Bridging Compliance and Voluntary Ambition in a Fragmented Policy Landscape

North America - encompassing the United States and Canada - presents a uniquely complex and dynamic climate landscape. Defined by a combination of federal, state/provincial, and regional regulations - such as the U.S. Renewable Fuel Standard (RFS), various Low Carbon Fuel Standards (LCFS), and Canada’s Clean Fuel Regulations (CFR) - the continent supports multiple, often overlapping, compliance-based carbon markets. Yet, alongside these mandates, a fast-growing and increasingly influential Voluntary Carbon Market (VCM) is empowering corporate climate leadership. Many businesses are now embracing “compliance-adjacent” strategies that go beyond regulatory requirements to reach ambitious net-zero goals and bolster ESG performance.

This article explores the nuances of North America’s VCM. We examine what motivates U.S. and Canadian companies to engage in voluntary offsetting, the types of projects they favour, and how the overlap between compliance and voluntary mechanisms shapes strategic decisions. Of particular interest is the role of biomethane (Renewable Natural Gas, or RNG) projects, which often generate both compliance credits and voluntary carbon offsets. We also highlight how expert partners such as AFS Energy are vital in navigating this fragmented yet lucrative market, helping ensure that corporate climate action is both credible and impactful.

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The North American Climate Framework: A Dual Approach

Climate action in North America is shaped by a two-track approach:

1. Compliance Markets

• United States:
  • Federal: The EPA’s Renewable Fuel Standard (RFS) mandates renewable fuel use in transport, generating tradable Renewable Identification Numbers (RINs).
  • State-Level: Programmes such as LCFS in California, Oregon, and Washington aim to reduce fuel carbon intensity, resulting in valuable LCFS credits.
  • Regional: Emissions trading schemes such as the Regional Greenhouse Gas Initiative (RGGI) and the Western Climate Initiative (WCI) also operate in select states.
• Canada:
  • Federal: The Clean Fuel Regulations (CFR) are broadly similar to LCFS schemes, targeting fuel decarbonisation.
  • Provincial: Several provinces have their own carbon pricing frameworks.

2. Voluntary Carbon Market (VCM)

Despite the strength of compliance markets, the VCM continues to thrive, fuelled by:

• Corporate Net-Zero Commitments: Major North American corporations, often aligned with initiatives such as the Science Based Targets initiative (SBTi), require action beyond regulatory obligations.
• Investor and ESG Pressures: Stakeholders increasingly demand strong environmental performance and transparency.
• Public Image and Leadership: Voluntary initiatives enhance reputational positioning and brand differentiation.
• Scope 3 and Residual Emissions: Voluntary credits are especially relevant for emissions outside compliance regimes, including value chain emissions and hard-to-abate residual emissions.

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Demand Drivers and Project Preferences in the North American VCM

VCM demand across North America is substantial and shaped by specific strategic priorities:

• Domestic Sourcing Preference: Many U.S. and Canadian organisations prefer offset projects located within their respective countries. This supports due diligence, improves transparency, strengthens community engagement narratives, and delivers local socio-economic benefits.
• High Demand for Methane Avoidance (RNG) Projects:
  • Potent GHG Impact: Methane capture from sources like landfills, agricultural waste, and wastewater results in significant and measurable emissions reductions.
  • Demonstrable Additionality: Smaller-scale RNG projects, particularly in agriculture, often depend on revenue from carbon credits for viability.
  • Meaningful Co-Benefits: Improved waste management, enhanced air quality, and local renewable energy supply are commonly realised.
  • Credit Stacking Opportunities: RNG projects can generate both compliance credits (e.g., RINs, LCFS, CFR credits) and voluntary carbon credits, creating strong financial incentives and a steady supply of high-integrity methane avoidance credits.
• Forestry and Land Use Projects: These remain central, including improved forest management, afforestation/reforestation, and avoided grassland conversion - especially relevant in the expansive U.S. and Canadian geographies.
• Emerging Carbon Removals: There is growing interest in technologies such as Direct Air Capture (DAC) and biochar, viewed as essential for offsetting long-term residual emissions.

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Certification and Standards: Blending Global and Regional Approaches

The North American VCM utilises both international and domestic certification frameworks:

• Global Standards:
  • Verra (VCS): Widely adopted for a range of projects, including RNG, across North America.
  • Gold Standard: Preferred for projects delivering strong sustainable development and community benefits, aligned with certain ESG priorities.
• Domestic Standards:
  • American Carbon Registry (ACR): Prominent in forestry, agriculture, and legacy emissions mitigation.
  • Climate Action Reserve (CAR): Especially notable for methodologies targeting landfill gas, livestock methane, and forest carbon.

These standards often feature tailored protocols suited to North American conditions.

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Regulatory Interaction: Compliance-Adjacent Opportunities

A distinctive feature of the North American VCM is its close, yet independent, relationship with compliance markets:

• RFS and LCFS Influence: Compliance-driven incentives make RNG projects economically viable. Although these schemes are regulatory in nature, they create an environment conducive to voluntary claims - provided robust safeguards are in place. For instance, an RNG project that generates RINs for transport fuel compliance cannot also generate VCM credits for Scope 3 offsetting from the same environmental benefit without clear differentiation.
• Avoiding Double Counting: Strict accounting practices are essential. Carbon credit registries and project standards implement controls to prevent the same GHG reduction from being counted in both compliance and voluntary contexts. Ongoing updates to the Greenhouse Gas Protocol (GHGP) aim to provide further clarity for biomethane accounting - particularly for non-segregated RNG supply.
• State-Level Incentives: Additional state-led initiatives (e.g., renewable thermal programmes, procurement mandates) further bolster RNG deployment and increase the pool of VCM-eligible projects where surplus attributes remain.

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Challenges and Opportunities in the North American VCM

Challenges:

• Market Fragmentation: Understanding and managing the overlap between federal (RFS), state (LCFS), regional (RGGI), and voluntary markets requires significant legal and technical expertise.
• Proving Additionality: As compliance-driven revenue improves RNG project economics, VCM projects must carefully demonstrate that carbon finance still plays a decisive role.
• Traceability: End-to-end transparency from project development to credit retirement remains essential to maintain confidence and avoid greenwashing risks.
• Financing Smaller Projects: While large-scale projects are more readily financed through compliance income, smaller, impactful initiatives often still depend on VCM revenue.

Opportunities:

• Robust Demand: Corporate net-zero strategies and investor-driven ESG benchmarks guarantee continued appetite for high-quality voluntary credits.
• Diverse Supply Potential: The region is rich in opportunities across agriculture, waste management, and forest ecosystems.
• Innovation in Credit Design: New methodologies for removals and land management are constantly emerging, contributing to market maturity.
• Leverage of Compliance Infrastructure: VCM project developers can build on compliance systems to improve efficiency and financial returns.
• Technological Edge: North America’s advanced digital infrastructure supports innovation in registry systems, tracking tools, and trading platforms.

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AFS Energy’s Role in the North American VCM: Maximising Value in a Complex Ecosystem

For North American companies looking to capitalise on the VCM - either as buyers of offsets or developers of eligible projects - navigating its intricacies requires expert support. AFS Energy, with an established presence in the United States and extensive expertise in environmental commodities, is ideally placed to assist.

AFS Energy’s Capabilities in North America Include:

• RNG Credit Stacking Expertise: Providing strategic advice on how to optimise returns from RINs, LCFS, and voluntary carbon credits, ensuring transparent differentiation to avoid double claims.
• Targeted Credit Procurement: Supporting corporate buyers in sourcing high-integrity credits, especially from biomethane projects aligned with their ESG and Scope 3 strategies, using standards such as Verra, Gold Standard, ACR, and CAR.
• Real-Time Market Intelligence: Delivering insights into credit pricing, supply/demand dynamics, and policy shifts from bodies such as the EPA, CARB, and provincial regulators.
• Compliance-Adjacent Strategy Development: Advising companies on how to integrate VCM credits into broader climate strategies responsibly and effectively, especially where emissions fall outside compliance regimes.
• Sustainability Assurance: Ensuring all traded biomethane credits meet top-tier environmental standards, supported by ISCC, Redcert, and Better Biomass certifications.
• Integrated Decarbonisation Advisory: Helping clients coordinate between compliance mechanisms (RFS, LCFS), voluntary initiatives, and wider energy management for a cohesive and optimised emissions reduction portfolio.

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North America's Voluntary Carbon Market – A Catalyst for Accelerated Decarbonisation

The North American VCM is an essential component of the continent’s climate strategy - offering a flexible and increasingly sophisticated platform for achieving emission reductions beyond compliance. With its strong interaction with existing regulatory markets, especially through biomethane projects, it offers a unique blend of challenges and opportunities.

For industry leaders, success in this market depends on navigating its complexities with precision and insight. With expert partners like AFS Energy, businesses can confidently unlock the full potential of the VCM - ensuring their climate action is credible, impactful, and a cornerstone of long-term Net Zero success.