The voluntary carbon market (VCM) enters 2026 with stronger foundations than a year ago. Despite political headwinds in 2025, investment, contracting, and integrity standards advanced.
According to Abatable’s 2026 market report, forward carbon credit contracts rose 58% year-on-year to $5.8 billion in 2025. This surge shows that buyers are locking in future supply rather than relying on spot purchases.
Funding for carbon credit projects reached $15.8 billion in 2025, even after a slowdown in engineered removal investments. Notably, nature-based funding hit a record $9 billion, signaling strong demand for high-integrity supply.
At the same time, compliance markets are reshaping demand patterns. CORSIA, the Carbon Offsetting and Reduction Scheme for International Aviation, is set to create an extra 78 million tonnes of demand by 2026. This is in addition to the 58 million tonnes needed for 2024 emissions.
But the most significant structural shift may come from Japan.
GX-ETS: From Voluntary Signal to Compliance Engine
Japan’s new GX-ETS (Green Transformation Emissions Trading Scheme) becomes mandatory in April 2026. The Asian country emits roughly 1 billion tonnes of CO₂ per year. The GX-ETS will initially cover 500–600 million tonnes annually, more than half of national emissions.
- Between 300 and 400 companies will be regulated under the scheme.
Companies will be allowed to meet up to 10% of their compliance obligations using carbon credits. That creates potential demand of 50–60 million tonnes of credits per year.
For comparison, total voluntary carbon market retirements across major registries were 163 million tonnes in 2025. Japan alone could represent roughly one-third of that volume in compliance-driven demand.
This is not incremental; it is structural.
Convergence in Practice: J-Credits and JCM
Japan’s design shows how compliance and voluntary systems are merging. Companies can use two credit routes under GX-ETS:
- J-Credits – Japan’s domestic carbon credit scheme
- Joint Crediting Mechanism (JCM) – An Article 6.2 international crediting system with 29 partner countries
J-Credits cover nature-based solutions, renewable energy, and industrial efficiency. Engineered removals such as BECCS (bioenergy with carbon capture and storage) and DAC(direct air capture) are expected to be added in future phases.
The JCM focuses largely on avoidance projects, including renewable energy and efficiency measures. This structure links Japan’s domestic compliance market directly to international carbon trading under the Paris Agreement. It effectively blends compliance demand with voluntary market infrastructure.
Why This Matters for the VCM: From Optional Offsets to Structured Demand
The voluntary market has long relied on corporate net-zero commitments. Yet, that driver is evolving.
The Science Based Targets initiative (SBTi) remains the most influential corporate demand-side framework. Its new Corporate Net Zero Standard V2 draft introduces the concept of Ongoing Emissions Responsibility (OER). Companies may be recognized for addressing ongoing emissions using carbon credits.
This shifts the narrative. Credits are no longer seen only as optional compensation tools. They may become structured components of transition plans.
Meanwhile, integrity has become central.
The Integrity Council for the Voluntary Carbon Market (ICVCM) has approved 40 CCP methodologies across eight programs. CCP-approved methods might create 865 million more credits by 2035. That’s a ninefold rise from current levels.
Even so, CCP-eligible credits are projected to represent only 12.7% of cumulative voluntary supply by 2035. In this context, Japan’s GX-ETS creates guaranteed, regulated demand for credits that meet compliance rules.
This may increase price discipline and quality screening.
Asia Emerges as the Carbon Pricing Growth Hub
Japan is not acting alone. China is expanding its national ETS and moving toward absolute emissions caps. India plans to launch its Carbon Credit Trading Scheme in mid-2026.
Across Asia, carbon pricing systems now cover hundreds of millions of tonnes of emissions. Globally, carbon pricing instruments cover about 28% of global greenhouse gas emissions, according to the World Bank.
Japan’s GX-ETS will become Asia’s second-largest carbon market.
This regional shift is important. Asia makes up a big part of global emissions and industrial output. When compliance systems in big economies allow some use of carbon credits, they connect voluntary methods to formal rules.
Several other Asian countries already run, or are building, carbon pricing systems.
South Korea operates the Korea Emissions Trading System (K-ETS), launched in 2015. It is one of the largest ETS programs in the region. The International Energy Agency reports that K-ETS includes nearly 80% of Korea’s domestic greenhouse gas emissions. It also targets around 800 of the country’s largest emitters.
Singapore uses a national carbon tax instead of an ETS. The National Environment Agency says Singapore raised its carbon tax to S$25 per tonne in 2024 and 2025, and it will rise to S$45 per tonne in 2026 and 2027. Starting in 2024, Singapore allowed companies to offset up to 5% of taxable emissions. They can use eligible international carbon credits for this.
Indonesia has moved into carbon trading through a formal exchange. The Indonesia Stock Exchange’s carbon platform, IDXCarbon, launched in September 2023, after the country’s financial regulator granted the operator a license. Indonesia’s wider system is expected to evolve into a hybrid model that links trading with a carbon tax-style backstop.
Vietnam has also set a clear roadmap. The International Carbon Action Partnership states that Vietnam updated its carbon market rules in June 2025. It also mandated a pilot ETS starting in August 2025. A fully functioning carbon market is expected by 2029.
These programs show how carbon markets are spreading across Asia through different policy designs. Some countries use cap-and-trade systems. Others use carbon taxes with limited credit use. These models can boost cross-border linkages over time. As Article 6 systems grow, buyers will look for credits that fit both voluntary and compliance needs.
Tightening Supply, Rising Quality Premiums
Supply dynamics are also shifting. Following the 2021 issuance peak, the 2025 supply continued to decline. The net surplus of credits fell to Abatable’s 2026 market report, down from 123 million in 2024.
Avoidance projects still dominate supply. Cookstoves, industrial efficiency, renewable energy, and REDD+ accounted for 222 million tonnes, or 83% of supply in 2025.
Notably, forward pricing data show buyers paying premiums for higher-integrity methodologies, especially CCP-approved projects. Meanwhile, engineered removals remain scarce and expensive. Biochar leads in engineered supply offers. Other removal types mainly use forward contracts for trading.
As compliance markets such as GX-ETS and CORSIA expand, demand for eligible units may tighten supply and lift prices. For CORSIA alone, total First Phase demand is projected at 200–220 million tonnes.
Adding potential GX-ETS demand of 50–60 million tonnes per year changes the scale of market expectations.
2026: A Structural Realignment, Compliance and VCM Begin to Merge
The convergence between compliance and voluntary markets is no longer theoretical. Japan’s GX-ETS demonstrates a model where:
- A large national ETS covers over half of emissions
- Companies can use carbon credits for 10% of compliance
- Domestic and international credit systems integrate
- Integrity standards increasingly define eligibility
This integration creates predictable demand. It may also reduce reputational risk for buyers. Credits used in compliance systems face higher scrutiny.
For voluntary buyers, this strengthens signals around quality and durability, while for project developers, it offers more stable forward revenue. For policymakers, it creates flexibility without abandoning emissions caps.
The VCM deployed 55 million tonnes of high-quality credits through Abatable’s platform alone, across more than 200 companies
In 2026, the market looks more institutional. Forward contracting is rising, integrity standards are tightening, and compliance systems are opening to credit use.
Japan’s GX-ETS may prove to be the clearest sign yet that carbon markets are moving toward structured integration. If 2025 was about resilience, 2026 may be about alignment. And Japan is leading that shift.
- READ MORE: The Carbon Credit Market in 2025 is A Turning Point: What Comes Next for 2026 and Beyond?
The post 2026 Could Redefine Voluntary and Compliance Carbon Market Convergence, with Japan Leading the Way appeared first on Carbon Credits.
Insetting program design starts with your supplier map. The carbon claim comes much later.
Consider a coffee procurement team that funds a farm intervention before checking its sourcing data. The supplier aggregates coffee lots from several regions. The buyer lacks farm-level traceability. Another purchaser expects to report the same outcome. A more attractive project brochure solves none of these problems.
If the distinction between a value-chain intervention and a purchased credit is still open, read CCC’s Insetting vs Offsetting guide before you set the brief.
Insetting program design begins with the purchasing relationship and works outward. You need to decide 1) where an intervention belongs, 2) what business problem it addresses, 3) who pays for it, 4) how results will be measured, and 5) what the evidence will let you say about them. This five-step playbook turns that sequence into a procurement plan.
Step 1: Insetting program design starts with supplier mapping
Start with the commodities that matter most to your Scope 3 inventory and sourcing continuity. Ask finance for spend by supplier, sustainability for the emissions baseline, and category managers for origin and volume records. Then identify which suppliers can trace material to a jurisdiction, sourcing region, producer group, or individual land-management unit.
The level of traceability affects what you can account for. Under the GHG Protocol Land Sector and Removals Standard, the spatial boundary for purchased land-based products depends on the traceability associated with each volume. Farm-specific factors or removals require physical traceability through an acceptable chain-of-custody model. A contract with a tier-one trader, by itself, does not establish a link to the farms behind its deliveries.[1]
Build a first-pass table with five columns: commodity and annual volume; supplier and origin; current traceability level; land-use and production risks; and the business owner who can change the purchasing terms. Mark missing data plainly. A blank cell is cheaper to fix before a program starts than after a claim is drafted.
If your company sets an SBTi Forest, Land and Agriculture target (FLAG), keep its land-related target boundary separate from energy and industry emissions. The current FLAG guidance also requires relevant companies to assess primary deforestation-linked commodities in their value chains.[2]
Step 2: Choose a commodity and jurisdiction for a pilot
Select one supply corridor where the sourcing connection can be established and procurement has a reason to stay. A useful pilot has repeat purchases, suppliers willing to share records, an intervention matched to a diagnosed problem, and a defined plan to measure the result. Carbon potential alone is a poor selection rule if the supplier cannot deliver the crop your business needs.
Compare candidate regions on land-use risk, supplier concentration, local rights and tenure, the availability of baseline data, and exposure to drought, erosion, or forest conversion. Check the relevant legal requirements separately. A nature project does not satisfy a due-diligence obligation merely because it has a carbon method attached.
Consider a coffee buyer sourcing from two districts. In the first, producer-group records identify the farms, while recent dry seasons have increased rejected green coffee lots. In the second, deliveries pass through several intermediaries and farm origins are unknown. Pilot shade management in the first district, with local agronomic advice and quality checks built into the plan. The buyer can trace purchases there and test the intervention against a defined sourcing problem.
Use a short decision memo to record why the selected corridor beats the alternatives, what remains uncertain, and what would stop the pilot. That memo is the first control against a project drifting toward whatever happens to photograph well.
Step 3: Design the supplier engagement and commercial model
The intervention needs an owner on each side of the contract. Decide who supplies planting material or training, who maintains the practice, who bears the cost if a harvest disappoints, and how long the buyer expects to purchase from participating suppliers. Where smallholders participate, budget cash flow and technical support for practices that offer a later return.
Put these terms in a supplier agreement or pilot addendum. It should cover eligible farms and volumes, consent to data collection, access for monitoring, any land or carbon rights that matter, benefit sharing, and what happens if the purchasing relationship ends. Ask local counsel and producer representatives to review the arrangement. The Accountability Framework is a useful reference for supply-chain work involving forests, ecosystems, and human rights.[3]
Avoid assigning an automatic carbon benefit to the buyer. The contract should say which party has the right to report each outcome, how overlapping claims will be checked, and how any issued credits will be handled. A reduction reported in a buyer’s inventory cannot simply be sold for someone else’s offset claim without an accounting review. SBTi FLAG guidance excludes purchased credits used as offsets from near-term FLAG target achievement.[2]
Set commercial measures beside environmental ones: delivered volume, rejection rate, supplier retention, and procurement cost. They tell you whether the program works as a supply-chain investment, even if carbon accounting takes longer to resolve.
Step 4: Build monitoring, reporting, and verification before rollout
Agree on the baseline and data flow before paying for a full rollout. Identify the land units or sourcing regions in scope, the practices that change, the records suppliers already keep, and the additional measurements the program requires. Decide which data can come from field visits, transaction records, or remote sensing, and who checks each source.
For carbon, separate three questions. Did the practice happen? Did emissions or removals change under an applicable method? Can the buyer attribute a defensible share to its purchased goods without double counting? The GHG Protocol’s 2026 guidance includes dedicated chapters on spatial boundaries, data and methods, evaluating actions, credited outcomes, and assurance.[1] These are distinct jobs. A photograph of a planted tree answers only part of the first.
CCC’s MRV and Additionality article explains the separate evidence questions a project reviewer will ask.
Create an evidence file for every reporting period: dated supplier and farm records, purchase volumes, methods and emission factors, uncertainty, quality checks, and changes from the baseline. Specify who can challenge the data and how corrections are recorded. If a project also seeks credit certification, keep project accounting and corporate inventory accounting separate. The GHG Protocol says its land standard focuses on entity-level inventories and does not set the rules for credit certification.[4]
Start with the minimum viable measurement design that can survive review. Add complexity when the pilot tells you which data actually changes a decision.
Step 5: Decide what can be reported and claimed
Insetting program design needs reporting rules before the marketing copy. Procurement, sustainability, finance, and legal should agree on four distinct outputs: operational performance; observed land or nature outcomes; inventory effects, if the accounting criteria are met; and any separately issued credits. One dashboard can display them, but they should not share a single unqualified headline.
SBTi FLAG guidance allows certain land-based removals within a company’s operations or supply chain to contribute to FLAG pathways, subject to criteria including permanence, traceability, data quality, and allocation. It does not allow purchased offsets to meet near-term FLAG targets.[2] Eligibility therefore depends on evidence and the applicable target rules, not on calling an activity “insetting.”
Draft a claims register. For each proposed sentence, record the period, boundary, data owner, calculation method, reviewer, and whether the result is measured, estimated, or still a goal. If the evidence supports only “we funded a pilot with 200 farms,” say that. Do not turn a funding fact into a verified emissions reduction.
What good looks like by year three
Treat year three as a review point, not a promised payback date. A mature pilot should have mapped participating supply volumes, a stable supplier agreement, a repeatable data collection process, and a comparison of commercial and environmental results against the baseline. It should also have a documented answer for outcomes that cannot be included in the buyer’s inventory.
Scale only where the pilot improves a sourcing decision and the evidence can follow the product. If neither condition holds, redesign the intervention or change the corridor. A disciplined program can conclude that a site is unsuitable. That is useful procurement intelligence.
Discuss your insetting program with CCC
Carbon Credit Capital designs nature-based supply chain investments around sourcing needs and measurable sustainability outcomes. Schedule a consultation with our carbon and sustainability experts to map your tier-one supplier network, FLAG exposure, and first pilot decision.
Sources
[1] GHG Protocol, Land Sector and Removals Standard, version 1.1, and companion Guidance, June 2026: https://ghgprotocol.org/land-sector-and-removals-standard ; https://ghgprotocol.org/land-sector-and-removals-guidance
[2] Science Based Targets initiative, Forest, Land and Agriculture Science-Based Target-Setting Guidance, version 1.2, March 2026, especially pp. 16–17, 37, and 41: https://sciencebasedtargets.org/resources/files/SBTiFLAGGuidance.pdf
[3] Accountability Framework initiative, Accountability Framework and guidance for companies: https://accountability-framework.org/
[4] GHG Protocol, Frequently Asked Questions: Land Sector and Removals Standard, questions 10 and 18: https://ghgprotocol.org/blog/frequently-asked-questions-land-sector-and-removals-lsr-standard
Nature-based carbon investments deserve consideration when they address a specific business dependency and produce outcomes you can measure. Imagine Moonbucks, a global coffee roaster planning next season’s espresso blend. It is considering natural Grade 4 coffee from Jimma, in southwestern Oromia, Ethiopia. Its sourcing decisions affect the roasting schedule and the cash tied up in coffee purchases. Moonbucks needs to understand which measures could protect that supply, what they would cost and how it would judge the results.
1. Define the sourcing problem before choosing a project
Moonbucks needs a dependable component for its espresso blend. Its procurement team wants continuity of volume and an agreed cup profile. Replacing a shipment at short notice could require new sample approval and changes to the blend, and given the schedules for cultivation, processing, and freight delivery, is practically impossible. Moonbucks needs to get this right, and its initial concern is inconsistent deliveries. It commissions an assessment of the supplying farms and post-harvest chain. The questions cover land condition, harvest availability and whether drying or storage problems are affecting saleable lots.
This distinction changes the investment brief. A tree-planting proposal cannot be assumed to fix drying problems. Better storage cannot restore eroded land. The team must establish which problem exists before selecting the response.
CCC’s guide to finding nature-based solutions in your supply chain explains where to look. Here, the next task is to turn a broad concern into a testable proposal.
2. Develop nature-based carbon investments around the actual supply chain
The assessment would trace Moonbucks’ purchases back through the exporter and supplying producer groups. Which farms supply the contracted lots? Who controls land-management decisions? How long does the buyer expect to maintain the purchasing relationship?
Furthermore, Jimma natural Grade 4 cannot be treated as interchangeable with every Ethiopian coffee. Moonbucks would need to test any substitute against its own blend and quality requirements.
Suppose Moonbucks’ assessment identifies an opportunity to maintain shade trees and restore vegetation along exposed streambanks. The IPCC describes agroforestry as a way to store carbon in vegetation and soil, with potential benefits for erosion control and water quality.1 Moonbucks would need local advice on species, growing conditions and maintenance before deciding how these measures fit its sourcing plan.
The proposal now has a defined sourcing connection and a candidate intervention. The next steps are to test its effect on production, assess carbon eligibility and build the financial case.
3. Compare the proposal with other ways to protect supply
WBCSD’s Nature-based Solutions Blueprint recommends comparing nature-based options with other responses across their benefits and costs.2 For Moonbucks, that means evaluating the landscape proposal alongside drying improvements, storage controls and alternative sourcing arrangements.
The product’s natural-process designation matters. Moonbucks should examine the drying and dry-milling chain alongside land conditions. Its team would check storage practices, contamination risks and incoming-lot quality to see whether problems arise before or after the coffee leaves the farms.
The revised proposal might combine land stewardship with separate post-harvest controls. Each component needs its own purpose and budget. A sustainability label should not obscure which activity is expected to solve which problem.
The project develops as the evidence improves. Its scope should follow the diagnosis rather than preserve the first idea unchanged.
4. Establish what the carbon outcome could count toward
Moonbucks’ sustainability team now tests the proposed carbon case separately from the sourcing case. Is the objective a measurable change in Moonbucks’ value-chain emissions, verified credits for separate voluntary use, or distinct outcomes under carefully defined arrangements?
Scope 3 covers value-chain emissions. A purchasing relationship alone does not prove that a farm intervention can be included in Moonbucks’ inventory. The team needs an applicable accounting method, defensible boundaries and evidence supporting attribution.
SBTi’s FLAG Guidance (forest, land and agriculture), version 1.2, says purchased credits used as offsets cannot meet near-term FLAG or energy and industry targets. Eligible land-based removals are subject to accounting requirements.3 Moonbucks needs to test its proposal against those rules before including an outcome in its targets.
For Moonbucks’ Jimma proposal, maintaining existing trees and establishing new vegetation could involve different carbon questions. Specialists must examine the baseline and additionality, meaning what changes because the project proceeds. They must also assess measurement and the risk that stored carbon is lost. CCC’s MRV and additionality article introduces those tests.
Until that work is complete, Moonbucks should not budget an assumed Scope 3 reduction or credit-sale receipt. Direct emissions reductions remain the priority.
5. Build a financial case that survives weaker assumptions
Moonbucks’ finance team would now build a multi-year budget. UNEP’s State of Finance for Nature 2023 compares current finance with the investment needed to meet climate, biodiversity and land-restoration goals.4 The company would cost its proposed activities, farmer participation and ongoing monitoring. Verification, where required, is a separate expense. Maintenance and responsibility for replacing failed plantings must remain visible after the initial establishment budget ends.
Operational benefits need equally careful treatment. If fewer rejected lots reduce emergency purchasing, count that saving once. Do not add “supply resilience” as another financial benefit when it represents the same avoided cost.
Moonbucks should compare a base case with slower benefits, higher implementation costs and no carbon revenue. It should also distinguish production outcomes from quality and shipment outcomes. A single good harvest would not prove that the landscape intervention caused better delivery performance.
A project can remain worth funding even when its carbon case needs more work. That decision must rest on the operational evidence and the company’s objectives, without unsupported environmental claims.
6. Fund a pilot with a clear expansion decision
Moonbucks’ first approval would fund a bounded pilot, rather than commit the entire sourcing program. Before spending, Moonbucks would agree on participating farms, responsibilities and the evidence needed at review.
Its scorecard could track farmer participation, implementation costs and plant survival, alongside accepted coffee volumes and lot-quality results. Carbon measurements would follow the selected method. Farm-level traceability must connect the intervention to the actual sourcing relationship.
Suppose Moonbucks’ review later finds that storage changes explain most quality improvements, while the land measures need longer observation. Those findings would shape the next decision: expand the proven component, adjust the landscape work or pause further spending. They would not justify crediting all improvements to tree planting.
This gives nature-based carbon investments a practical place in a multi-year strategy. Funding increases as the evidence supports it, and the project can change direction before a larger commitment.
Discuss a sourcing opportunity with CCC
Carbon Credit Capital’s nature-based supply-chain investment service uses its Dual-Value Model to examine supply-chain economics alongside potential sustainability outcomes.
Schedule a consultation to discuss your sourcing exposure and the questions to resolve before allocating capital.
Sources
- Intergovernmental Panel on Climate Change (IPCC), Climate Change 2022: Mitigation of Climate Change, Chapter 7, Agriculture, Forestry and Other Land Uses, section 7.4.3.3 (Agroforestry).
- World Business Council for Sustainable Development (WBCSD), Nature-based Solutions Blueprint, 5 June 2024.
- Science Based Targets initiative (SBTi), Forest, Land and Agriculture Science-Based Target-Setting Guidance, version 1.2, March 2026, section 3.1.4, pp. 37–38.
- United Nations Environment Programme (UNEP), State of Finance for Nature 2023, 2023.