TECHNICAL ARTICLE
The Role of Voluntary Carbon Credit Markets in Supporting CCUS
It is an exciting time for carbon markets. After years of unsuccessfully trying to reach a consensus, mechanisms for Article 6.4 of the Paris Agreement received approval at COP29. The door is now open for countries and businesses alike to trade credits on a UN carbon market. This article explores how the carbon credit space has given rise to a business model for technologies that reduce or remove carbon dioxide.
By Eve Pope, IDTechEx
Existing carbon trading markets
Of course, the concept of a carbon market is nothing new. For many decades, the importance of finding a financial mechanism to address CO 2 emissions has been recognized, but the global approach has remained disjointed. Compliance carbon trading markets such as the EU ETS( Emissions Trading System), where industries must lower their carbon footprint or purchase additional allowances for unabated emissions, have already been established by governments in several regions. About ¼ of all global anthropogenic CO 2 emissions are now covered by some form of compliance carbon pricing.
Businesses not already covered by carbon pricing regulation have been able to access voluntary markets. In voluntary carbon markets, corporates or individuals set climate targets, and voluntarily purchase carbon credits from environmental projects that can reduce or remove carbon dioxide emissions, in order to reach them.
Voluntary carbon credit markets have weathered several scandals pertaining to poor quality credits in recent years. The complex and sometimes volatile nature of these markets has led some to view the carbon credit space as“ the wild west”. However, while most of the voluntary market saw a downturn in 2023, corners of the market selling durable, carbon removal credits are flourishing and playing a vital role in supporting emerging technologies such as direct air capture and CO 2 utilization in concrete.
Carbon removal credits are restoring trust in voluntary action
By volume, most carbon credits sold are based on CO 2 reduction / avoidance. Examples of projects that reduce CO 2 include avoided deforestation or switching to cleaner cookstoves. However, to calculate how much CO 2 has been avoided or reduced, a hypothetical baseline scenario must be established. Inaccurate choice of this baseline has led to some carbon credit projects claiming a much larger environmental benefit than was actually achieved, leading to controversy and greenwashing allegations. For some businesses, trust in this type of credit has been eroded.
But the picture is very different for durable, engineered carbon removal credits – such as those generated from CO 2 that is captured and permanently sequestered directly from the atmosphere( DAC – direct air capture) or the biosphere( BECCS – bioenergy with carbon capture and storage). Because of the highly verifiable climate impact and lack of reversibility, corporations are willing to pay top prices for high quality climate action and
16 FUGITIVE EMISSIONS JOURNAL • APRIL 2025