Voluntary Carbon Credits: The Market Is Splitting in Two

Two Markets, One Name

Here's something that caught my attention: in 2025, corporate climate commitments surged 227%. But actual carbon credit retirements — the number of credits companies actually used — fell 7%.

Let that sink in. More companies are pledging to go net-zero than ever before. But fewer are buying and retiring the carbon credits that are supposed to get them there.

What's going on? The voluntary carbon market is going through an identity crisis — and what's emerging is essentially two separate markets masquerading as one. On one side, you have high-integrity credits backed by rigorous verification, commanding premium prices. On the other, you have a shrinking pool of cheap, questionable offsets that buyers are increasingly afraid to touch.

I think this split is actually a good thing. But it's creating confusion, opportunity, and risk all at the same time. Let me walk you through it.

$1.6-2.5BVoluntary Carbon Market Value (2025)Source: Industry estimates, Ecosystem Marketplace

The State of the VCM in 2026

The voluntary carbon market was valued at roughly $1.6 to $2.5 billion in 2025, depending on whose estimates you use. That's tiny compared to the $114.3 billion compliance market. But it's a market with outsized influence on corporate climate strategy and enormous growth potential — projected to grow at 20-38% CAGR over the next several years.

The problem is that the VCM spent the last few years in a credibility crisis. High-profile investigations revealed that many popular offset projects — particularly tropical forest protection (REDD+) projects — weren't delivering the emission reductions they claimed. Companies that had loudly trumpeted their carbon-neutral status found themselves accused of greenwashing.

The market's response has been a dramatic flight to quality. And that's where the split comes in.

The Quality Revolution: CCP Tags and Price Divergence

The Integrity Council for the Voluntary Carbon Market (ICVCM) introduced its Core Carbon Principles (CCP) framework to separate the wheat from the chaff. Credits that meet CCP standards are tagged, independently verified for additionality, permanence, and genuine environmental benefit.

The market's verdict has been swift and decisive:

• CCP-tagged credit retirements doubled from 3% to 7% of total retirements in 2025
• High-rated credits trade at ~$14.80/tonne
• Low-quality credits languish at ~$3.50/tonne

That's a 4x price difference for products that are nominally the same thing — one tonne of CO2 avoided or removed. But the market is telling us they're very much not the same thing.

$14.80/tHigh-Quality Credit PriceSource: Voluntary carbon market data, 2025

I think this price divergence is going to widen further. Companies with serious climate commitments and reputational risk to manage are gravitating toward higher-quality credits, even at premium prices. The cheap end of the market is increasingly the domain of buyers who want to check a box rather than make a genuine impact.

Technology Removals: The Premium Tier

If high-quality nature-based credits are the upper tier, technology-based carbon dioxide removal (CDR) is the penthouse.

Direct air capture (DAC), biochar, enhanced weathering — these technologies physically remove CO2 from the atmosphere and store it permanently. They're expensive, they're verifiable, and they command extraordinary premiums:

• Direct air capture credits: $400-600+ per tonne
• Biochar credits: $150-300 per tonne
• Enhanced weathering: $100-250 per tonne

Compare that to the $3.50 for a low-quality avoidance credit. We're not talking about a price gap — we're talking about entirely different asset classes.

The Microsoft Effect

And then there's Microsoft. The tech giant has committed to being carbon negative by 2030, and it has backed that commitment with its checkbook in a way that no other company has come close to matching.

Microsoft now accounts for over 80% of all forward carbon dioxide removal purchase commitments. That's not a typo — one company dominates the entire forward CDR market.

The total value of forward CDR contracts rose 58% year-over-year to $5.8 billion in 2025. Microsoft's contracts with companies like Climeworks (direct air capture) and Heirloom (limestone-based carbon capture) represent the bulk of this.

I have mixed feelings about this concentration. On one hand, Microsoft's purchasing is single-handedly scaling up CDR technologies that the world desperately needs. On the other hand, having a single buyer dominate a market this much creates fragility. If Microsoft's climate strategy shifts for any reason, the entire CDR market feels it.

Nature-Based Solutions: Still Big, Getting Better

Despite the quality concerns, nature-based carbon credits aren't going away. In fact, nature-based solutions attracted $9 billion in funding in 2025 — a massive amount that reflects continued belief in the sector's potential.

The difference is that the bar for quality is much higher now. Projects need to demonstrate:

• Additionality: The emission reductions wouldn't have happened without carbon credit revenue
• Permanence: The stored carbon won't be released back (a major concern with forests that can burn)
• Accurate measurement: Rigorous monitoring, reporting, and verification (MRV)
• Community benefit: Positive impacts on local communities, not just carbon accounting

Projects that clear these hurdles — high-quality reforestation, mangrove restoration, regenerative agriculture with robust monitoring — can still command solid prices. The ones that can't are being left behind.

Article 6 and the Two-Tier Market

I mentioned Article 6 of the Paris Agreement in my global markets overview. For the voluntary market, Article 6.4 creates a very specific dynamic: the concept of "authorized" versus "non-authorized" credits.

Here's the distinction. Under Article 6, when a country authorizes a carbon credit for international transfer, it applies a "corresponding adjustment" — meaning it doesn't count that emission reduction toward its own national climate target. The credit is essentially transferred from the host country's ledger to the buyer's.

Non-authorized credits don't get this adjustment. The emission reduction stays on the host country's books AND the buyer claims it. Some argue this is double-counting.

For the voluntary market, this creates two tiers:

1. Article 6 authorized credits: Higher integrity, corresponding adjustment applied, likely higher prices
2. Non-authorized credits: Still usable for voluntary purposes, but without the same accounting rigor

I think this will become an increasingly important distinction as countries' own climate targets get more ambitious. If a country needs every emission reduction it can get to meet its Paris Agreement goals, it may be less willing to authorize credit exports.

CORSIA: The Aviation Wild Card

Here's a demand driver that doesn't get enough attention. The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) requires airlines to offset the growth in their international emissions above 2019 levels.

CORSIA needs approximately 200 million tonnes of CO2 in eligible credits by January 2028. That's a huge slug of demand heading toward the market in the next two years.

The catch: CORSIA has its own eligibility criteria that filter for quality. Not just any credit will do. This creates yet another tier in the market — credits that are CORSIA-eligible carry a premium because airlines need them for compliance.

For the voluntary market overall, CORSIA demand is bullish. It soaks up supply of higher-quality credits and could contribute to price increases across the quality spectrum.

What the Skeptics Get Wrong (and Right)

I want to address the elephant in the room. Carbon offsets have earned a lot of skepticism, and some of it is deserved. Here's my honest assessment:

What the skeptics get right:

• Many historical offset projects were genuinely low quality
• "Carbon neutral" claims based on cheap avoidance credits were often misleading
• The market lacked standardization and transparency for too long

What the skeptics get wrong:

• The market hasn't stood still — quality frameworks like CCP are a real response to these problems
• Voluntary credits at their best fund genuine climate action in developing countries
• Technology-based removal credits are physically verifiable and permanent
• The perfect shouldn't be the enemy of the good — carbon pricing of any kind changes behavior

The voluntary market in 2026 is dramatically different from what it was in 2022. The question isn't whether offsets can work — it's whether the quality revolution can outpace the credibility crisis.

My Take

I'm cautiously optimistic about the voluntary carbon market, but with some important caveats.

The quality split is healthy. Price signals that reward integrity and punish low quality are exactly what this market needs. The $14.80 vs. $3.50 divergence tells me the market is starting to self-correct.

CDR is the future, but it's still tiny. Technology-based removals represent the most defensible form of carbon crediting. But at current prices ($150-600+/tonne), they're accessible only to deep-pocketed corporates like Microsoft. Scale and cost reductions are essential.

Forward contracts are the smart money signal. The 58% increase in forward contract values to $5.8 billion tells me that sophisticated buyers are locking in supply of high-quality credits, expecting prices to rise. When buyers compete for future supply, that's bullish.

Watch CORSIA demand. The 200 million tonne requirement by 2028 is a real deadline with real compliance consequences. Airlines will need to secure eligible credits, and that demand will ripple through the market.

The risk is regulatory fragmentation. With Article 6 creating authorized vs. non-authorized tiers, CORSIA having its own criteria, and national systems proliferating, the voluntary market could become too complex for smaller buyers to navigate. Simplification and interoperability will be key.

The Bottom Line

The voluntary carbon market is smaller than the compliance market, messier, and more controversial. But it's also where some of the most important innovation in climate finance is happening. The flight to quality is reshaping which credits have value and which don't. Technology-based removals are creating a new premium tier. And regulatory developments like Article 6 and CORSIA are injecting real demand into the system.

If you're watching this space — and I think you should be — focus on quality. The days of cheap, undifferentiated carbon offsets are numbered. The future belongs to verified, high-integrity credits that can withstand scrutiny.

Next up in this series: a practical guide to actually investing in carbon credits in 2026 — the vehicles, the risks, and the opportunities.

This is part 4 of our carbon credits series. Not financial advice. Always do your own research.