The voluntary carbon market (VCM) is a crucial tool in the global fight against climate change. It allows companies, governments, and individuals to purchase carbon credits that represent a reduction or removal of greenhouse gases, offsetting their own emissions. Over the past decade, the VCM has grown rapidly, but it is now entering a new, more complex phase.
Forest Trends’ Ecosystem Marketplace State of the Voluntary Carbon Market (SOVCM) 2025 report shows that the market is shifting. It’s moving from cheap credits and volume to higher standards of environmental integrity.
Buyers are demanding credits that offer clear, verifiable climate benefits. This change comes from increased attention from regulators, investors, and civil groups. They want to make sure carbon offsets truly reflect climate progress.
New technologies and methods are also emerging. They improve how entities measure and verify emissions reductions and removals. These shifts are becoming more visible in market data, particularly in how transaction volumes and buyer behavior are evolving.
Falling Transaction Volumes, But Demand Remains Resilient
One of the most striking findings in the SOVCM 2025 report is the sharp drop in the total volume of carbon credits traded on the VCM. In 2024, the transaction volume fell by 25% compared to the previous year, bringing it to the lowest level seen since 2018.
The decline has sparked questions about demand for voluntary offsets. This is important, especially as companies face pressure to meet net-zero targets and cut their carbon footprints. However, a closer look reveals that demand is holding steady — just in a more cautious and deliberate way.
The market is seeing fewer credits traded. However, the number of credits retired for emissions offset has stayed steady. It’s about 182 million metric tons of carbon dioxide equivalent (MtCO2e) each year since 2021.
Retirement means the credits are used and are permanently removed from the market. This way, they can’t be resold. It shows that buyers are still dedicated to making real climate impacts.
The drop in trading volumes and steady retirements show that companies are being more careful and strategic in buying carbon credits. They seem to focus more on quality than quantity. They look for projects that fit their sustainability goals and meet stricter standards.
Ricardo Bayon, Partner and Co-founder of Encourage Capital, emphasized this VCM finding, noting:
“The underlying fundamental indicator of demand, the retirements, continue to grow and they have been growing on a pretty constant trend since the market was created. Those companies and individuals who are buying carbon and retiring them are still doing so undeterred; chastened but not deterred. And so the market continues to grow (maybe not as rapidly as its most fervent acolytes would like), and I believe it will once again boom when issues of trust and integrity are dealt with. And they are being dealt with. Buckle up. What goes down, can also go up.”
Carbon credit prices also reflect this cautious optimism. In 2024, the average price for carbon credits dropped slightly by 5.5% to just over $6 per ton of CO2e.
Even though this dip is small, prices are still more than double what they were five years ago. This shows that demand for higher-quality projects is growing. The small price drop may be connected to a wider slowdown in credit supply. It could also relate to market uncertainty from changing regulations.
This steady demand shows a growing market. Buyers now want more than just compliance or publicity. They seek real, lasting environmental benefits. It also underscores the importance of continued market reforms to ensure trust and credibility.
Quality Over Quantity: The Market’s Shift Toward Integrity
As the voluntary carbon market matures, quality has become a central theme. The time of cheap, poorly verified credits is ending. Now, there’s a stronger focus on the environmental quality of carbon offsets.
The report shows that the total value of traded carbon credits in the voluntary market dropped by 29% in 2024. It hit $535 million, down from earlier years. Despite this decline, the market value remains 1.9 times higher than in 2018, due to relatively stable prices.
The fall in value reflects a 25% drop in transaction volume, but not a collapse in demand. Buyers are now more selective. They focus on higher-quality credits, so prices have not dropped sharply. This trend suggests that while liquidity is lower, the underlying market interest in carbon credits—especially those with strong environmental integrity—remains firm.
This focus has led to a rise in the value of “removal” credits—those generated by projects that physically extract carbon from the atmosphere and store it long-term. Examples include reforestation, afforestation, mangrove restoration, and emerging technologies like direct air capture.
In 2024, removal credits sold for an average price 381% higher than regular emission reduction credits. This shows that buyers are ready to pay more for projects that actively take carbon from the air.
The move to removal credits comes from the understanding that just cutting emissions isn’t enough to reach the Paris Agreement goals. Many climate experts say we need negative emissions to keep global warming below 1.5°C. This means removing carbon from the air. In response, voluntary buyers are backing projects that help with long-term carbon storage and improve ecosystem health.
New Rules, New Trust: Standards Take Center Stage
The Integrity Council for the Voluntary Carbon Market (ICVCM) has launched Core Carbon Principles (CCPs). These principles aim to spot high-quality credits. These standards are still being put into action. So far, only a few projects have been approved under the CCPs in 2024. However, they are already impacting market demand.
For instance, credits from CCP-approved landfill gas projects tripled in transaction volumes. Prices also rose by 35% in the year’s second half. This shows that market participants are starting to reward credits that meet stricter quality criteria.
Project Types: Winners and Losers
Not all carbon credit projects are seeing the same trends. Forestry and land use credits are growing fast. Improved Forest Management (IFM) credits are a big part of this. In fact, IFM credit trading volumes have risen over 3x. Buyers are focusing on sustainable forest practices.
In contrast, credits from Reduced Emissions from Deforestation and Forest Degradation (REDD+) projects have dropped. This decline is partly due to worries about their additionality and permanence.
Renewable energy projects, once a staple of the voluntary carbon market, continue to lose ground. Trading volumes for these credits dropped nearly 25% in 2024.
Biogas and landfill gas projects are gaining popularity in this category. They command higher prices because they provide clear and verifiable emission reductions. Plus, they often bring local environmental benefits.
Agriculture, afforestation, and blue carbon projects create removal credits. Their prices rose by about 20%, showing more buyer interest.
Preference for Recent Vintage Credits
Buyers are showing a strong preference for carbon credits from recent years. Credits with vintages from the last five years sold at a 217% premium compared to older credits, up from a 53% premium in 2023. This indicates that buyers want assurance that offsets are current and reflect recent climate action.
Looking Ahead: Navigating a Market in Transition
The voluntary carbon market is clearly in a period of change—moving from a legacy system toward a more robust, transparent, and high-integrity marketplace. Transaction volumes are down, but steady credit retirements and stable prices show that demand for carbon offsets is strong.
Standards like the ICVCM’s Core Carbon Principles are gaining traction, and buyers now focus more on removals and recent vintages. This shift is setting up the market for long-term growth rooted in quality, not just quantity. This transition may be bumpy, but it is essential for the voluntary carbon market to play a credible role in global climate action.
