Understanding Voluntary Carbon Markets: Key considerations for professional accountants and purchasers on the carbon credit life cycle
Voluntary Carbon Markets (VCMs) were created to mobilize private capital at scale towards nature-based climate solutions and innovative low-carbon technologies. The use of carbon credits within VCMs to reduce greenhouse gas emissions (GHG) has been hotly debated and is increasingly scrutinized.
To add clarity and highlight potential risk factors, the International Federation of Accountants (IFAC), CPA Canada and the Institute for Sustainable have published a resource for professional accountants and existing and potential market participants, including businesses, capital providers and the broader public, on the state of VCMs and their future development, Understanding Voluntary Carbon Markets: Key considerations for professional accountants and purchasers on the carbon credit life cycle. This report examines existing VCMs and related standards and best practices to increase confidence in carbon markets and encourage investment in credible GHG reduction projects and schemes. It follows IOSCO's consultation report to promote the integrity and orderly functioning of the VCMs which now forms part of IOSCO's updated 2024 workplan.
This is the first instalment of a three-part series and covers the fundamentals of VCMs:
- Why do voluntary carbon markets exist?
- How do they differ from compliance markets?
- What is a carbon credit and how are they processed and used?
- Who is participating in the market and why?
- What are the criticisms of carbon credits, and risks and challenges for market participants?
- And what are the considerations for verifying, valuing and pricing credits?
Two future installments will dive deeper into the accounting and disclosure issues, particularly against the backdrop of identified risks and areas of manipulation in the market.
Stathis Gould, Director, IFAC: “Professional accountants are instrumental in making well-informed decisions to reduce GHG emissions and must be well-versed in the challenges and opportunities presented by VCMs to advance climate action, safeguard credibility and ensure transparency.”
Download the report: Understanding Voluntary Carbon Markets: Key considerations for professional accountants and purchasers on the carbon credit life cycle.
About IFAC
IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 180 members and associates in 135 countries and jurisdictions, representing more than 3 million accountants in public practice, education, government service, industry, and commerce.