The Shadow of the EU Green Deal and the Light of the Voluntary Carbon Market

The European Union stands as a global exemplar of climate ambition, with policies such as the European Green Deal and the ‘Fit for 55’ package forming a comprehensive legislative framework for decarbonisation. At the heart of this strategy lies the EU Emissions Trading System (EU ETS), a mandatory compliance market placing a binding price on carbon for large segments of the industrial and power sectors. Yet, within this robust regulatory architecture, an equally powerful complementary mechanism is emerging: the Voluntary Carbon Market (VCM).

For numerous EU-based businesses - particularly those pursuing ambitious net-zero targets and seeking to address complex Scope 3 emissions - the VCM provides a vital avenue to accelerate climate action beyond legal obligations while bolstering Environmental, Social, and Governance (ESG) credentials.

This article explores the unique dynamics of the VCM within the EU-27. We examine the factors compelling European companies to participate in voluntary offsetting, the types of projects they favour, and how global carbon standards intersect with the EU’s stringent climate agenda. We also highlight the growing emphasis on credit integrity within the EU and the essential role played by expert advisors like AFS Energy in navigating this evolving landscape to ensure credible and effective climate contributions.

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The EU’s Drive for Decarbonisation and the Role of the VCM

European companies operate under some of the most stringent climate regulations globally. The EU ETS captures a significant share of direct emissions (Scope 1 and some Scope 2) for many industrial sectors, mandating emissions reductions or the purchase of carbon allowances. Nevertheless, large parts of a company’s emissions footprint remain outside this scope, especially:

• Scope 3 Emissions: Indirect emissions arising throughout the value chain - upstream (e.g., suppliers) and downstream (e.g., product use and disposal) - are often the largest and least regulated emission source.
• Residual Emissions: Emissions that are currently technically or economically unfeasible to eliminate.
• Beyond Compliance: A proactive desire to exhibit climate leadership, support innovation, and fund climate initiatives in jurisdictions lacking robust regulation.

This is where the VCM becomes critical. Through the purchase of voluntary carbon credits, EU-based firms can:

• Offset Uncovered Emissions: Compensate for Scope 3 or other emissions not captured by compliance markets.
• Accelerate Climate Contributions: Channel private capital into verifiable emissions reductions or removal projects globally.
• Achieve Voluntary Targets: Progress towards internal net-zero goals or align with initiatives like the Science Based Targets initiative (SBTi).
• Improve ESG Standing: Enhance ESG ratings, attract sustainable investment, and strengthen reputational value.
• Engage in Purpose-Led Climate Action: Support initiatives aligned with corporate values, especially those with additional environmental or social benefits.

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Demand Drivers and Project Preferences Among EU Buyers

EU demand for voluntary carbon credits is strong and steadily rising, shaped by a blend of climate ambition, regulatory expectations, and stakeholder scrutiny. Key demand traits include:

• A Commitment to High-Integrity Credits: European companies, under increasing scrutiny from investors, regulators, and NGOs, are acutely aware of the reputational risks of “greenwashing”. They prioritise carbon credits that offer proven additionality, permanence, independent monitoring, and transparent reporting - often paying a premium for this assurance.
• Focus on Co-benefits: Beyond emissions reductions, buyers value projects that deliver measurable social and environmental improvements, such as biodiversity conservation, improved public health, and community development.
• Rising Interest in Carbon Removals: A growing shift towards carbon removal projects (e.g., Direct Air Capture, biochar, afforestation) is evident, particularly to address residual emissions in line with net-zero commitments.
• Biomethane Projects in High Demand: Projects capturing methane from landfills, agriculture, or wastewater are especially attractive due to:
  • Powerful GHG Mitigation: Methane’s potency as a greenhouse gas makes its capture highly impactful.
  • Strong Additionality: Many such projects in developing economies would not proceed without carbon finance.
  • Multiple Co-benefits: Including improved waste management, sanitation, and local energy access.
  • Clear Fossil Fuel Displacement: Substituting natural gas with biomethane contributes to tangible decarbonisation.

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Standards and Certification: Global Frameworks with European Expectations

The EU’s VCM largely utilises global crediting standards for project validation and credit issuance, including:

• Verra (VCS): The world’s most widely used standard, accepted across EU corporate portfolios.
• Gold Standard (GS): Particularly favoured for its emphasis on sustainable development and community engagement, resonating with EU values.
• ACR and CAR: Recognised in Europe when sourcing credits from North American projects.

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The Carbon Removal Certification Framework (CRCF): A Look Ahead

Although current VCM engagement is based on global standards, the EU is establishing its own Carbon Removal Certification Framework (CRCF), intended to:

• Standardise Removals: Establish a rigorous system for certifying high-quality carbon removals within the EU, with a focus on transparency, traceability, and environmental integrity.
• Create a Unified Certification Framework: Enabling removals to be recognised across various uses - from corporate reporting to potential future regulatory mechanisms.
• Stimulate Domestic Supply: Encourage investment in EU-based carbon removal solutions, including forestry, soil carbon, and industrial carbon capture or utilisation.

Although the CRCF is initially EU-focused, its influence may shift buyer preference towards EU-certified credits in the future, impacting sourcing decisions across voluntary markets.

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Regulatory Interaction: Balancing Compliance and Voluntarism

EU regulations directly influence the VCM, particularly in how they interface with the EU ETS:

• Complementary, Not Substitutive: Voluntary credits are not intended to substitute for compliance obligations under the EU ETS. Instead, they are a means to address non-regulated emissions and to support companies striving to go beyond compliance.
• Mandatory Transparency: Initiatives such as the Corporate Sustainability Reporting Directive (CSRD) demand clear disclosure of climate strategies - including the nature and quality of carbon credits used - driving demand for more rigorous offsets.
• FuelEU Maritime: This regulation incentivises the use of sustainable fuels, including biomethane, in the maritime sector. While distinct from the VCM, it reflects broader EU regulatory interest in certified low-carbon fuels, which may overlap with carbon markets.

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Challenges and Opportunities in the EU VCM

Challenges

• Perceptions of Greenwashing: Despite improvements, VCMs still attract scepticism from the public and media. EU companies must demonstrate robust due diligence and transparent communications to maintain trust.
• Supply Constraints: The availability of high-integrity carbon removals and avoidance credits is limited relative to surging demand.
• Evolving Standards: The ongoing development of the CRCF and updates from global standard-setters such as the ICVCM create a moving target for compliance and best practice.
• Price Volatility: Market fluctuations complicate long-term procurement and budgeting for voluntary offsets.

Opportunities

• Sustained Corporate Demand: Strong ESG mandates and net-zero commitments will continue to drive VCM participation across Europe.
• Leadership in Quality and Governance: The EU can shape global standards and drive market maturation through its emphasis on integrity.
• Innovation Through CRCF: The CRCF provides a formal pathway to support next-generation carbon removal technologies and methodologies within the bloc.
• Biomethane Investment Potential: Supporting biomethane projects offers an immediate, measurable pathway for GHG reductions, aligned with both voluntary and compliance markets.

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AFS Energy: Supporting EU Clients in the Voluntary Carbon Market

For EU organisations seeking meaningful climate impact through the VCM, expert navigation is essential. AFS Energy, with deep experience in environmental markets and a broad European presence, offers tailored support across the VCM lifecycle.

AFS Energy’s VCM Expertise Includes:

• Rigorous Credit Sourcing: Utilising high-integrity standards (e.g., ISCC, Redcert, Better Biomass) and applying ICVCM-aligned principles to source credits from credible projects - especially those focused on biomethane and methane avoidance.
• Strategic Procurement Advice: Assisting clients in incorporating VCM credits into robust net-zero plans, ensuring usage aligns with best practice frameworks like the Voluntary Carbon Markets Integrity Initiative (VCMI).
• Market Intelligence & Project Access: Offering up-to-date insight into pricing trends, project pipeline dynamics, and emerging credit types aligned with EU buyer preferences.
• Biomethane Project Advisory: Helping corporates evaluate and invest in carbon-generating biomethane projects globally, ensuring compliance with EU standards and alignment with ESG goals.
• Integrated Compliance Planning: Creating holistic decarbonisation strategies that balance the EU ETS, national obligations (e.g., Dutch biomethane blending) and VCM participation for maximum impact.

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The VCM as a Pillar of Europe’s Net-Zero Strategy

The Voluntary Carbon Market in the EU is maturing rapidly, driven by corporate ambition, regulatory expectation, and a clear need for high-integrity climate solutions. While challenges remain, the combination of global standard evolution and EU-led frameworks like the CRCF are setting a new benchmark for credibility.

For European businesses, participation in the VCM is not merely about offsetting emissions - it is about leadership, investment in real climate outcomes, and contributing to a just and sustainable transition. With expert partners such as AFS Energy, organisations can confidently navigate this complex terrain and ensure their voluntary climate action is both impactful and strategically aligned with long-term goals.