The carbon market is an essential tool to help companies and individuals meet their climate goals. A large, effective voluntary carbon market can increase the flow of capital to projects that reduce, avoid, or remove greenhouse gases from the atmosphere. These projects play a key role in helping companies reach their net zero and even net negative emissions targets. To scale up these efforts, we need a system that is transparent, verifiable, and resilient. This is what a new private-sector Taskforce on Scaling Voluntary Carbon Markets has set out to do.

The Taskforce is a group of private sector leaders who are working together to improve the design, operation and integrity of voluntary carbon markets so they can be an efficient and cost-effective tool to help countries, businesses, and individuals meet their climate goals.

A carbon.credit (or allowance) is a tradable "right" or certificate linked to activities that lower the amount of greenhouse gas in the atmosphere. A person or company buys a carbon credit, and it allows them to "offset" their own emission by funding projects that lower greenhouse gas in other ways (e.g. by planting trees or investing in energy efficiency measures).

Purchasing carbon credits keeps CO2 out of the atmosphere, while supporting local economies and creating jobs. The buyer is then able to claim that they have "zero" or even negative emissions. There are two kinds of carbon markets: the compliance market, where regulators set a cap on how much a specific sector can emit, and the voluntary market. The latter is what the Taskforce is focused on improving, as it is the most promising and flexible approach to reaching global climate goals.

There are a variety of players in the carbon market, including carbon credit issuers, buyers, brokers, and project developers. Each of these has a unique perspective on the value of a carbon credit, but the main thing that all buyers and sellers have in common is their goal to reduce or remove greenhouse gases from the atmosphere.

Carbon credits are generally traded between companies or, in some cases, between governments or the public. They work like permission slips, allowing a company or individual to generate a certain number of offsets, which they can then sell on the market.

Project developers can create a carbon credit by following one of a handful of standards, or methodologies, that describe how to verify that a given project is actually reducing or eliminating emissions. Those standards are developed by the organizations, or standards bodies, that oversee each project type. Typically, these organizations are NGOs or environmental or development agencies.

Because the quality of a carbon credit is so dependent on its verification and the specifications of the standard that it follows, these processes can take a long time to complete. This makes it difficult for buyers to find high-quality credits. To address this, some exchanges have set up standard products to guarantee that credits trading under those labels meet a few basic requirements. For example, Xpansiv CBL and ACX have both created a standard product for nature-based carbon credits that are guaranteed to meet certain characteristics, such as a fairly recent vintage and certification from a restricted set of standards.