Carbon Markets

Certified & Voluntary Markets

Offsets from carbon emission reduction projects can be either certified, such as CERs (Certified Emission Reductions from CDM projects) or voluntary (coined VERs: Voluntary/Verified Emission Reductions).

Certified Market

To participate in the certified market, projects must follow the UNFCC or European Union requirements which relate to the Kyoto Protocol. For projects in developing countries, the appropriate mechanism is the Clean Development Mechanism (CDM) while Joint Implementation is used for projects in developed countries.

Voluntary Market

Many corporations, organizations, and individuals in non-Kyoto Protocol countries (such as the US) are actively seeking ways to offset their greenhouse gas emissions. In addition, many organizers of international events for example are willing to voluntarily offset the emissions from their events.

The types of projects whose credits would be traded on the voluntary carbon market are typically similar to those traded through CDM in terms of their reducing greenhouse gas emissions. However, projects may choose to utilize this market instead of the certified market for a variety of reasons. For example, the project may be too small to be economical under the CDM, it may be in the wrong location, or there may not be an approved methodology to follow under the CDM.

There are different voluntary markets throughout the world, each with its own requirements. The most credible ones require verification, monitoring, and assurance that the credits are not being double counted.

Future Trends

In 2012, the first commitment period of the Kyoto Protocol will expire. The impact on the voluntary and certified markets is unknown but negotiations are already taking place over the targets for the second commitment period. Most analysts agree that the carbon market is here to stay and that carbon emission reduction credits will become a globally traded commodity. Furthermore, in anticipation that voluntary credits will also be traded under some kind of a global trading mechanism, even with entities within countries that ratified the Kyoto Protocol, there is interest in the voluntary market.

Elysium can help guide projects through the decision and implementation process in both the voluntary and certified markets.