Voluntary carbon markets (VCMs) are navigating a crucial phase as global efforts toward net-zero emissions intensify. With corporate investments, innovative technologies, and evolving policy frameworks at the forefront, VCMs hold immense potential to address climate change.
Drawing on recent developments, this summarises some of the key articles from our free voluntary carbon markets weekly newsletter.
For in-depth coverage of these stories and access to regular updates, sign up for our free Fastmarkets Carbon Newsletter.
UK’s updated NDC signals greater ambitions
The United Kingdom has raised the bar for emission reductions by submitting its 2035 Nationally Determined Contribution (NDC) goal to the United Nations Framework Convention on Climate Change (UNFCCC). The new target commits the country to reduce greenhouse gas (GHG) emissions by at least 81% (excluding shipping and aviation) from 1990 levels by 2035. This bolstered target expands on the prior commitment of a 68% reduction by 2030.
The UK was one of just 12 countries that submitted their updated NDCs to the UNFCCC by the original February 10 deadline. The deadline was subsequently extended to September to allow for inclusion in the NDC Synthesis Report that will be published before the COP in Brazil.
One key element of the UK’s submission is its current stance on Internationally Transferred Mitigation Outcomes (ITMOs) under Article 6 of the Paris Agreement. While it does not plan to use ITMOs to meet its targets, the UK has left the door open for future engagement. ITMOs provide countries with mechanisms to trade carbon credits authorized and correspondingly adjusted by host nations which can then be used to help meet their own NDCs.
For example, Switzerland has adopted this approach, striking bilateral agreements with Peru, Ghana, Thailand, and others under Article 6.2. These partnerships allow nations to take a cooperative approach to achieving their climate goals by tapping into international emissions reductions. Switzerland’s strategy to gradually reduce its reliance on ITMOs from 2031 onward indicates a maturing framework for their use.
Sustainable aviation fuel (SAF) faces investment hurdles
The push for decarbonizing aviation through Sustainable Aviation Fuel (SAF) continues, but recent challenges loom larger than anticipated. US government programs that once bolstered SAF development, such as the SAF Grand Challenge and the 40B blenders’ tax credit, are facing uncertainty. This transition away from the 40B credit to the production-oriented 45Z tax credit has added complexities, directly impacting the path forward for innovative SAF technologies.
Under 45Z, tax credits are linked to carbon intensity (CI) scores. For instance, HEFA (Hydrotreated Esters and Fatty Acids) fuels with lower CI scores receive larger credits, making waste feedstocks particularly advantageous. Technologies like Fischer-Tropsch (FT), derived from biomass feedstocks such as corn stover, are now gaining traction due to their lower CI scores with tax credits ranging up to $1.65 per gallon. Similarly, plant waste like sugarcane bagasse is being tapped to produce SAF within FT processes, with companies initiating pilot projects aimed at full-scale production in the years ahead.
Another emerging technology, power-to-liquids (PTL), holds great promise but faces significant obstacles. PTL could achieve a negative CI score when operational, qualifying for the maximum tax credit of $1.75 per gallon. However, its scalability and the removal of SAF-specific incentives raise concerns about its ability to reach commercial viability. The absence of sustained governmental
backing risks delaying critical advancements, which could impact aviation’s ability to achieve long-term emissions reductions.
Google deepens commitment to carbon removal
Google continues to be one of the leaders in corporate climate action with its large investment in carbon removal credits. For 2024, the company has committed over $100 million, spanning projects like direct air capture (DAC), enhanced rock weathering, biomass carbon sequestration, and biochar production. With nearly 800,000 tonnes of CO2 equivalent removals secured to date, Google is making a notable contribution to scaling durable carbon removal solutions.
These investments, which include purchases through carbon demand aggregator Frontier, demonstrate Google’s holistic strategy. For example, biochar and enhanced rock weathering projects contribute towards Google’s portfolio, with scalability and innovation driving down costs for future buyers. Google’s commitment reflects a broader trend among corporations integrating climate innovation into their operations while supporting global net-zero ambitions.
United Airlines seeks scalable DAC initiatives
Through its Sustainable Flight Fund, United Airlines has made its first investment in Direct Air Capture (DAC) through project developer Heirloom. This partnership not only provides funding but also secures United the option to acquire up to 500,000 tonnes of CO2 equivalent removals, either for sequestration or as a raw material for sustainable aviation fuel (SAF) production using power-to-liquid methods.
Heirloom’s technology combines DAC with geological storage to achieve permanent carbon removal. The company currently oversees a 1,000 tCO2 per year DAC facility in California, with the first phase of a larger Louisiana plant capable of capturing up to 17,000 tCO2 per year planned for 2026. A separate facility in Louisiana is set to add a further 100,000 tCO2e year of carbon removals in 2027. This collaboration underlines the growing engagement of the aviation sector with scalable carbon removal technologies to tackle the industry’s residual emissions.
Broader implications for voluntary carbon markets
The landscape of voluntary carbon markets continues to evolve, offering a mix of optimism and challenges. The UK’s ambitious climate targets, advancements in SAF production, and significant private-sector investments highlight the sector’s forward momentum. However, looming uncertainties in policy and funding underscore the challenges still facing the market.
Corporate and governmental collaboration remains critical to addressing gaps in support and scaling the adoption of innovative solutions, from SAF to DAC technologies. Staying informed and proactive is essential for stakeholders aiming to leverage the market’s potential fully.
Voluntary carbon markets are not only a bridge to today’s climate challenges but also a powerful platform for fostering long-term sustainability. By aligning with Fasmarkets latest news, pricing and analysis updates, market participants can better position themselves to capitalize on the opportunities ahead.
Why stay updated on voluntary carbon markets?
Voluntary carbon markets are at the forefront of climate innovation, bridging the gap between corporate sustainability goals and global climate targets. Whether through biochar, ARR credits, or durable carbon removals, VCM developments are setting a precedent for high-quality, impactful climate finance.
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