Lesson 1, Topic 1
In Progress

Key Aspects of the Compliance Market

The Compliance Carbon Market (CCM) unlike the Voluntary Carbon Market (VCM), is driven by the regulatory acts or policies established by the governments, due to this reason the environmental integrity can play a different role, as for example in the following key concepts:

  • Financial additionality: This is one of the most relevant aspects of the VCM, since carbon credits are generated as incentives to invest in a voluntary carbon project. However, the importance of additionality in the CCM is reduced, as the market is already generated by the mandatory enforcement to fulfil the environmental obligation.
  • Compliance enforcement and Penalties: Effective mandatory participation of these mechanisms and sanctions play an important role in maintaining environmental integrity. Entities that do not comply with emission limits or engage in fraudulent activities should face appropriate penalties to prevent them from complied with and maintain market integrity.
  • Avoidance of double counting: In order to maintain environmental integrity, CCM implements measures to avoid double counting of emission reductions. Clear rules and guidelines are set up to guarantee that emission reductions are only counted once, and safeguards are implemented to prevent the same reduction being claimed by several parties or initiatives.