Carbon markets come in two kinds that are easy to mix up. Compliance markets are set up by law and apply to a defined group of emitters. The voluntary market is open to anyone who wants to fund emission cuts or removals. Both trade in tonnes of CO₂ equivalent, but the buyers, the rules and the reasons for buying are different.
New to the topic? Start with what a carbon credit is and what the carbon market is, part of our Learn section.
How do voluntary and compliance markets compare?
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| Aspect | Compliance market | Voluntary market |
|---|---|---|
| Who takes part | Companies in covered sectors, required by law | Any company or individual, by choice |
| What is traded | Allowances issued by a government, sometimes with limited offset credits | Carbon credits issued by independent standards |
| Unit | 1 allowance = 1 tCO₂e | 1 credit = 1 tCO₂e |
| Who sets the rules | A government or regulator | Standards bodies, with ICVCM setting a quality threshold |
| Examples | EU ETS, UK ETS, California Cap-and-Trade, India’s CCTS | Credits under Verra’s VCS and Gold Standard |
As of Oct 2026
Both markets count in tonnes: an EU allowance gives the right to emit one tonne of CO₂eSource 1, and a Verra credit represents one tonne reduced or removedSource 5. In the voluntary market, the ICVCM’s Core Carbon Principles act as a shared quality bar across standardsSource 6.
Examples of compliance carbon markets
- EU Emissions Trading System (EU ETS). Launched in 2005, it covers electricity and heat generation, industrial manufacturing and aviation, about 40% of the EU’s total greenhouse gas emissions, and has covered maritime transport since 2024Source 1.
- UK Emissions Trading Scheme (UK ETS). It came into effect on 1 January 2021. It is a cap-and-trade scheme: a cap limits total emissions, and operators must surrender an allowance for each tonne they emitSource 2.
- California Cap-and-Trade Program. It covers about 80% of the state’s greenhouse gas emissions and began in 2013; one allowance equals one metric ton of CO₂eSource 3.
- India’s Carbon Credit Trading Scheme (CCTS). Its compliance mechanism sets greenhouse gas emission-intensity targets for energy-intensive industries, and each certificate represents one tonne of CO₂eSource 4.
Allowances are not the same as credits
A compliance allowance is a permit to emit. A voluntary carbon credit is a record that a project reduced or removed a tonne. Both are counted in tonnes of CO₂e, but they answer different questions.
Where do the two markets overlap?
The line between the two is not sealed. Some links between them:
- Offsets inside compliance schemes. California lets covered companies use offset credits for a small portion of their compliance obligation each yearSource 3. India’s scheme pairs its compliance mechanism with a voluntary, project-based offset mechanism for entities that aren’t covered by the targetsSource 4.
- Article 6 of the Paris Agreement. Article 6.2 allows countries to cooperate and transfer the mitigation outcomes this produces, and Article 6.4 sets up a crediting mechanism run centrally by the UNFCCC secretariatSource 7. See Article 6 explained.
- CORSIA for aviation. In October 2016, the International Civil Aviation Organization (ICAO) agreed a global measure for CO₂ from international flightsSource 8. CORSIA requires aeroplane operators to offset the growth in international aviation emissions above a baseline: 2019 emissions in the pilot phase (2021 to 2023), and 85% of 2019 emissions from the first phase (2024 to 2026) onwardsSource 9. See CORSIA explained.
What can individuals buy?
Individuals usually buy in the voluntary market. You pick credits from a project type you trust, buy them from an offset shop, reseller or broker, and make sure they are retired in your name with the serial numbers shown in a public registry.
Describe what you funded
Retiring credits doesn’t erase your own emissions. The clearest claim is a factual one, such as “we funded the retirement of 5 tonnes of verified reductions”, with a link to the registry record.
Rules and tax treatment differ by country. Our country guides cover buying in the United Kingdom, the United States, Canada, Australia and India.
Before you buy, cut what you can and work out what is left. Our guide to buying carbon credits takes you through it step by step.