Understanding voluntary carbon markets
Voluntary carbon markets (VCMs) have the potential to advance climate action by providing an avenue for organizations to offset their hard-to-abate greenhouse gas (GHG) emissions. However, concerns about quality and integrity remain. This three-part series provides guidance in applying due diligence to decisions regarding VCMs and enhancing understanding of the potential for carbon markets as part of the infrastructure needed to support a sustainable transition. The research is a collaboration between CPA Canada, the International Federation of Accountants and the Institute for Sustainable Finance.
Paper 1: Understanding Voluntary Carbon Markets: Key considerations for professional accountants and purchasers on the carbon credit life cycle
The first paper is an essential read for new participants in VCMs, providing base-level knowledge with an overview of the process for generating a carbon credit and considerations for purchasing carbon credits. It also examines existing carbon markets to promote best practices that can increase confidence in carbon markets and encourage investment in credible GHG emissions reduction projects. A glossary of terms empowers market participants with the language of VCMs.
Key takeaways:
- what carbon credits are and why they exist
- types of carbon credits
- key considerations for purchasers
- valuation and pricing
Paper 2: Canadian & Global use of Voluntary Carbon Credits and the Related Financial Accounting and Disclosure Considerations
The second report dives deeper into VCMs, examining their use in Canada and globally, as well as the related financial accounting and other disclosure implications of using carbon credits toward GHG emission reduction targets. This report will help guide buyers, project developers and investors in the VCM ecosystem to bolster transparency of GHG emissions reduction claims achieved through carbon credits.
Key takeaways:
- use cases for voluntary carbon credits
- financial accounting considerations for purchasers of carbon credits
- the sustainability-related disclosure requirements on the use of carbon credits
Paper 3: Coming in 2025
Based on interviews with a range of parties in the VCM ecosystem, the third and final report in this series will illustrate the role of CPAs in enhancing the integrity of VCMs and identify key opportunities to foster trust, bolster transparency and strengthen accountability as VCMs continue to expand in Canada, and around the world.