What is the difference between regulatory and voluntary carbon offset markets?

Various governments around the world have developed regulated markets for trading greenhouse gas (GHG) credits (eg. European Union Emissions Trading Scheme, New South Wales Greenhouse Gas Reduction Scheme, etc.).  The Commonwealth Government has committed to introducing an Australian Emissions Trading Scheme by 2010.

These schemes are usually designed to support targets or  requirements for businesses in specific sectors to reduce greenhouse gases (GHGs). These schemes are governed by rules on a range of issues, such as monitoring and verification of emission reductions, and trading of GHG credits with other businesses in the scheme. Trading scheme rules also set out how emission reductions from outside the sectors covered under the scheme can qualify as ‘offsets’ in order to provide flexibility to businesses in meeting their GHG targets.

Outside of these regulated markets, businesses may voluntarily seek to reduce GHG emissions through offsetting, and this may involve:

• Voluntary purchases offset credits recognised under a regulated market.
• Voluntary purchases of offset credits from emission reduction or sequestration projects outside the regulated market.. The voluntary nature of these purchases also allow for investment in a broader range of projects than are available through regulated markets These projects can also be selected to reflect the goals or values of the purchaser (e.g. EPA invested in an offset product which also diverted waste from landfill).

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