Carbon Markets 2.0
By “carbon markets” here I mean the buyer-led, non-regulated segment—often called the voluntary carbon market (VCM). I’ll use VCM as shorthand below.
TL;DR
The VCM has split in two: “1.0” struggling vs “2.0” growing fast
Buyers now prioritize removals, recent vintages, and labeled quality
Offtakes are the dominant instrument: multi-year, pricier, defensible
The quality revolution
The market for carbon credits is undergoing a quality revolution, I would call this the shift from “VCM 1.0” to “VCM 2.0” (Voluntary Carbon Market generations). Under VCM 1.0 – roughly the first era of voluntary offsets – volume was king, but quality was variable. Many credits issued and traded were from avoided emissions projects (like REDD+ avoiding deforestation, or even older projects like industrial gas destruction and renewable energy). These were cheaper and more plentiful credits, suitable for companies looking to offset large volumes at low cost. Indeed, until recently, the majority of credits retired by companies were these reduction/avoidance credits. However, controversies over integrity (e.g., whether a forest conservation project truly avoided deforestation, or whether a renewable energy project was really additional) began to erode buyer trust in generic offsets. By 2022–2023, the voluntary market faced a glut of older VCM 1.0 credits with shaky reputations, and prices for many of these plummeted.
Source: Arbonics
At the same time, a new segment VCM 2.0 started to emerge, focused on high-integrity carbon removals. In VCM 2.0, the emphasis is on credits that are real, additional removals of CO₂ from the atmosphere, generated under stringent methodologies. This typically means nature-based removals (like afforestation/reforestation, soil carbon sequestration) and emerging engineered removals (like direct air capture, biochar, etc.), with strong monitoring and safeguards.
The numbers tell the story of this shift. In 2024, the traditional voluntary carbon market (largely VCM 1.0 credits) was worth about $535 million with ~84 million credits transacted.
Source: Ecosystem Marketplace
This was actually a dip in value from prior years, reflecting the headwinds and buyer skepticism around older credits [Ecosystem Marketplace].
Here comes 2.0
Yet, in parallel, an explosion of forward purchases took place for nature-based removals (VCM 2.0). By mid 2025, companies had contracted roughly 34 million tonnes of future forest carbon credits and announced commitments for another ~68 million tonnes – together valued around $2.0+ billion – far exceeding the current size of the spot market [cdr.fyi]. In other words, the future market (VCM 2.0) for high-quality forest carbon is already multiple times larger than last year’s entire market for traditional credits. This remarkable statistic confirms that VCM 2.0 has arrived: big buyers are effectively bypassing the low-quality market and pouring money into forward agreements for removals that meet new integrity criteria.
What are those criteria? Initiatives like the Symbiosis Coalition – a buyer coalition defining a new quality bar – exemplify VCM 2.0 standards. Symbiosis (which includes Microsoft, Meta, Google, Salesforce and McKinsey) has outlined strict pillars for nature-based removal projects: conservative accounting, durability, community benefits, transparency, and ecological integrity [Symbiosis Coalition]. They’re only interested in methodologies that ensure real, long-term carbon removal, excluding things like avoided deforestation credits. Offtake agreements under Symbiosis seek to contract projects that will remove carbon through new forests and lock it away for the long term – essentially cherry-picking the best of the best projects. By pre-booking up to 20 million tonnes by 2030 under these standards, this means more than a billion dollars of new demand and such coalitions send a strong demand signal for afforestation and other removal projects.
Offtakes as a new standard
A key feature of VCM 2.0 is the role of offtake deals: instead of just buying credits from past projects on the spot market, corporations are now signing forward contracts to purchase future credits from trusted projects. This off-take model indicates a long-term commitment and a vote of confidence in quality – companies are effectively saying they’ll pay for carbon that will be delivered over 5, 10, or even 20 years from now, often at higher prices, because they believe these credits will meet future standards and stakeholder scrutiny. Offtake deals are only happening because we have stepped into VCM 2.0 - the higher integrity allows the buyers to feel secure to make the future purchases.
Source: MSCI
From the buyer’s perspective, VCM 2.0 credits also carry strategic advantages. They can often be counted as “removals” in net-zero strategies, which are increasingly preferred to offsets from emission reduction projects. A recent analysis noted that buyers are currently seeking 1) removals over reductions, 2) newer vintages, and 3) credits with recognized high-quality labels [Ecosystem Marketplace].
K-shaped market
This is creating what some call a “K-shaped market”: high-quality credits rising in demand and price, while older low-quality credits lag or even become obsolete[21].
The K-shaped market: “1.0” struggling vs “2.0” growing fast (Source: Arbonics)
In summary, VCM 1.0 vs 2.0 comes down to quantity vs quality. VCM 1.0 delivered a large volume of offsets with mixed integrity – enough for early corporate CSR needs but insufficient for robust climate claims today. And let’s not bash VCM 1.0 here, 1.0 of anything is imperfect. If your iPhone were to be replaced with iPhone 1 today, you would probably just be in a shock.
VCM 2.0 is about high-integrity carbon removals, which are fewer but in far higher demand per unit.
In the future we will move towards versions 3.0 and 4.0 - there is room to develop further. The future trends:
the V will disappear from VCM and compliance markets and voluntary markets will converge
with further standardization, carbon will move closer to other commodities in terms of trading - an active futures market