Voluntary carbon market up for ‘bumpy ride’ as integrity grows

The voluntary carbon market contracted for the third year in a row in 2024 – but experts believe this “bumpy ride” is a sign of its transition towards greater integrity.

Transaction volumes dropped by 25% and average credit price was down 5.5% in 2024, bringing the overall value of the voluntary carbon market down 29% to US$535 million, according to Ecosystem Marketplace’s latest State of the VCM report. 

This is the third consecutive year of contraction, with value down by more than 70% since the 2021 peak of US$2 billion. But the decline appears to be slowing down: last year, market value was down 61% from 2022. 

And while transaction volume continued to decline in 2024, the volume of credits retired from the ten largest standards has remained high since 2021, with 182 million tonnes of credits retired in 2024.

Ecosystem Marketplace explains this year’s trends as the result of a growing focus on integrity, with companies backing away from cheap credits that cannot prove their additionality, and initiatives like the Core Carbon Principles slowly improving the quality of carbon credit supply.

“We’re seeing a winding down of a legacy market from older methodologies, and the scaling up of a new phase of the VCM,” said Charlotte Barber, Associate Director of Ecosystem Marketplace. “While supply from new project types takes time to ramp up to meet the needs and demand of this new phase, end-user demand is staying steady, with credit retirements holding steady and increasing demand for some trusted project types.”

Price premium for removal credits

The average price of a carbon credit on the VCM was US$6.34, but integrity efforts are creating growing price premiums for credits considered high-quality. For example, within forest and land use credits, REDD+ projects, which are yet to offer CCP-labelled credits after some methodologies were approved by the Integrity Council for the Voluntary Carbon Market (ICVCM) last November, lost both market share and value (-23%), while the price of agroforestry projects increased by 22%. 

Meanwhile, the price of blue carbon credits, generated from the restoration of coastal ecosystems, increased by a whopping 257%.

Carbon removal credits, which draw CO2 from the atmosphere either through nature-based or engineered solutions, were sold at a 381% price premium last year, compared to carbon reduction credits (which avoid greenhouse gases). 

The most expensive credit type was engineered biochar removal credits at overUS $165/tCO2e. These made up less than 1% of transaction volumes last year, but this is likely to increase in 2025, with Microsoft recently purchasing 1.24 million tonnes.

‘Strong demand signals are fundamental’

While the trends in this year’s report suggest that carbon credit supply is slowly increasing in quality and buyers are prioritising high-integrity credits, VCM experts warned that “high-integrity supply alone will not scale the market to where we need to be to tackle the climate crisis”: “More work is still needed on the demand side, working with companies to build stronger business cases and standard setters to ensure they send a clearer signal that compensation for emissions via removals and reductions is vital for the millions of tonnes of carbon companies will continue to emit as they progress towards net zero,” commented Eron Bloomgarden, CEO of Emergent, the coordinator of the LEAF Coalition.

Alexia Kelly, Managing Director, Carbon Policy and Markets Initiative, High Tide Foundation added: “This year’s report demonstrates a market that is transitioning to higher quality, higher prices, and still steady retirements. Committed market participants aren’t backing away, but this market is still in its infancy. Strong demand signals and continued focus on quality and market reform are fundamental to increasing trust, growth and impact.”