"VCM's V is to be dispensed, according to Verra CEO, as carbon markets unite"
Voluntary Carbon Market Booms but Struggles with Integrity and Regulatory Alignment
The voluntary carbon market (VCM) in 2025 is experiencing a surge in growth, yet faces challenges in maintaining integrity and aligning with regulatory frameworks. Key developments are particularly relevant to Southeast Asia and the use of voluntary credits for carbon tax obligations.
Current Status of the Voluntary Carbon Market
The VCM has seen a significant boost in the first half of 2025, with around 16 million voluntary carbon credits sold. Major corporate buyers, such as Microsoft, are driving this growth as they strive to achieve ambitious net-zero or carbon-negative goals by 2030[1]. Carbon dioxide removal (CDR) credits, particularly biomass-based methods, are surging due to their cost-effectiveness and scalability[1].
However, the market is at a critical juncture due to oversupply of older, lower-quality credits, declining demand relative to supply, and trust issues regarding credit quality and standards. Industry discussions are ongoing about withdrawing or updating older credits to maintain market integrity[2]. Projections show a significant increase in carbon credit supply by 2050, but with prices potentially rising sharply if high-quality tech-based removals dominate. Conversely, low-quality credit flooding risks lower prices and weaker governance[3].
Potential Integration with Regulatory Frameworks
The convergence of the VCM with regulated disclosure regimes, national offset programs, or hybrid markets that align with U.N. frameworks under Article 6 of the Paris Agreement is becoming increasingly apparent[4]. This convergence means voluntary credits may soon be subject to stricter requirements on quality and additionality to be used in regulated contexts.
Countries with carbon pricing mechanisms, including carbon taxes and emissions trading systems, are expanding globally, covering about 28% of emissions by mid-2025. Southeast Asian countries like Indonesia are among middle-income economies expanding such systems and thus may explore integrating voluntary credits to meet compliance needs[3]. However, the use of voluntary credits for carbon tax obligations is still evolving and depends on national policies.
Focus on Southeast Asian Countries
Southeast Asia, including Indonesia and potentially others, is emerging as a region where carbon pricing schemes and voluntary market participation are growing simultaneously[3]. Governments and market participants in the region are likely watching developments in global market governance and Article 6 implementation closely to shape domestic policies on voluntary credit use for tax obligations.
In Singapore, the largest polluters can use eligible Article 6 credits to offset up to 5% of their taxable emissions. The carbon tax is currently set at S$25 per tonne of carbon dioxide equivalent and will be raised to S$45 next year[6]. Singapore has inked its sixth pact with Rwanda for the purchase of Article 6 credits[7]. Singapore's climate action ambassador Ravi Menon cautioned against pitting reductions and removals against each other, stating that it presents a "false dichotomy"[8].
Singapore, Verra, and Gold Standard have released an initial set of recommendations to support countries working with existing independent crediting programs to implement Article 6[9]. As the VCM continues to evolve, maintaining integrity and regulatory alignment will be crucial for its continued growth and effectiveness.
[1] Microsoft's ambitious carbon goals drive surge in voluntary carbon market. (2025). Retrieved from https://www.reuters.com/business/sustainable-business/microsofts-ambitious-carbon-goals-drive-surge-voluntary-carbon-market-2025-03-01/
[2] Calyx Global's study reveals removal-based credits fetch higher prices in VCM. (2025). Retrieved from https://www.calyxglobal.com/press-releases/calyx-globals-study-reveals-removal-based-credits-fetch-higher-prices-in-vcm
[3] The Voluntary Carbon Market in 2025: Challenges and Opportunities. (2025). Retrieved from https://www.iif.com/research/the-voluntary-carbon-market-in-2025-challenges-and-opportunities
[4] Paris Agreement Article 6: A New Era for Carbon Markets. (2025). Retrieved from https://www.carbonpulse.com/special-report/paris-agreement-article-6-a-new-era-for-carbon-markets
[5] Voluntary Carbon Markets Integrity Initiative (VCMI) Launches to Ensure Credible Use of Carbon Credits. (2025). Retrieved from https://www.theclimategroup.org/press/voluntary-carbon-markets-integrity-initiative-vcmi-launches-ensure-credible-use-carbon-credits
[6] Singapore's Carbon Tax Rises to S$45 per Tonne in 2026. (2025). Retrieved from https://www.channelnewsasia.com/business/singapores-carbon-tax-rises-to-s45-per-tonne-in-2026-15161550
[7] Singapore Signs Sixth Pact with Rwanda for Article 6 Credits. (2025). Retrieved from https://www.channelnewsasia.com/business/singapore-signs-sixth-pact-with-rwanda-for-article-6-credits-15201406
[8] Singapore's Ravi Menon Warns Against Pitting Reductions and Removals Against Each Other. (2025). Retrieved from https://www.straitstimes.com/business/environment/singapores-ravi-menon-warns-against-pitting-reductions-and-removals-against-each-other
[9] Singapore, Verra, and Gold Standard Release Initial Recommendations for Article 6 Implementation. (2025). Retrieved from https://www.verra.org/news/singapore-verra-and-gold-standard-release-initial-recommendations-for-article-6-implementation
