Voluntary Carbon Markets Insights:
2018 Outlook and First-Quarter Trends
SPONSORSAcknowledgments
The production of this report relied heavily on professionals active in voluntary carbon markets. We would
like to thank all the companies and organizations who responded to our survey and shared data. We
would also like to thank the following experts who generously provided insights and feedback that helped
guide the creation of the report: Andrew Beauchamp, Max DuBuisson, Julian Ekelhof, Edward Hanrahan,
Brian McFarland, Evan Neyland, Rhiannon Szmigielski, Rene Velasquez, and Claire Wigg.

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pleasecontact
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Disclaimer
Some of the information in this document is based upon information supplied by participants in a market
survey. Forest Trends’ Ecosystem Marketplace does not represent or warrant the accuracy, suitability,
or content of the survey responses or the results of that survey as set out herein. It is the sole
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Voluntary Carbon Markets Insights: 2018 Outlook and First Quarter Trends

Voluntary Carbon Markets
Outlooks and Trends
January to March 2018

August 2018
Authors
Kelley Hamrick
Melissa Gallant
Editors
Stephen Donofrio
Anne Thiel
Contributing Researcher
Evan Yoshimoto

Voluntary Carbon Markets Insights: 2018 Outlook and First Quarter Trends

Foreword
In the 13 years since Forest Trends’ Ecosystem Marketplace first started reporting on the voluntary
markets for carbon offsets, we have never seen greater change on the horizon.
Countries have begun to enact their emissions reduction goals under the Paris Agreement, many of whichplan to implement domestic carbon pricing schemes and/or trade emissions reductions across borders—
if they have not done so already. Yet, the Paris Agreement contains few hard-and-fast rules about
international carbon trading, so negotiators are working hard to develop this structure and guidelines
before 2020 (see page 13). On top of that, the international aviation industry is preparing to launch what
may become the largest cap-and-trade program in the world (see page 17).
How these compliance markets affect existing voluntary carbon projects depends on how they are rolled
out. Will they allow offsets from voluntary projects? If so, will there be restrictions on the type of projector when offsets are produced? With government and industry representatives around the world making
these critical decisions in the remaining half of 2018 or 2019, now is a crucial time to track these market
developments.
In the meantime, voluntary carbon market actors are continuing to explore and innovate. They are finding
new ways of generating and selling emissions reductions, integrating their projects’ activities with broader
sustainable development goals, and collaborating with policymakers and industry groups about how toensure compliance markets incorporate the best practices from voluntary carbon markets. Overall, these
activities have resulted in over 430 million tonnes of emissions reductions generated since 2005 – this isequivalent to more than all of Australia’s energy-related emissions in 2016.
To keep pace with this rapidly changing carbon markets landscape, we are deviating from our typicalannual report format this year and are piloting a new mini-report, Voluntary Carbon Markets: Outlooks
and Trends, that covers a shorter, more recent time period and examines the key trends that haveemerged in the first quarter (Q1) of 2018. We provide an overview of the voluntary carbon markets – what
they are and how they work – along with the latest first-quarter data on offset issuances, transactions,and retirements to bring our readers up to date. We also provide an in-depth outlook of the voluntarycarbon markets, examining some of the major upcoming policy decisions that might radically change thevoluntary carbon markets–or not.
Our full State of the Voluntary Carbon Markets report will return in 2019, but before then, we believe theabove developments are significant enough to track as they happen. We welcome your feedback andinput, even more so in these evolving times.

Michael Jenkins
CEO and President of Forest Trends

Stephen Donofrio
Director, Forest Trends’ Ecosystem Marketplace and Supply
Change Initiatives

Kelley HamrickManager, Forest Trends’ Ecosystem Marketplace and Supply
Change Initiatives
Voluntary Carbon Markets Insights: 2018 Outlook and First Quarter Trends

Table of Contents
History and Background on Voluntary Carbon Markets
What Are Carbon Offsets?...................................................................................................1
How Are Voluntary Carbon Offsets Produced?....................................................................2
Where Are Voluntary Carbon Offsets Produced?................................................................3
What Are the Climate Benefits of Voluntary Carbon Projects?............................................4
What Is the Total Supply and Demand of Voluntary Offsets?..............................................5

Recent Market Activity
Q1 Trends: Issuances……………………………………………………………………………..6
Q1 Trends: Transactions…………………………………………………………………..……...8
Q1 Trends: Retirements…………………………………………………………………….……9
Outlook……………………………………………………………………………………………….……11
On the Horizon: Regulated Markets……………………………………………………………12
From the Experts: Regulated Markets…………………………………………………………13
On the Horizon: Voluntary Markets…………………………………………………………….14
From the Experts: Voluntary Markets……………………………………………………….….15
Up in the Air: CORSIA’s Potential Impact on Voluntary Offsets………………………….…16
Conclusion………………………………………………………………………………………………..19
Annex I: Methodology…………………………………………………………………………………..19
Annex II: Acronyms and Glossary……………………………………………………………………21
Figures and Tables
Table 1. Categories of Voluntary Carbon Projects, 2008-2018………………………………..……2
Figure 1. Locations of Voluntary Carbon Offset Projects, 2008-2018………………….……..……3
Figure 2. Historical Voluntary Carbon Offset Issuances and Retirements………………..…..……5
Figure 3. Q1 Issuances by Project Category, Standard and Country………………………………7
Figure 4. Volume of Offsets Sold and Number of Transactions by Price, January – March
2018…………………………………………………………………………………………...……...……8Figure 5. Q1 Transactions by Project Category, Standard and Country…………………..…….…9
Figure 6. Q1 Retirements by Project Category, Standard and Country…………….………..……11
Figure 7. How Voluntary Market Actors Perceive Potential Upcoming Compliance Markets…...14
Table 2. Key Timelines of CORSIA Decisions and Activities………………………………..…...…17
Figure 8. Countries Participating in the Voluntary Phase of CORSIA* and Countries with Aviation
Included in a Compliance Market……………………………………………………...…………….…19
Table 3. Number of Airlines Offering Voluntary Offsetting to Passengers, by Airline Headquarter
Region……………………………………………………………………………………………….……19

Voluntary Carbon Markets Insights: 2018 Outlook and First Quarter Trends

What Are Carbon Offsets?
The health of our planet depends on every government, company, and citizen to minimize theirgreenhouse gas emissions. Many are making major strides by transitioning to cleaner energy, reducing
waste, and finding other creative solutions to cut their emissions. But these activities aren’t enough toeliminate a carbon footprint completely. When reducing one’s own emissions becomes physically
impossible or financially unfeasible, many emitters turn to carbon offsets – measurable, quantifiable,
and trackable units of greenhouse gas (GHG) emissions reductions.
Carbon offsets are produced by projects that carry out on-the-ground emissions reduction activities, andare typically measured in metric tonnes of carbon dioxide equivalents, or tCO2e.1 They can either be
traded on the voluntary markets, where buyers and sellers trade on their own volition, or as part of acompliance market, where government regulations require emitters to either reduce their emissions orpurchase offsets.
The vast majority of projects on the voluntary market follow rules and procedures set out by a voluntarycarbon standard. If a project meets these criteria, the standard will issue carbon offsets equivalent to
the emissions reductions. Project developers can then transact these offsets directly to end buyers,
who can claim the emissions reductions as their own if they retire and remove the offsets from circulation.
In other cases, project developers sell to retailers or brokers, who then resell or charge a fee for finding
end buyers.

Box 1. Voluntary Carbon Market Standards
During the early stages of the voluntary carbon markets, many project developers used internal
methodologies to calculate their project’s emissions reductions. Today, most projects adhere tomethodologies set out by one of several voluntary standards. These standards require projects tosubmit to third-party validation and verification to ensure projects have achieved their stated emissions
reductions. Standards can differ by which project activities and types are allowed, where projects may
be located, and what regulations projects must adhere to.
However, all voluntary standards require that offsets be: Real: there will be evidence that the project actually removes or prevents emissions; Additional: the emissions reductions would not occur without those project activities;
 Measurable: the volume of emissions reductions can be accurately measured; and Verifiable: a neutral, third-party auditor has verified the emissions reductions.

1

Throughout this report, we measure offsets in thousand (KtCO2e) or million (MtCO2e) metric tonnes of carbon dioxide

Voluntary Carbon Markets Insights: 2018 Outlook and First Quarter Trends

1How Are Voluntary Carbon Offsets Produced?
Project developers can employ a variety of activities to produce offsets, from installing renewable energy
infrastructure like wind turbines or solar panels, to planting trees that remove and store carbon from theatmosphere.2 The different methods for producing offsets are what distinguishes the various projecttypes. Forest Trends’ Ecosystem Marketplace groups project types into eight categories, listed below.

Table 1. Categories of Voluntary Carbon Projects, 2008-20183
Project Categories

Projectswith Issued
Offsets

Volume of Offsets
Issued in MtCO2e(2005 - Present)4New
Projects5

Agriculture – modifying agricultural practices to reduce
emissions by switching to no-till farming, reducing chemicalfertilizer use, etc.

87

6.7

1

Chemical Processes and Industrial Manufacturing –modifying industrial processes to emit fewer greenhousegases.

72

63.5

0

Energy Efficiency and Fuel Switching – improving
energy efficiency or switching to cleaner fuel sources.

633

127.9

8

Forestry and Land Use – managing forests, soil,
grasslands, and other land types to avoid releasing carbon
and/or increasing the amount of carbon the land absorbs.

170

95.3

3

Household Devices – distributing cleaner-burning stoves
or water purification devices to reduce or eliminate theneed to burn wood (or other inefficient types of energy).

161

23.4

0

Renewable Energy – installing solar, wind, and otherforms of renewable energy production.

611

61.9

2

Transportation – increasing access to public and/or
alternative transportation (like bicycling) and reducing
emissions from private transportation like cars and trucks.

43

1.1

0

Waste Disposal – reducing methane emissions fromlandfills or wastewater, often by collecting converting it tousable fuel.

238

57.5

0

2

Click here for a more detailed explanation of how carbon offsets are produced and sold.

3

Click here to see which project types are in each category.

All data in this table are based on information from five standards: the American Carbon Registry (ACR), the Climate Action Reserve, the Gold Standard, Plan Vivo, and Verra’s Verified
Carbon Standard (VCS).
4

5

Here we are defining “new projects” as projects that issued their first offsets in Q1 of 2018.

Voluntary Carbon Markets Insights: 2018 Outlook and First Quarter Trends2Where Are Voluntary Carbon Offsets Produced?
Voluntary carbon projects exist in 83 countries around the world, and, for the most part, can be tradedfreely between buyers and sellers in the same or across different countries. Some countries, like theUnited Kingdom and South Korea, have government-operated domestic markets that encouragebusinesses and individuals to buy locally-produced offsets.
Figure 1 shows how many projects in each country have issued offsets using voluntary carbon standards
since 2005.6 A total of 2,008 projects have issued offsets during this time, mainly in Asia (51%) andNorth America (18%).7 Another 11% of projects have been based in Latin America and the Caribbean,
11% in Europe,8 and 11% in Africa. Oceania has been home to the fewest projects, with only 14 projects(1%) having issued offsets.
Projects in Asia and North America have also generated the largest share of the 435.4 MtCO2e of offsets
issued to date (39% and 26%, respectively), followed by Africa (13%), Latin America and the Caribbean(12%), Europe (9%), and Oceania (1%). Almost three quarters (72%) of all voluntary carbon projects arelocated in the top five project-hosting countries: India (442), China (426), the United States (351), Turkey(124), and Brazil (97).
Figure 1. Locations of Voluntary Carbon Offset Projects, 2008-2018

Notes: The map shows only projects that have issued offsets through the following voluntary carbon standards from 2008 to Q1 2018: American Carbon Registry (ACR), Climate Action Reserve(CAR), Gold Standard, Plan Vivo, and Verra’s Verified Carbon Standard (VCS) as of April 2018. Although projects were issued by voluntary standards, some projects’ offsets may eventually be soldon compliance markets, such as California’s Cap and Trade or Colombia’s Fuel Tax. Based on data from 2,008 projects in 82 countries.

6

It is important to note that not all offsets issued by voluntary standards are ultimately used on the voluntary market. Some may be used for compliance purposes.

7“North America” here refers to the United States and Canada only. Voluntary carbon projects and offsets from Mexico are included in our “Latin America and the Caribbean” region.

“Europe” here refers to all European countries, whether or not they are within the European Union (EU), as well as Turkey. There are few voluntary carbon projects within the EU because,
historically, many EU member states have already committed to emissions reductions under the Kyoto Protocol. Thus, there are few instances where voluntary carbon projects could makeadditional emissions reductions beyond those included in the state emissions reductions accounting.
8

Voluntary Carbon Markets Insights: 2018 Outlook and First Quarter Trends

3What Are the Climate Benefits of Voluntary Carbon Projects?
The volumes of offsets issued, transacted, and retired are important metrics for determining market size,
but none of them are comprehensive indicators of the overall emissions reductions and climate benefits
achieved by projects in the voluntary market.
Issuances reflect the volume of emissions reductions verified under a standard. Because verificationand issuance of offsets costs money, some project developers only issue offsets when they haveidentified a buyer. Still, not all issued offsets are sold, and some offsets are resold multiple times. Hence,transactions and retirement volumes are also not a comprehensive indicator for a project’s total
emissions reductions.
In order to track the exact volume of greenhouse gas emissions avoided or absorbed because ofvoluntary carbon markets, we would need to look at the volume of offsets generated. That volume
undoubtedly exceeds the volume of offsets issued, transacted, or retired.9
In the absence of this information, voluntary offset issuances are the closest proxy to the voluntary
markets’ environmental impact. Since 2005, projects have helped to reduce, sequester, or avoid
over 437.1 MtCO2e. That is more than all of Australia’s energy-related emissions in 2016.10 Last
year alone, projects issued 62.7 MtCO2e: a record high for the market. That is the equivalent of notconsuming almost 150 million barrels of oil.11
Box 2: Sustainable Development and Carbon Offset Projects
While offsets are traded based on their climate benefits, many projects also have a host of additional
impacts, known as “co-benefits.” These co-benefits are often in line with other aspects of sustainable
development, such as supporting the local economy through job training and creation, preserving
watershed areas that supply clean water, or safeguarding biodiversity. In many cases, co-benefits areintegral to the project and often one of the main reasons that suppliers and many buyers are engaged
in voluntary carbon markets.
Several standards either incorporate co-benefits in their requirements or offer add-on certifications tomeasure co-benefits. Recently, many project developers and standards have begun aligning their cobenefits metrics with the United Nations’ Sustainable Development Goals12, which include everythingfrom ending hunger to providing access to energy, to conserving marine life.
While there currently is no set of universally used metrics to measure many of these co-benefits, it isfair to say that many of the 437.1 MtCO2e of offsets issued since 2005 have provided additional benefits
to the communities and ecosystems in which they operate.

9This information is typically found within Project Design Documents, Validation and/or Verification reports. Since the data might be located in different pages or documents, we do notcurrently have the aggregated emissions reductions generated numbers for voluntary carbon projects.
10“National Greenhouse Gas Inventory,“ Australian Government Department of Environment and Energy, accessed May 2018, http://ageis.climatechange.gov.au/.

“Greenhouse Gas Equivalencies Calculator,” United States Environmental Protection Agency, last updated September 2017, https://www.epa.gov/energy/greenhouse-gas-equivalenciescalculator.
11

12 “Sustainable Development Goals,” United Nations, accessed July 2018, https://www.un.org/sustainabledevelopment/sustainable-development-goals/.

Voluntary Carbon Markets Insights: 2018 Outlook and First Quarter Trends

4What Is the Total Supply and Demand of Voluntary Offsets?
Issuance and retirements volumes are useful measures of supply and demand in the voluntary market,
since issuances represent offsets available for sale, and retirements represent offsets that can no longer
be resold. Issuances typically exceed retirements, in part because historically supply has outstrippeddemand, but also because of time lag between supply and demand; while perceived demand for offsets
drives the creation and continuation of projects on the voluntary carbon markets, it might take years
before a project produces a single offset.
Overall, since the voluntary carbon markets picked up in the late 2000’s, offset issuances andretirements have both increased dramatically. In 2017, issuances (62.7 MtCO2e) and retirements(42.8 MtCO2e) reached record-highs.
Figure 2. Historical Voluntary Carbon Offset Issuances and Retirements

Notes: Data is based on project registries from the following carbon standards: American Carbon Registry (ACR), Climate Action Reserve (CAR), Gold Standard, Plan Vivo, and Verra’s Verified Carbon
Standard (VCS) as of April 2018. Based on 401.5 MtCO2e offsets issued and 212.4 MtCO2e offsets retired between 2008 and 2017. Although there was some pre-2008 market activity, it is not includedin this figure due to a lack of consistent, publicly-available information.

While many factors contribute to the volume of offsets issued and retired in a given year, one reason forthis uptick in 2017 may have been the Paris Agreement,13 as more awareness of climate change may
have led businesses to make new commitments to reduce emissions. Likewise, the US government’s
decision to pull out of the Paris Agreement may have also sparked an uptick in demand, as morebusinesses and individuals were motivated to take climate action into their own hands.
Another factor in the historic year-over-year variation is compliance market activity. For example, many
companies regulated under California’s compliance market decided to purchase voluntary offsets in2012—in preparation for the program’s launch in 2013. After 2013, some project developers andstandards that previously operated in the voluntary markets shifted their focus towards California’scompliance market. In this way, new or expanding compliance markets may reduce activity in voluntary
markets.

13

For more information, see the “Outlook” section starting on page 12.

Voluntary Carbon Markets Insights: 2018 Outlook and First Quarter Trends

5

Q1 Trends: IssuancesStandards will issue offsets to a project only if the following criteria are met: the project has implemented
its emissions reductions activities and demonstrated that it has achieved quantifiable emissions
reductions by undergoing third-party validation (to approve project activities and plans prior to projectcommencement) and verification (to ensure the project’s activities have been implemented).
When an offset is issued, it is assigned a unique serial number and listed on a registry that traces theoffset from issuance through transaction(s) to retirement. This is a critical step in providing transparency
around offset ownership and to prevent double-claiming.
As discussed previously, a project’s total volume of offsets issued does not always equate to the project’s
total volume of emissions reduced. Because project developers must pay for both third-party verificationand the issuance of offsets, some project developers will only pay for these services if they have acommitted buyer. Hence, issuance volumes represent a minimum amount of emissions reductions andavailable offset supply (see page 4 for more information about the environmental impact of offsetting).

A class from Southern Oregon University on a sustainability and energy tour looking at a new solar installation. Photo credit: BP Target Neutral, Green Campus
energy project

Voluntary Carbon Markets Insights: 2018 Outlook and First Quarter Trends

6Figure 3. Q1 Issuances by Project Category, Standard and Country

160 projects issued 15.8 MtCO2e offsets January-March 2018.
7.0 MtCO2e in January | 5.2 MtCO2e in February | 3.5 MtCO2e in March

By Project Category

By Standard

By Country

Notes: The data is based on project registries from the following carbon standards: American Carbon Registry (ACR), Climate Action Reserve (CAR), Gold Standard, Plan Vivo, and Verra’s Verified Carbon
Standard (VCS) as of April 2018. Based on 15.8 MtCO2e offsets issued. Some category totals do not add up to 15.8 MtCO2e due to rounding conventions.

Voluntary Carbon Markets Insights: 2018 Outlook and First Quarter Trends

7

Q1 Trends: Transactions
After offsets are listed in a secure registry account, project developers may sell to intermediaries like aretailer, broker, or exchange (who can resell to an end buyer) or directly to an end buyer.14 While anoffset can only be issued and retired once, it may be transacted an unlimited amount of times before
retirement. Because of this, there are a few critical differences between the transaction data presented
here than the issuance and retirement data presented elsewhere in the report.15
First, we include the volume of offsets recorded for each transaction – even if the same offset wastransacted multiple times (for example, from project developer to retailer to end buyer). Second, because
there is no public source of transaction data, Ecosystem Marketplace conducted a survey16 to gather
data directly from market participants: because we only report on survey respondents’ data, thetransaction data presented here should be viewed as conservative. Third, while issuances andretirements information is based on project registries from the five most common standards, thistransactions information also includes offsets certified by other standards.
Box 3: What’s in a Price?
In contrast to compliance markets, where offsets typically sell at a relatively consistent price, offset prices
on voluntary carbon markets can range dramatically. While Ecosystem Marketplace has tracked average
prices ranging between $3-$6/tCO2e, actual prices range from under $0.1/tCO2e to just over $70/tCO2e.
Figure 4 below depicts the volume and number of transactions by price reported in Q1 of 2018.17

Volume (MtCO2e)

Figure 4. Volume of Offsets Sold and Number of Transactions by Price, January – March 2018

Notes: The data is based on results from Ecosystem Marketplace’s survey of project developers, retailers, and brokers conducted in Spring 2018. Based on 1239 transactions totaling 16.6
MtCO2e offsets reported between January – March 2018. See Annex I: Methodology for more information.

This range in prices may be attributed to several factors, including: project costs (which can differ basedon the project’s location and type of activity); buyer’s preferences (e.g., specific location, project type,co-benefits, or other buyer criteria), and the type of the transaction (typically, offsets bought in bulk tend
to sell at lower prices than offsets bought in smaller quantities).

14

In some cases, a buyer or intermediary may choose not to sell immediately and instead wait for more favorable market conditions.

15

While most of the market activity data in this report comes directly from five voluntary standards (ACR, CAR, the Gold Standard, Plan Vivo, and VCS), transaction data comes from an
Ecosystem Marketplace survey conducted to carbon project developers, retailers, and brokers. See the methodology section for more information.
16

Our latest survey builds on our experience collecting voluntary carbon market data over the last twelve years.

17

Transaction data could be presented in aggregate or individual transactions. As a result, the number of transactions in this figure is underestimated.

Voluntary Carbon Markets Insights: 2018 Outlook and First Quarter Trends

8Figure 5. Q1 Transactions by Project Category, Standard and Country

18.7 MtCO2e offsets transacted January-March 2018 at an average price of$2.4/tCO2e.
By Project Category

By Standard

By Region* Other includes transportation and other project types.
Notes: Data is based on results from Ecosystem Marketplace’s survey of project developers, retailers, and brokers conducted in Spring 2018. See the methodology for more information. Based on 18.7
MtCO2e offsets transacted. Some category totals do not add up to 18.7 MtCO2e due to rounding conventions and/or incomplete offset attribute information.

Voluntary Carbon Markets Insights: 2018 Outlook and First Quarter Trends

9

Q1 Trends: Retirements
Retirement is the final stage of an offset’s lifecycle, after which offsets are no longer able to be traded.
At this point, the end buyer may claim the emissions reductions represented by that offset against theirown emissions. In order to ensure the offset cannot be resold, the registry tracking that offset permanently
removes the offset’s unique serial number from circulation.
While it is best practice to retire an offset before claiming it against emissions, sometimes end buyers
claim the emissions reduction before retiring the offset. Hence, the retirement volumes noted throughout
this report represent a minimum amount of end-buyer demand for offsets.
Box 4. Who Buys Offsets?
Many kinds of people, companies, organizations, and governments voluntarily offset their emissions.
A traveler might offset their air travel emissions. A major company may choose to offset a portion of
their emissions as part of their sustainability strategy. Earlier this year, the rock band Pearl Jam offset
the emissions associated with their tour in Brazil.18
In the surveys for our State of the Voluntary Carbon Markets reports, Ecosystem Marketplace asks
market participants (project developers, retailers, brokers, and exchanges) about who purchases theiroffsets. Last year’s report supported trends we have seen over the last decade, namely that: The bulk of voluntary offset purchases by volume are made by multi-national, private, for-profit
companies.
 Returning buyers tend to purchase higher volumes, while new buyers, perhaps dipping their
toes in the market, often purchase fewer offsets.
 There are many different reasons an end buyer may choose to purchase offsets, but often
offsetting is generally part of a corporation’s broader environmental sustainability strategy or anindividual’s specific goal to reduce emissions.
 When choosing which offsets to buy, end buyers who are looking for “charismatic” offsets thatemphasize co-benefits like economic growth or biodiversity preservation, and they are often
willing to pay higher prices for them.

“Pearl Jam invests in Amazonian reforestation to offset emissions from current Brazil tour,” Mongabay, published March 20, 2018, https://news.mongabay.com/2018/03/pearl-jam-investsin-amazonian-reforestation-to-offset-emissions-from-current-brazil-tour/.
18

VOLUNTARY CARBON MARKETS INSIGHTS: 2018 OUTLOOK AND FIRST QUARTER TRENDS

23

Figure 6. Q1 Retirements by Project Category, Standard and Country

213 projects retired 13.7 MtCO2e offsets, January-March 2018.
5.2 MtCO2e in January | 5.1 MtCO2e in February | 3.3 MtCO2e in March
By Project Category

By Standard

By Country

Notes: The data is based on project registries from the following carbon standards: American Carbon Registry (ACR), Climate Action Reserve (CAR), Gold Standard, Plan Vivo, and Verra’s Verified Carbon
Standard (VCS) as of April 2018. Based on 13.7 MtCO2e offsets retired in 58 countries. Some category totals do not add up to 13.7 MtCO2e due to rounding conventions.

Voluntary Carbon Markets Insights: 2018 Outlook and First Quarter Trends

10

On the Horizon
The previous sections of this report focused on past developments in the voluntary market for carbon
offsets – how they have evolved, how they work, and recent market activity. With more countries
designing and rolling out carbon pricing schemes that create domestic compliance markets, as well asinternational markets developed by the UNFCCC’s climate negotiators and the airline industry, there
are key future decisions and policies that could completely transform supply and demand for voluntarycarbon markets.
This section examines some of the factors that have the potential to reshape the voluntary carbon
market in the coming years and decades. “What to Watch” pages provide a summary of how
compliance and voluntary markets may evolve. “From the Experts” includes input from active voluntarycarbon market participants that we surveyed in early 2018. Finally, we take a closer look at one of thebiggest developments on the horizon for the voluntary carbon market: the Carbon Offsetting andReduction Scheme for International Aviation (CORSIA).

A mother and child using a SmartSaver wood cookstove in Lagos, Nigeria. Photo credit: Envirofit.

Voluntary Carbon Markets Insights: 2018 Outlook and First Quarter Trends

11What to Watch: Regulated Markets
Under the 2015 Paris Agreement, all 195 signatory countries made a commitment to reduce greenhousegas emissions.19 This is great news for the planet, but what will it mean for the voluntary carbon markets?
As countries determine how to meet their carbon reduction commitments under the Paris Agreement,
more and more plan to implement domestic carbon pricing schemes and/or trade emissions reductions
across their borders. This will undoubtedly impact the voluntary carbon markets. How voluntary markets
are affected depends on which regulations are enacted, and how they are implemented. There areseveral ways planned compliance systems could integrate voluntary carbon markets:Allow voluntary offsets to transition into a domestic compliance markets: Somegovernments already allow regulated emitters to use offsets certified by voluntary standards tocomply with emissions regulations. Colombia’s carbon fuel tax, for example, allows regulated
businesses to purchase offsets developed by voluntary standards instead of paying the tax.
Similarly, California allowed eligible voluntary carbon projects to transfer into the state’s cap-andtrade program via its “Early Action” initiative in order to ensure there was a tradable supply
available at the program’s start. In addition, many of California’s cap-and-trade program’s offsets
protocols were adapted from existing voluntary standards.

Allow voluntary offsets to transition into an international, decentralized compliance market(Paris Agreement, Article 6.2):20 Article 6 of the Paris Agreement lays out a few options forencouraging offset trading. In Article 6.2, countries agreed to establish a unit of emissions
reductions (called Internationally Transferable Mitigation Outcomes, ITMOs) that could be traded
between countries. The criteria for ITMOs are still being debated: they might represent
allowances, offsets, or some new unit of measurement. In May 2018, negotiators met in Bonn,
Germany to discuss and propose eligibility rules. These negotiations culminated with 54 pages ofnotes that recorded many contradictory views; negotiators plan to meet again in Bangkok,
Thailand before the upcoming United Nations Framework Convention on Climate Change(UNFCCC) Conference of the Parties in December to finalize their positions.



Allow voluntary offsets to transition into an international, centralized compliance market(Paris Agreement, Article 6.4): 21 Article 6.4 proposes the creation of a centralized, global
mechanism to trade ITMOs. Such a mechanism would be supervised by an international
governing organization, like the Clean Development Mechanism (CDM). Countries currently
participating in the Kyoto Protocol can trade the globally-recognized CDM-approved offsets. A
new Article 6.4 mechanism might transfer all CDM offsets, duplicate parts of the CDM, or create
an entirely new mechanism. Alternatively, countries may choose to forgo a centralized market,
and instead favor multi- or bi-lateral trading through similar policies or markets.

Allow voluntary offsets to transition into the CORSIA market: International aviation is notcovered by countries’ national Paris Agreement commitments. Instead, the International Civil
Aviation Organization (ICAO) plans to launch the first-ever sector-wide cap-and-trade program,
CORSIA. CORSIA could rely heavily on carbon offsetting to meet the industry’s emissions
reductions targets. Representatives to ICAO are in the process of negotiating the program
specifics, including offset eligibility rules. Decisions about which project types and vintages are
accepted will have major implications across the voluntary carbon markets (see page 17).

19

While the United States signed and adopted the Paris Agreement, it plans to withdraw from the Agreement by 2020.

20“Paris Agreement”. United Nations Treaty Collection, accessed July 16, 2008, https://treaties.un.org/pages/ViewDetails.aspx?src=TREATY&mtdsg_no=XXVII-7-d&chapter=27&clang=_en.

21

Ibid.

Voluntary Carbon Markets Insights: 2018 Outlook and First Quarter Trends

12From the Experts: Regulated Markets
These different pathways represent a snapshot of the many changes that are afoot in the world of carbon
markets. While predicting the future is challenging, we conducted a survey to ask current market
participants and experts about how these changes may affect the voluntary carbon markets. Morespecifically, we asked what they view as the markets’ biggest challenges and opportunities, and how they
expect the aforementioned potential compliance markets to impact their work.
Most respondents viewed the upcoming CORSIA, Paris Agreement, or domestic markets as positive newopportunities (see Figure 7). These markets may result in both a new source of demand for projects thattransition to selling offsets in compliance markets, as well as a reduction in the supply of voluntary offsets.
Regardless of whether or not upcoming compliance markets allow for voluntary offsets, many agreed
that raising overall awareness of offsetting is a good thing for the voluntary carbon markets.
Figure 7. How Voluntary Market Actors Perceive Potential Upcoming Compliance Markets

Notes: Data is based on results from Ecosystem Marketplace’s survey of project developers, retailers, and brokers conducted in Spring 2018. See the methodology for more information.

Despite this generally favorable outlook, nearly all respondents reiterated the same word when describing
the future of voluntary carbon markets: uncertainty. This was especially true for the Paris Agreement’s
Article 6.2 decisions around allowing voluntary offsets to transition into an international, decentralized
compliance market. We explore this further in the next section, “On the Horizon: Voluntary Markets.”
While few respondents expected to be negatively impacted by a new international market, several werewary of the effect domestic programs might have on their projects. A number of respondents commented
that they had gotten frustrated when interacting with country officials and feel that their governments don’t
understand or incentivize private action on climate change. This skepticism is particularly felt with regards
to Reducing Emissions from Deforestation and Forest Degradation (REDD+) national programs andpolicies, where many REDD+ project developers struggle to get their governments to learn from theirexperiences and consider including them in future jurisdictional, sub-national and/or nation-wide
programs for addressing deforestation.

Voluntary Carbon Markets Insights: 2018 Outlook and First Quarter Trends

13What to Watch: Voluntary Markets
Given that many potential paths for future voluntary offset activity involve transitioning segments of thevoluntary market into compliance programs, what does that mean for the existing voluntary market?
The International Carbon Reduction and Offset Alliance (ICROA) has been convening expert roundtables
to discuss ways voluntary offsetting can fit into this new and uncertain future. In November 2017, ICROA
released guidance 22 for voluntary offsets in a post-2020 world, which identified potential ways thatvoluntary carbon projects could co-exist with countries’ climate commitments. These solutions, along withother potential solutions collected from Ecosystem Marketplace’s survey of market experts are presented
below:Countries create domestic voluntary markets: Many voluntary offset suppliers have historicallysold to international end buyers. 23 However, a growing number of countries and regions are
creating government-run domestic voluntary markets to boost demand for local offsets. Many ofthese programs are quite small and operate alongside an active compliance market. They include:
France’s Voluntary Carbon Land Certification initiative, the United Kingdom’s Woodland Carbon
Code, Colombia’s Voluntary Carbon Market, and Korea’s Forest Carbon Offset Scheme.

Countries agree to subtract voluntary offsets from their reporting: Voluntary offsets may
continue to be generated in sectors covered by the host country’s climate goal, as long as thatcountry is willing to remove those emissions reductions from their reporting to the UNFCCC.
Whether any countries would be willing to give up claims to these emissions reductions remains
to be seen.



Voluntary carbon projects exist outside of regulated sectors: The Paris Agreement provides
flexibility for countries to decide how to regulate and reduce carbon emissions, including which
sectors of the economy are responsible for achieving emissions reductions. As a result, there may
be room for voluntary offsets generated from non-covered sectors within those countries. If thehost country does not calculate emissions from that sector, the offsets might be sellable tointernational buyers; if the emissions are counted but unregulated, the offsets might be sellable
to domestic buyers.

Voluntary carbon projects sell non-carbon certificates to buyers: Instead of purchasing
emissions reductions, voluntary end buyers could receive recognition for their financial
contribution to a voluntary carbon project. The offsets, however, would be claimed by the hostcountry’s government.



Voluntary offsets can sell to voluntary buyers through Article 6.4: If the Paris Agreement’s
Article 6.4 allows voluntary offsets into its proposed global mechanism, the mechanism may allow
non-state participants like companies or individuals to purchase and retire offsets. This would, in
effect, ensure that emissions reductions occur above and beyond what countries have promised.



Voluntary carbon markets remain as-is in the United States: Since the United States iscurrently planning to withdraw from the Paris Agreement by 2020, most of what has been
discussed above does not apply to the US voluntary offset market. With no nationwide compliancemarket either, US-based voluntary carbon projects can continue to operate and sell offsets without
the risk of double claiming.

22

International Carbon Reduction and Offset Alliance. Guidance Report: Pathways to increased voluntary action by non-state actors (International Carbon Reduction and Offset Alliance,2017), https://icroa.org/resources/Documents/ICROA_Pathways%20to%20increased%20voluntary%20action.pdf.
23

With a notable exception being the US, where most US-based projects sell offsets to US-based end buyers.

Voluntary Carbon Markets Insights: 2018 Outlook and First Quarter Trends

14

From the Experts: Voluntary Markets
A number of challenges – some new, some old – exist for active voluntary market participants. Many
respondents to the Ecosystem Marketplace survey reiterated their frustration from previous years about
low pricing and lack of demand. Meanwhile, depending on how new markets like CORSIA and the Paris
Agreement are designed, market participants could see a rapid rise in demand for voluntary offsets.
Therefore, the market is seen as high-risk for new project investment and (due to associated costs)
they are also less inclined to invest in verification and issuance of new offsets from existing projects.
Encouragingly, other respondents said voluntary demand has never been better, citing more corporates
making serious commitments to fight climate change or increasing the ambition of existing emissions
reduction goals (especially by reducing emissions outside of their direct activities).
Despite these new and ambitious goals, many companies are not recognized nor rewarded for theiroffsetting investments and activities. One of the primary reasons is that the most commonly-used
standard for quantifying corporate GHG emissions, the Greenhouse Gas Protocol, does not allow
offsets as a means to reduce net emissions. In addition, while a plethora of new initiatives seek toencourage climate-smart corporate behaviors, including CDP’s Climate Change Program (which is
structured in alignment with the GHG Protocol), the Science Based Targets Initiative, and the RE100
Initiative, they offer little or no acknowledgement to corporations that go beyond internal emissions
reductions activities to fund external emissions reductions through offsetting.

Seedlings being grown at a community tree nursery for a smallholder reforestation program in San Juan de Limay, Nicaragua. Photo credit: Taking Root,CommuniTree Project

Voluntary Carbon Markets Insights: 2018 Outlook and First Quarter Trends

15

Up in the Air: CORSIA’s Potential Impact on Voluntary Offsets
The signing of the 2015 Paris Agreement was a landmark moment in the global effort to address thedrivers of climate change. Nearly every country in the world agreed to limit its national greenhouse gas
emissions; however, these domestic goals do not cover emissions occurring across borders, namely frominternational aviation and shipping.
Instead, countries agreed to collaborate on reducing these emissions through two United Nations (UN)sector-specific agencies: International Civil Aviation Organization (ICAO) and International Maritime
Organization (IMO). While negotiations for industry-wide regulations to reduce emissions frominternational shipping are ongoing, the 192-member states of ICAO already set an aspirational emissions
reduction goal back in 2013: to achieve carbon neutral growth beginning in 2020.
There are several potential pathways to achieve this goal: improving aircraft fuel efficiency, transitioning
to cleaner-burning fuels (e.g. biofuels), and implementing market-based mechanisms for emissions
reductions (e.g. offsetting). With international aviation expected to grow rapidly in the coming years,
improving fuel efficiency and using cleaner fuels will likely be insufficient to achieve this goal. That’s why,in 2016, ICAO adopted the first sector-wide carbon offsetting scheme: CORSIA. CORSIA will be
implemented in phases:
1. The pilot phase (2021-2023), where countries can participate on a voluntary basis. 24
2. The first phase (2024-2026), where countries can participate on a voluntary basis.25
3. The second phase (2027-2035), where all countries must participate.26
Depending on the growth in international aviation and the development of other emissions reductions
activities (namely fuel efficiency and cleaner-burning fuels), CORSIA could generate demand of 1.6-3.7
billion tonnes for emissions reductions27 during its three phases of implementation (from 2021-2035).28
This would dwarf any other operational or planned market, including the European Union’s Emissions
Trading Scheme and China’s cap-and-trade program.
Table 2. Key Timelines of CORSIA Decisions and Activities
Date

24

Parties

Outcome2019, January

All Countries

2021-2023
2022
2023-2026
2025
2027-2035
2028

Countries participating on voluntary basis
ICAO
Countries participating on voluntary basis
ICAO
All countries (except exempted countries)
ICAO

Standards and Recommended Practices(SARPs) adopted by the ICAO Council.
Countries must start monitoring, reporting andverifying airlines’ international emissions.
Pilot phase begins
Review of CORSIAFirst phase begins
Review of CORSIA
Second phase begins
Review of CORSIA

2018, June

ICAO

As of 1 July 2018, 72 States, representing 76% of international aviation activity (2014 RTK data), intend to voluntarily participate in CORSIA from its outset.

25

The difference between the pilot and first phases is the baseline from which airlines will calculate their emissions reduction requirements; in the pilot phase, airlines will have the option tochoose 2020 or the current year, whereas beginning in the first phase airlines must use the current year.
26

Exceptions include countries that have very few international flights (determined by ICAO analysis of international revenue tonne-kilometers), and countries categorized as least developed
countries, small island developing states, and landlocked developing countries. Any of these countries may still decide to voluntarily participate.
27

Sean Healy, CORSIA: Quantification of the Offset Demand (Öko-institut e.V., June 2017), https://www.carbonmechanisms.de/fileadmin/media/dokumente/sonstige_downloads/CTI_Workshop_2017/5_Healy_170623_CORSIA_CTI_Presentation.pdf.
CORSIA’s baseline emissions are determined as the average emissions of 2019 and 2020. ICAO is now hard at work to develop Standards and Recommended Practices (SARPs) as wellas guidance for countries to monitor, report and verify emissions as well as how to comply with offsetting requirements.
28

Voluntary Carbon Markets Insights: 2018 Outlook and First Quarter Trends

16

ICAO’s Big Decisions for CORSIA
The potential demand from CORSIA would have major implications for the voluntary markets, however,
who benefits will be largely determined by ICAO’s decisions about how the market is structured and which
offsets are eligible. Here are a few of the big decisions at play:Standards: The ICAO Council, consisting of 36 ICAO Member States, adopted Standards andRecommended Practices (SARPs) in late June 2018. These SARPs will be added to the legallybinding Chicago Convention on International Civil Aviation and lay out the criteria for essential
design elements of CORSIA. Decisions around offset eligibility will occur in a separate process
led by the ICAO Council and a Technical Advisory Body.



Emissions Units: A Technical Advisory Body will screen and recommend eligible standards andoffsets for approval by the ICAO Council. These standards might include voluntary standards,
compliance standards, and/or REDD+ programs. They might also include specify that certain
methodologies or project types with a standard or program are eligible. At the moment, few details
are known about which standards, project types, or other criteria might be allowed for use in
CORSIA. Until a final decision in this regard is taken by the ICAO Council, voluntary carbon project
developers still won’t have a clear idea of whether they are eligible to provide emissions units to
be used in CORSIA.29



Vintage: Another key question is how new offsets must be (an offset’s age is called “vintage”).
Countries home to many historical carbon offset projects typically prefer to keep vintages
unrestricted, as this could help funnel more finance into their existing offset projects. Yet a numberof other countries, especially those in the European Union, prefer stricter restrictions on offset
age. Vintage restrictions are also under consideration for CORSIA.30

The ICAO Council and Governing Body are currently negotiating these aspects of CORSIA, but decisions
might not happen until after first compliance cycle begins in 2021. Furthermore, CORSIA is subject to aperiodic review every three years beginning in 2022, and many of these decisions may change in the
future. ICAO will take into account the decisions made by the UNFCCC regarding Article 6 of the Paris
Agreement and promote compatibility with those decisions. 31 Given that these negotiations are stillongoing, the eligibility of standards, project types, and emissions units under CORSIA may change in the
future.

Current Airlines that Offset
While many airlines will offset for the first time under CORSIA, others have already been offsetting forvoluntary or compliance purposes. Also, Figure 8 shows which countries already measure and reduce
emissions from domestic flights; all flights within the European Union, for example, already have to meetthe EU’s emissions reduction goals for the sector and usually do so by purchasing compliance offsets.
Many airlines also voluntarily offset some of their domestic and international emissions and/or offer theopportunity for customers to offset their flights. We analyzed 129 of the largest airlines around the world
and recorded if they voluntarily offset or offered customers the option to voluntarily offset the emissions
associated with their flight.

29

According to Assembly Resolution A39-3, paragraph 20 d), the ICAO Council will establish a standing technical advisory body to make recommendations to the Council on the eligible
emissions units for use by CORSIA.
30

Outside of ICAO negotiations, countries have proposed a variety of vintage restrictions. These proposed dates align with a date of key decisions within ICAO: such as when ICAO agreed
to consider market-based measures to meet their 2020 carbon neutrality goal (2013), set up CORSIA (2016) or launch CORSIA (2019).
31
According to Assembly Resolution A39-3, paragraph 20 e)

Voluntary Carbon Markets Insights: 2018 Outlook and First Quarter Trends

17Figure 8. Countries Participating in the Voluntary Phase of CORSIA* and Countries with
Aviation Included in a Compliance Market

Notes: The most recent data about countries participating in the voluntary pilot phase of CORSIA can be found on the ICAO website: https://www.icao.int/environmental-protection/Pages/marketbased-measures.aspx. Countries may voluntarily join CORSIA at the beginning of any given year, provided they notified ICAO of their decision to join by June 30 of the preceding year. The data
about countries with aviation emissions reductions come from: ICAP, Emissions Trading Worldwide: Status Report 2018 (Berlin: ICAP, 2018). These programs only cover domestic (or in the case of
the EU, intra-regional) aviation, not international. Voluntary offsetting activity by airlines collected directly by Evan Yoshimoto, contributing researcher to this report.

A total of 29 airlines offer offsetting to their customers, while 15 airlines voluntarily offset their own
emissions in some capacity (11 of these airlines offset their own emissions and offered offsetting to theircustomers). In general, airlines headquartered in Oceania (38%) were most likely to have carbon
offsetting programs for customers, followed by airlines based in North America (29%) and Asia (29%).
Airlines aren’t the only actors in the aviation sector concerned about the climate. The Airport Carbon
Accreditation program encourages airports around the world to measure their footprint, reduce their own
emissions, reduce third-party emissions at the airport, and finally offset remaining emissions. Currently,
237 airports participate in the program and 39 (primarily European airports) have reached the fourth levelof accreditation to become carbon neutral by offsetting.
Table 3. Airlines Offering Voluntary Offsetting to Passengers, by Airline Headquarter Region

Asia

31

# of Airlines Offering Voluntary
Offsetting
9

Europe34

7

Regions# of Airline Headquarters

Africa102

Oceania83

Latin America & Caribbean

21

3

North America

14

4

Non-EU Europe

111

Notes: Voluntary offsetting activity by airlines collected directly by Evan Yoshimoto, contributing researcher to this report.

Voluntary Carbon Markets Insights: 2018 Outlook and First Quarter Trends

18Conclusion
Since trading of voluntary carbon offsets first took off in the late 2000’s, voluntary carbon projects havehelped to reduce, sequester, or avoid over 437.1 MtCO2e. But this is still just a drop in the bucket
compared to the total action needed on a global scale. Even with countries’ new pledges under the Paris
Agreement, scientists estimate that at least an 11,000 MtCO2e emissions reduction gap remains to keep
the world from warming above two degrees Celsius.32
It would be easy to dismiss the climate impact of the voluntary carbon markets as insignificant, but that
ignores a few critical facts. First, voluntary markets are growing fast. In the last decade, demand forvoluntary carbon offsets has grown by over 140-fold, from just 0.3 MtCO2e in 2008 to 42.8 MtCO2e in2018. Major brands, like Disney, Microsoft, and most recently Lyft, are using offsetting as part of theiremissions reduction strategies.
Perhaps even more significant, though, are the voluntary markets’ technical advancements. Voluntary
markets have a unique ability to innovate and incubate new ideas – they have developed science-based
methodologies for quantifying emissions reductions, enforced requirements to ensure that emissions
reductions are real, and built market infrastructure to track emissions reductions and prevent double
claiming. Upcoming compliance markets now have the opportunity to capitalize on the extensive
groundwork laid by voluntary carbon markets.

Photo credit: Shutterstock

32

United Nations Environment Programme. Emissions Gap Report 2017. Accessed July 16, 2018,https://wedocs.unep.org/bitstream/handle/20.500.11822/22104/EGR_2017_ch_3.pdf?sequence=1&isAllowed=y.

Voluntary Carbon Markets Insights: 2018 Outlook and First Quarter Trends

19Annex I: Methodology
Where Did the Data Come From?
We obtained issuance and retirement data in April of 2018 from five voluntary standards: American
Carbon Registry, Climate Action Reserve, Gold Standard, Plan Vivo, and Verra’s Verified Carbon
Standard. Where up-to-date public information was available, we downloaded records from standards’
websites. Where it was not, we obtained records through email correspondence.
There is no comprehensive online data available for voluntary transactions of carbon offsets. In order toobtain information about the volume, price, project type, and standards for offsets traded in the voluntary
market, Ecosystem Marketplace conducted a survey of carbon project developers, retailers and brokers.
In March and April 2018, we sent 607 requests for data. We received 131 responses in total, 37 of whom
did not conduct transactions in Q1, and 63 of whom had conducted transactions and shared that
information confidentially for this report.

How Do You Protect the Confidentiality of Survey Responses?
This report presents only aggregated data. All supplier-specific information is treated as confidential. Any
supplier-specific transaction data mentioned in the text is already public information or approved by the
supplier. Additionally, we do not identify prices or volumes from any country, project type, standard, or
vintage for which we have fewer than three data points.

What Is Not Included in Our Findings and Figures?
While we have done our best to ensure that the data in this report is as complete as possible, due tolimited time and data availability, there are some elements of the market that are not included. As such,
all findings and figures should be regarded as conservative.
Our issuance and retirements data is based on data from 5 major voluntary standards (listed above), butdoes not include offsets used voluntarily from the United Nations Framework Convention on Climate
Change’s Clean Development Mechanism, or offsets issued under voluntary government-mediatedprograms with their own standards, like the United Kingdom’s Woodland Carbon Code.
Our data on carbon offset transactions is based on a survey of project developers, retailers and brokers.
Not all companies and organizations active in this space responded to our request for data, and we did
not send requests to every active company and organization. The carbon offset industry is an everevolving world. While we do our utmost to ensure that we reach out to any carbon project developers,
retailers, and brokers actively involved in the market, inevitably there are some we miss. If you are in the
carbon space and would like to be included in future surveys, please email
info@ecosystemmarketplace.com.

Voluntary Carbon Markets Insights: 2018 Outlook and First Quarter Trends

20Annex II: Acronyms and Glossary
Acronyms:
ACR – American Carbon Registry
CAR – Climate Action Reserve
CDM – Clean Development Mechanism
CORSIA - Carbon Offsetting and Reduction Scheme for International Aviation
EU – European Union
GHG – Greenhouse Gas
ICAO – International Civil Aviation Organization
ICROA – International Carbon Reduction and Offset Alliance
ITMO – Internationally Transferable Mitigation Outcomes
Q1 – First quarter of 2018 (January – March)
REDD+ – Reducing Emissions from Deforestation and Forest Degradation
SARPs – Standards and Recommended Practices
tCO2e – Metric tonnes of carbon dioxide or equivalent (typically measured in millions, M, orthousands, K)
UN – United Nations
UNFCCC - United Nations Framework Convention on Climate Change
US – United States
VCS – Verified Carbon Standard
Glossary of Terms and Concepts:
Broker: Brokers are intermediaries who do not take ownership of offsets, but facilitate transactions for a
fee between project developers and end users, between project developers and retailers, and/or between
retailers. When given the opportunity, some retailers will also perform this role, but generally not at
significant volumes.
Carbon Market: Carbon markets are where carbon offsets are bought and sold. They may be either
voluntary or compliance.
Voluntary markets refer to the collective voluntary transactions tracked worldwide. There is nocentralized single marketplace for voluntary transactions but rather many discrete transactions
and, in some cases, country or program-related markets (such as the United Kingdom’s
Woodland Carbon Code).
Compliance markets are the result of government regulation to reduce greenhouse gas
emissions, and allow regulated entities to obtain and surrender emissions permits (allowances)
or offsets in order to meet predetermined regulatory targets.
Carbon Offset: Also referred to as “offsets”. A carbon offset is a quantified environmental benefit that isdesigned to compensate for impacts to habitat, environmental functions, or ecosystem services. Offsets
may be regulatory or voluntary. Within carbon and greenhouse gas markets, offsets specifically refer to
one metric tonne of carbon dioxide equivalent reduced, avoided or sequestered by an entity tocompensate for emitting that tonne elsewhere.
Co-Benefit: Co-benefits are additional environmental, social, or other benefits arising from a carbon
project that are quantified based on metrics or indicators defined by the project developer, a co-benefits
certification program, or third-party carbon project standard that accounts for both climate and co-benefits.
Some registries and standards enable co-benefits certification to be “tagged” onto issued carbon offsets,
if quantification and verification of co-benefits are not already embedded in a carbon project standard.
Voluntary Carbon Markets Insights: 2018 Outlook and First Quarter Trends

21

End Buyer: End-buyers are buyers who purchase offsets with the intention to retire them. Offsets will nolonger be sold after transferring to an end-buyer. This is in contrast to retailers, who purchase offsets with
the intention to resell them. End buyers are also referred to in this report as “end-users.”
Greenhouse Gas (GHG): A gas that contributes to the climate change by absorbing the sun’s infrared
radiation when in the earth’s atmosphere.
GHG Emitting Entities: Any entity, e.g. corporation, that produces greenhouse gas emissions. GHG
Emitting Entities are considered to be sources of GHG emissions, and their emissions are calculated
either at the entity-wide or facility level.
Issuance: Issuance is the final project stage which occurs after third-party auditors have guaranteed aproject has avoided or sequestered carbon dioxide or its equivalent. Once a project has met all
requirements by its voluntary standard, the developer can apply to a standards body to issue eligible
offsets. Any offsets issued to the project owner come with a unique serial number and are listed in aregistry that monitors any ownership transfers or offset retirement. Issuance takes place once a carbon
offset project has been validated, verified, and undergone other required processes.
Paris Agreement: The Paris Agreement was a landmark decision negotiated by 196 countries
participating at the United Nations Framework on Climate Change’s Conference of the Parties in
December 2015. The Agreement states that countries should set national emissions reductions goals inorder to keep the global average temperature rise below 2 degrees Celsius, and attempt to keep
temperature rise below 1.5 degrees Celsius. As of June 2018, 195 countries signed the agreement and178 countries are party to the agreement. The United States, while party to the agreement, hasannounced its intention to withdraw; the earliest this withdrawal can happen is November 2020.
Project: Also referred to as “carbon projects” and “carbon offset projects”. A project is a site, or suite ofsites, where restoration, sequestration, or other activities are implemented for the purposes of marketing
the resulting ecosystem service assets or outcomes to buyers. Projects quantify their avoided or reduced
emissions to produce tradable climate reduction certificates, called offsets. We often refer to projects aseither voluntary or compliance projects, based on which the intended market for the projects’ offsets.
Project Category: Project categories represent similar groups of project types of carbon offset projects.
Project Developer: A project developer is a catch-all phrase to describe organizations that create carbon
offset projects, beginning with the initial Project Design Document all the way to offset issuance. Project
developers include organizations that are the project owner, partner organizations involved in project
implementation, project financiers/investors, or others.
Project Type: Project developers may implement a variety of activities to reduce, sequester, or avoid
emissions of greenhouse gases and produce offsets. Project type refers to the type of activities used to
produce offsets.
Reduced Emissions from Deforestation and Forest Degradation (REDD+): REDD+ projects areproject types in areas where existing forests are at risk of land-use change or reduced carbon storage.
The projects focus on conserving these forests before they are degraded or deforested, resulting in the
avoidance of a business-as-usual scenario that would have produced higher emissions. Emissions
reductions occur primarily through avoided emissions.
Registry: A registry issues, holds, and transfers carbon offsets, which are given unique serial numbers
to track them throughout their lifetime. Registries can also retire offsets. In compliance markets, eachmarket has its own designated registry. In the voluntary market, independent registries exist.

Voluntary Carbon Markets Insights: 2018 Outlook and First Quarter Trends

23

Retailer: Retailers do not traditionally manage project development and documentation. Instead, they
contract with project developers to take ownership of a portfolio of offsets that they then offer to endbuyers. Retailers typically offer other corporate carbon management services to end-buyers, such asadvising on internal emissions reductions strategies.
Retirement: The final project development stage, retirement is the point at which an organization
permanently sets aside a carbon offset in a designated registry, effectively taking the carbon offset’s
unique serial number out of circulation. Retiring offsets through a registry ensures that they cannot be
resold. This is of particular importance if the buyer’s intent is to claim the offset’s emissions reductions
against a carbon reduction or neutrality target.
Standard: A standard is a set of project design, monitoring, and reporting criteria against which carbon
offsetting activities and/or projects’ environmental and social co-benefits can be certified or verified. In
the voluntary markets, a number of competing standard organizations have emerged with the intent toincrease credibility in the marketplace. More recently, national and sub-national regulated markets havealso designed standards specific to regional needs for voluntary use.
Transaction: The point at which a buyer signs a contract to purchase offsets, regardless of whether
suppliers agree to deliver offsets immediately or in the future.
Validation: The project development stage that follows the Project Design Document. Validation is theapproval of carbon offset projects during planning stages. To achieve validation, projects must submit
information on project design for third-party approval. Project design information generally includes
baseline scenarios, monitoring plans, and methodologies for calculating emissions reductions.
Verification: The project development stage that follows validation. Verification may take place up to
several years after validation. It refers to the process of verifying emissions reductions generated by an
offset project to a particular standard, which quantifies actual emissions reductions to ensure that theappropriate number of offsets are issued to the project.
Vintage: The year in which emissions reductions occur. The vintage of the offsets may not necessarily
match the year in which the offsets are transacted—and the vintage year may be in the future.

Voluntary Carbon Markets Insights: 2018 Outlook and First Quarter Trends

24About Forest Trends
Ecosystem Marketplace, an initiative of the non-profit organization Forest Trends, is a leading global source of
information on environmental finance, markets, and payments for ecosystem services. We believe that transparency
is a hallmark of robust markets and that by providing accessible and trustworthy information on prices, regulation,science, and other market-relevant issues, we can contribute to market growth, catalyze new thinking, and spur thedevelopment of new markets, and the policies and infrastructure needed to support them.
Forest Trends works to conserve forests and other ecosystems through the creation and wide adoption of a broad
range of environmental finance, markets and other payment and incentive mechanisms. Forest Trends does so by
1) providing transparent information on ecosystem values, finance, and markets through knowledge acquisition,
analysis, and dissemination; 2) convening diverse coalitions, partners, and communities of practice to promote
environmental values and advance development of new markets and payment mechanisms; and 3) demonstrating
successful tools, standards, and models of innovative finance for conservation. For up-to-date information on
environmental markets, sign up for our newsletters here: https://www.forest-trends.org/ecosystem-marketplace/

About Our Sponsors
3Degrees exists for one simple reason – to make it possible for businesses and theircustomers to take urgent action on climate change. As a certified B Corporation, we
provide renewable energy and emission reduction solutions to global Fortune 500
companies, utilities and other organizations that want to join the fight against climatechange. The 3Degrees team has deep expertise in sustainability consulting, environmental
markets, renewable energy and carbon project development, and utility renewable energy
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solutions that ensure environmental integrity and make good business sense.
3Degrees was founded in 2002 as a division of 3Phases Energy Services and spun off in2007. Since our founding, we have worked with over 400 clients in 60 countries and havebeen widely recognized for our industry leadership and award-winning programs forclients. The company is headquartered in San Francisco, with offices in Portland, Oregon,
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BP Target Neutral develops carbon neutral products and services for BP’s customers andpartners. The programme is not managed for profit and has offset 3 million tonnes of carbon
on behalf of customers since 2006 - that’s equivalent to taking around 1.3 million cars off UK
roads for one year. The programme uses the best practice of reduce, replace and neutralize
to drive efficiencies, source lower carbon feedstocks, and then offset any unavoidable
emissions. Underpinning their carbon neutral offers, BP Target Neutral uses carbon credits
sourced from a portfolio of high quality offset projects around the world. The selection ofcarbon offset projects is overseen by an independent Project Selection Forum, comprised ofenvironmental NGOs with a distinguished history in improving how corporations andindividuals can minimize their impact on the environment. More information is available atwww.bptargetneutral.com.
Cool Effect is a San Francisco Bay Area 501(c)(3) non-profit that allows individuals andbusinesses to direct funding to carefully vetted, high-quality carbon reducing projects aroundthe world. Carbon credits are a measurable way to take immediate action to fight climatechange.
Cool Effect verifies the science and the business practices of each project on its platform
and provides the highest level of transparency and education for buyers of carbon credits.
Over 90% of each donation goes directly to the project to help each grow and reduce evenmore carbon pollution. Since the launch of the platform in 2017, over 300,000 people have
reduced over 600,000 metric tonnes of greenhouse gas emissions. To learn more about our
mission, please visit cooleffect.org or follow Cool Effect on Facebook, Instagram, Twitter,and YouTube.
Voluntary Carbon Markets Insights: 2018 Outlook and First Quarter Trends

25

The Family ofForest Trends Initiatives

Pioneering Finance for Conservation
Biodiversity Initiative
Promoting development of sound, science-based, andUsing mitigation
innovative financing
to promoteeconomically sustainable
and no net
loss of thebiodiversity impacts
conservation of coastal and marine ecosystem services

Coastal and Marine Initiative

A global platform for transparent information

Demonstrating
the valueof coastal
andon ecosystem service
payments
and markets
marine ecosystem services

Forest Trade & FinanceCommunities Initiative

Bringing sustainability to trade and financial
investments in the global market for forest products

Strengthening local communities’ capacity to secure their rights, manage andconserve their forests, and improve their livelihoods

Ecosystem Marketplace

Building capacity for local communities and governments
to engage in emerging environmental markets

A global platform for transparent information on environmental finance andmarkets, and payments for ecosystem services
Business and Biodiversity Offsets Program, developing,

testingand supporting
bestandpracticein biodiversity
offsets
ForestPolicy,Trade,
Finance
Initiative

Supporting the transformation toward legal and sustainable markets fortimber and agricultural commodities
Building a market-based program to address water-quality(nitrogen) problems in the Chesapeake Bay and beyond

Public-Private Finance Initiative
Creating mechanisms that increase the amount of public and private capital for
Incubator
practices that reduce emissions from forests, agriculture, and other land uses
Linking local producers and communities
to ecosystem service markets

Supply Change

Learn more about our programs at

www.forest-trends.org
Tracking corporate commitments,
implementation policies, and progress

on reducing deforestation in commodity supply chains

Water Initiative
Promoting the use of incentives and market-based instruments to protect
and sustainably manage watershed services

Learn more about our programs at www.forest-trends.org