The real relationship between voluntary and compliance carbon markets 

I get asked some version of this question at almost every conference I attend: when does the voluntary carbon market become the compliance carbon market? 

My honest answer is: it doesn’t. And I think the assumption embedded in the question – that these two worlds are on a collision course, heading toward some grand unification – is one of the more persistent misconceptions in our industry. 

 Let me explain why I believe that, and why I actually think the more interesting question is how these markets sit alongside each other, connected in some important ways, but ultimately distinct. 

 The convergence story is appealing but wrong 

 The appeal of the convergence narrative is understandable. Compliance markets have scale and mandatory participation. They have price discovery mechanisms and enforcement. The voluntary carbon market has sometimes struggled with both credibility and liquidity. So the logic goes: as carbon markets mature, voluntary activity gets absorbed into compliance structures, everything tightens up, and we end up with one coherent global carbon price. 

 It’s a tidy story. I just don’t think it reflects how these markets actually work, or how they’re likely to develop. 

 Compliance markets are political constructs. They exist because a government or regulatory body decided that certain emitters within a specific jurisdiction must account for their emissions. The EU ETS covers specific sectors, specific geographies, specific types of activity. The UK ETS does the same. Emerging schemes in Japan, Canada, parts of the Middle East are all similarly bounded. These systems are enormously important, and I’m genuinely encouraged by the direction of travel in Europe and elsewhere. But they are not designed to absorb the entirety of corporate voluntary climate action. 

 Voluntary carbon markets, by contrast, exist to allow companies and individuals to go beyond their regulatory obligations – to decarbonise their supply chains, to respond to customer and investor pressure, to make credible net zero claims. The motivations are different. The buyer base is different. The project types are different. The geographies are different. 

Where they do connect 

 That said, I’m not arguing that these markets operate in hermetically sealed worlds. They connect in some important ways, and being clear about where they connect matters. 

 The most significant connection, in my view, is through methodology convergence. Over time – and I mean over a longer horizon than most people seem to expect, probably a decade or more – I do think the standards used in voluntary markets and the requirements embedded in compliance frameworks will move closer together. The EU’s Carbon Removal Certification Framework (CRCF) is a good example of this dynamic playing out in real time: you can see European policymakers looking carefully at what voluntary registries like Puro.earth have built and thinking about how to incorporate similar quality standards into a regulatory environment. That’s a healthy development. It raises the floor for everyone. 

 The second connection is through project finance. A voluntary carbon credit that is credible, liquid, and traded in a functioning market can dramatically lower the cost of capital for projects that also generate compliance value or that are located in jurisdictions where compliance frameworks are emerging. The credit essentially serves as part of the financing stack – it de-risks the project for investors. In this sense, a healthy voluntary market actively supports the development of the compliance infrastructure that will eventually come online in many developing countries. 

 The third connection is through price signals. When voluntary markets establish prices for high-quality engineered removals – currently well above €100 per tonne in the case of biochar – that creates reference points that compliance policymakers, developers, and investors can use. It’s not convergence, but it’s not isolation either. 

The Article 6 distraction 

 A lot of the convergence conversation gets filtered through Article 6 of the Paris Agreement. I want to be direct about something: for the vast majority of voluntary carbon market activity – particularly for engineered removals used within the context of corporate Scope 3 decarbonisation – Article 6 is largely a red herring. 

 Here’s why. When a company buys removal credits to neutralise emissions in its own operations or supply chain, those credits are being used within a voluntary framework. There is no international transfer of benefits in any meaningful sense. The company isn’t trading across borders in a way that requires sovereign involvement. Article 6 mechanisms are designed for a different purpose – primarily to allow countries to trade carbon units between each other as part of their nationally determined contributions. 

 Conflating the two doesn’t make the voluntary market more rigorous. It just adds complexity that doesn’t serve the actual purpose of the transaction. 

What comes next 

 I expect the next five years to be defined by voluntary markets continuing to mature on their own terms, while compliance frameworks develop in parallel. The signals out of the EU are genuinely encouraging – the CRCF is moving, the ETS still sends strong price signals, and the role of removals within the European regulatory environment is becoming clearer. SBTi’s forthcoming revised Corporate Net-Zero Standard, and its planned guidance on carbon credit use by the end of 2027, will be important for demand.  

 But I want to be clear: I don’t think we should wait for compliance markets to create momentum. The voluntary carbon market for engineered removals doesn’t need to become a compliance market to succeed. It needs to become a more liquid, more transparent, more financially sophisticated market – and that is already happening. 

 The presence of financial intermediaries taking speculative positions, the development of forward contracts and floor price mechanisms, the entry of new buyers across multiple geographies – none of this is waiting for a regulatory mandate. It’s happening because the fundamentals are strong. 

A final thought 

 I think sometimes the focus on convergence actually undersells what the voluntary carbon market can achieve in its own right. The global scale of corporate decarbonisation commitments is enormous. The ambition embedded in net zero pledges, if even partially realised, creates a demand signal for high-quality removals that is more than sufficient to build a very significant market. 

 The voluntary and compliance markets will influence each other. They will share data, methodologies, price signals, and in some cases projects. But they are not becoming the same thing. 

 Two markets, sitting alongside each other. Connected, but distinct. And both necessary. 

 That’s the future I’m building for – and I think it’s actually a more interesting one. 

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Jan-Willem Bode is President of Puro.earth, the world’s leading registry for engineered carbon removal. 

This article first appeared in Quantum Commodity Intelligence on 4th June