Compliance carbon markets are the result of national, regional, or international policy or regulatory requirements. In these markets, companies, and national and subnational governments that are required by law (or other regulation) to account for their greenhouse gas (GHG) emissions use carbon credits to comply with these requirements. For example, in the European Union, energy-intensive sectors (oil and gas, metal production) must participate in the EU Emissions Trading System (ETS). At an international level, Article 6.4 of the Paris Agreement enables countries to leverage global compliance carbon markets to meet their national climate goals, known as Nationally Determined Contributions (NDCs).
Certain compliance markets are accepting high-quality carbon credits issued by voluntary GHG crediting programs, including the VCS, to fulfill their respective emission reduction and/or removal requirements.
Currently, the VCS Program is accepted into the following compliance markets:
Colombia’s Carbon Market
The Colombian government implemented a National Carbon Tax (Law 1819 of 2016) in 2017, mandating that polluting industries are taxed for GHG emissions they emit. The tax law allows entities in the country to offset up to 100% of their tax liability with high-quality carbon credits from projects in Colombia, including VCUs (credits issued in Verra’s Verified Carbon Standard Program).
All program participants must adhere to both VCS Program rules and requirements and the mandates of Colombia’s tax law.
South Africa’s Carbon Market
In June 2019, South Africa’s Carbon Tax Act went into effect to help the country meet its climate commitments under the Paris Agreement. Verra’s Verified Carbon Standard (VCS) Program is recognized under the South African carbon tax regulation. South African entities with tax obligations can use Verified Carbon Units (VCUs) to cover a portion of their tax liability.
VCUs from the Verra Registry can be retired and listed in the Carbon Offset Administration System (COAS), which facilitates the use of offsets in South Africa’s carbon market. South African projects in the transport, waste, and AFOLU sectors are eligible to generate credits.
To help the aviation industry achieve its goal for carbon neutral growth, the International Civil Aviation Organization (ICAO) implemented the Carbon Offsetting and Reduction Scheme for International Aviation. ICAO intends to use the program to offset those emissions that cannot be reduced through efforts to eliminate operational waste and use sustainable technologies and fuels. The Verified Carbon Standard (VCS) Program is eligible to supply emission reduction units for compliance under the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA).