As a part of the global carbon market, the voluntary CO2 market is different from the compliance schemes under the Kyoto Protocol and EU-ETS. Instead of undergoing the national approval from the project participants and the registration and verification process from the UNFCCC (United Nations Framework Convention on Climate Change), the calculation and the certification of the emission reduction are implemented in accordance with a number of industry-created standards.
The advantage of lower development/transaction cost makes the voluntary market especially attractive to those small and sustainable projects to which the UN certification process is too expensive.
Compared to compliance markets like the EU-ETS, the total size of the voluntary CO2 market is much smaller. Credits originated from the voluntary CO2 market are called Voluntary Emissions Reductions (VER). Currently VERs are mostly used by companies who are looking to voluntarily offset the emissions generated during their business activities in order to show social responsibility and establish a healthy and green corporate image. An increasing number of companies are investing in VER projects in order to reduce their carbon footprint and to reach a “zero emission” status.
There is a range of different certification and quality standards:
CDM and Gold Standard
The Gold Standard, which was developed in 2003 by a group of NGOs, is the first independent and the most rigorous certification standard for creating high-quality carbon offset projects in the CDM, JI and voluntary carbon market. So far the Gold Standard is not only supported by more than 80 civil society groups and many corporations but also by the UN and many national governments. The Gold Standard ensures that the generated carbon credits are a real, verifiable and a measurable contribution to the sustainable development of the environment.
The Gold Standard is regarded as independent criteria to evaluate carbon projects internationally. The objective is to label the carbon projects which are both ecologically and socially effective.
CDM Projects labeled by the Gold Standard (GS CDM Projects) must be verified by the UN-authorized independent auditors and must meet even stricter requirements than normal CDM projects. This unique quality standard is chosen to demonstrate broader CSR commitment and it is more likely that credits from Gold Standard porjects will remain eligible in future compliance regimes. These high-quality carbon credits are often used by international banks, insurance companies, public authorities or individuals.