Voluntary carbon markets (VCMs) offer an important market mechanism that allows firms to efficiently abate their emissions. By utilizing the VCM, firms can buy voluntary carbon credits (VCCs) from carbon projects that have a lower marginal cost of abatement, allowing firms to decarbonize more efficiently.
This efficiency may lead to firms decarbonizing their operations more quickly and further than they would otherwise do on a voluntary basis.
One of the main obstacles in delivering the lowest cost abatement through VCCs and liquid, transparent VCMs is the perceived risk of greenwashing and its associated reputational and regulatory risks.
This paper: (1) provides an overview of VCCs; (2) explains greenwashing; (3) describes the origin, causes and risks of nature- and technology-based VCC methodologies at both the credit and system level; (4) discusses the effects of greenwashing on primary and secondary carbon markets; (5) highlights market reforms to minimize the risk of greenwashing (both regulatory and industry-led efforts); and (6) provides recommendations.
Click on the PDF to read the paper in full.
Documents (1) for Navigating the Risks of Greenwashing in the Voluntary Carbon Market
Latest
ISDA In Review – August 2026
A compendium of links to new documents, research papers, press releases and comment letters published by ISDA in August 2026.
Remove Bureaucracy from Cross-margin Approvals
Cross-margining programs play a critical role in financial markets. By ensuring margin requirements more closely reflect the actual risk of a portfolio of products, they reduce liquidity strain and improve market efficiency, both of which will become even more important...
Joint Response on CCP Resolution
On September 7, ISDA and FIA responded to a Bank of England (BOE) discussion paper on central counterparty (CCP) resolution. The associations support greater clarity on valuation capabilities prior to a crisis scenario and the boundary between recovery and resolution,...
Expanding Legal Agreement Coverage in the CDM
This paper examines the recent extension of the Common Domain Model (CDM)1 to represent two of the most significant, and previously undeveloped, areas of its legal agreement model: umbrella agreements and contract amendments. Umbrella agreements are widely used to document...