Voluntary Participation: Compliance carbon markets operate on a mandatory basis, while voluntary carbon markets are voluntary.
Regulatory vs. Non-Regulatory: Compliance carbon markets are established and regulated by governments, while voluntary carbon markets are not.
Compliance carbon markets are an important tool for governments to achieve their carbon reduction targets, while voluntary carbon markets provide companies and other organizations with a way to offset their carbon emissions on a voluntary basis. Both types of carbon markets are important in the transition to a low-carbon economy.
Find more important climate terms in our glossary.
About us: CHOOOSE™ is a venture-backed leader in technology-based climate action, building digital tools so that everyone, anywhere, can easily integrate climate action into everyday life and business. Through flexible integrations, customer-friendly interfaces, automated carbon measurement, and a connected marketplace of climate solutions, CHOOOSE delivers a complete platform that enables its partners to build and manage high-impact climate programs. Learn more at www.chooose.today.