Voluntary Carbon Market (VCM)

What’s In and What’s Out in the Voluntary Carbon Market 2.0

At Rubicon Carbon, we’re laser-focused on building and scaling the Voluntary Carbon Market (VCM) so society can meet its Net Zero goals. But we’re not talking about your parent’s carbon market: VCM 2.0 has learned the lessons of the past and is taking on the critical improvements that must be made in order to earn public trust. 

These changes are coming soon, as several initiatives that aim to raise the bar on carbon credit integrity are poised to impact the VCM in the coming months. In anticipation, we created this reference chart to track what’s out and what’s in as we transition from “VCM 1.0” to “VCM 2.0”. Below, we filled in some context for a few of the most impactful changes. 

Out: Legacy certification bodies

In: The ICVCM and VCMI

Many of the integrity issues plaguing the VCM stem directly from standards maintained by the most prominent certification bodies. These standards rely too heavily on ad-hoc statistical analysis, outdated methodologies that validate procedures rather than results, and a program structure that incentivizes producing as many credits as possible. 

New initiatives from the Integrity Council on the Voluntary Carbon Market (ICVCM) and the Voluntary Carbon Markets Integrity Initiative (VCMI) are seeking to standardize quality benchmarks on both the supply and demand sides, which can be translated across a large number of different carbon projects. 

The ICVCM will begin tagging credits with their integrity label early in 2024, while the VCMI will finalize its Claims Code of Practice, a guiding document for buyers of carbon credits, before the end of this year. 

These processes will also need to be improved to maximize their impact on carbon credit quality, but establishing a single set of integrity standards is a critical step towards VCM 2.0. 

Out: Static baselines and analog forest maps

In: Dynamic baselines and satellite analysis

When it comes to nature-based projects, one of the greatest sources of over-crediting risk is the approaches used to calculate baseline deforestation rates. In VCM 1.0, this process is typically “static”, assuming that an assessment of deforestation from one span of time will apply to the life of projects that last decades. The selection of areas used to define baselines is left up to the project developer, and in some cases, these decisions are based on maps that are literally drawn by hand. 

In VCM 2.0, a new suite of firms, including Rubicon Carbon, are leading the way on approaches that better reflect the complexities of predicting carbon saved from forest loss, with innovations such as dynamic baselines that change through time, analyses backed with time series of satellite images, and data-driven approaches for selecting jurisdictional reference areas that actually resemble the project area. 

Out: Carbon Cowboys

In: Projects that empower local communities

One of the most troubling aspects of recent media attention on the carbon market is the potential role of middleman developers and government officials who may have an incentive to prevent conservation finance from reaching local communities.

Some of these so-called “carbon cowboys” have likely profited from VCM 1.0, by taking advantage of complex land ownership histories that are common in the global south to position themselves as intermediaries between carbon credit brokers and the local communities that must be engaged in order to ensure the success of a forest carbon project.

VCM 2.0 is shining a spotlight on this issue, emphasizing transparency around benefit sharing for local communities, ongoing stakeholder consultations, and the establishment of grievance mechanisms within project regions. At the same time, newly formed independent rating agencies are providing much more insight into the actual, on-the-ground social impact of the projects. 

The newfound emphasis on the local communities is necessary and welcome and will evolve as VCM 2.0 continues to take shape. At the same time, UN policymakers are looking to directly engage Indigenous Peoples and local communities in developing mechanisms for international carbon markets, and new efforts such as the Equitable Earth Coalition are working to develop voluntary standards that center land tenure rights and community benefit. 

Out: Single project credits

In: Carbon credit portfolios

In VCM 1.0, the onus was on the buyer to do project-by-project due diligence. Retiring the wrong credits could turn well-meaning buyers into targets for accusations of greenwashing. 

As with other kinds of assets, carbon credit portfolios distribute risk over a range of different types of projects. Managing a credit portfolio also lets us deploy the tools of finance, helping to guarantee that offsets represent real impact, including adjusting credit retirements to account for risk and deploying active management to address changes that could undermine once-successful projects, such as catastrophic wildfires or changes in governance.

As the risks associated with carbon credits become better understood by the broader market, in VCM 2.0 we are seeing a shift away from purchasing credits from single projects and towards diversified, risk-adjusted carbon credit portfolios.  


These are just some of the changes that are afoot as the voluntary carbon market undergoes the transformation to VCM 2.0. This is vital because carbon markets remain an essential climate finance tool – one we should improve rather than simply cast aside. To be clear, there is a lot more work to be done, and the path to truly high-integrity credits won’t be a straight line. All of these changes add up to a better direction: greater standardization, more rigor, and better use of data. For more on how we get to VCM 2.0, watch the Rubicon Carbon blog. 




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