The Voluntary Carbon Market is one way carbon pricing manifests in corporate operations. Its unit of account is the carbon credit, a transferable certificate proving that a participant has achieved an additional emission reduction or carbon removal equivalent to 1 ton of carbon dioxide, but has transferred the right to make the resulting green claims to another market participant in exchange for financial compensation, so that the latter can offset its emissions with them. Participants - whether standards owners, project developers, certifiers, green investors, or credit buyers - all enter the market voluntarily; thus, their activities go beyond regulation and national commitments, thereby generating additional benefits for climate action.
The Voluntary Carbon Market is the “mischievous lady” of global decarbonization: it emerged as a bottom-up, voluntary, and self-regulating initiative, but this diversity and lack of regulation also act as barriers to its further development. The market is undergoing significant change, with interrelated megatrends radically transforming its operations. Regulation is needed, which also implies a fundamental shift in project development directions: the focus has clearly shifted to technological carbon removal and nature-based carbon farming, which presents a major opportunity for Hungary as well.
Carbon farming is a key focus of EU regulation
In the world of carbon farming, ecology, more specifically the soil’s carbon sequestration capacity, is being transformed into a monetary value, a measurable, auditable, and increasingly valuable financial instrument: carbon credits. Carbon farming is not merely an agricultural technique, but also a civilizational decision regarding whether, in the agricultural sector, we prioritize short-term extraction or long-term ecological stabilization. Recognizing this, the EU has placed carbon removal and carbon farming at the center of its regulatory focus. In doing so, the EU has set an example for others to follow, and Wopke Hoekstra, the EU Commissioner for Climate Action, has explicitly stated that sending a positive signal is one of the goals of the regulation. The essence of the regulation is that the EU not only legitimizes offsetting emissions through carbon credits from carbon removal and carbon management but also directly incentivizes market participants to do so economically.
To this end, in 2024 the EU became the first in the world to adopt a transparency rulebook (Carbon Removal Carbon Farming Framework - CRCF) for Voluntary Carbon Market certification systems, for which the implementing regulation due at the end of 2025 already contains complex procedural, methodological, and quality requirements, and regulates the work of standard-setting bodies, certification bodies, and project developers. However, the regulatory process does not stop there. Valeria Forlin, Deputy Director-General of the EU’s Directorate-General for Climate Action (DG CLIMA), which is responsible for climate action and thus also for CRCF regulation, spoke about this at the third European Carbon Farming Summit held in Padua in mid-March of this year, which I will briefly summarize below.
Scope of the Regulation
The CRCF divides the scope of the regulation within the certification framework into several areas and, within those, into separate methodologies, which are technically based on the GHG standard (GHG Protocol Land Sector and Removals Standard 1.0) published at the end of January this year and applicable from January 1, 2027. The scope covers the following main areas:
- Technological carbon removal. The regulations allow project developers to account for technological carbon removals within the EU system and generate CRCF-accredited carbon credits based on them. This area comprises three specific methodologies: the first is bioenergy production with carbon capture and storage (Bio-CCS), the second is technological carbon dioxide capture from the air combined with geological storage (DACCS), while the third group consists of projects aimed at the production and agricultural use of biochar (BCR). In early February 2026, the Commission had already adopted these and opened them for public consultation.
- Carbon farming. The EU is expected to define three methodologies in this area as well, which are expected to be adopted and submitted for public consultation by the end of April this year. The first of these is regenerative agriculture (including agroforestry), which aims to ensure that soil organic carbon stocks increase measurably over time as a result of changes in farming practices, thereby enabling carbon removal without taking the land out of agricultural use (reducing chemical inputs, growing cover crops, no-till or low-till techniques etc.). Second, land-use changes should be mentioned, which result in areas being removed from intensive agricultural use and undergoing ecological and legal reclassification (e.g., restoration of peatlands and wetlands), and thus, in addition to carbon sequestration, they make a significant contribution to biodiversity and the prevention of desertification. Finally, this also includes sustainable forest management, which involves either establishing forests in areas where there were previously no forests, or reforestation, i.e., the restoration of forest cover in previously forested areas. Resilient forest management has also emerged as a new concept within the regulatory framework, aimed at improving forest health to reduce societal risks associated with rising temperatures, changing water management conditions, storms, wildfires, and pest infestations.
- Carbon storage in buildings. The Commission has pledged to develop an innovative carbon credit generation methodology based on the new Bioeconomy Strategy by the end of 2026, with the aim of using the additional revenue generated by the issuance of carbon credits to pave the way for the long-term (at least 35 years) sequestration of biogenic carbon dioxide in the end product.
Two important areas appear to have been omitted from the current scope of the CRCF regulations, but this will not remain the case indefinitely. According to statements made at the conference, the Commission is working to expand the scope to include these areas in the foreseeable future. On the one hand, this includes carbon farming activities related to livestock management, with particular regard to enteric fermentation and manure management. On the other hand, to account for joint decarbonization interventions (insetting) along the value chains, aligning the planned regulation with new methodological standards emerging in the field, such as the Science Based Targets Initiative Corporate Net-Zero Standard (SBTi V2.0) or the Value Chain Intervention Framework (VCIF).
Planned Operation of the Regulated Market
The regulation published at the end of 2025 (EU 2025/2358) describes in detail the planned operation of the market and sets out the certification rules governing the operation of certification systems, certification bodies, and audit processes. I would like to highlight a few key points from it:
- Accreditation of certification systems. International Voluntary Carbon Market certification systems (e.g., Verra, Gold Standard, etc.) may have their carbon farming methodologies -whether existing and aligned with CRCF regulatory requirements or entirely newly developed based on the aforementioned new GHG standard on Land Sector - accredited by the Commission. The accreditation process may begin in May 2026, by which time the Commission will have developed the evaluation procedures. The same applies to the accreditation of independent validation and verification bodies wishing to be affiliated with these certification systems. The Commission has promised that the accreditation process will be open-ended, so there is no risk of missing the deadline.
- Approval of soil carbon and biomass models. The soil carbon and biomass calculation models underlying the methodologies submitted for accreditation must first be approved by the European Environment Agency (EEA), which evaluates them based on a four-point criteria system covering transparency, credibility, applicability, and accuracy. To ensure a level-playing field, the EEA will include the approved models in its repository of accepted soil carbon and biomass models, and from that point on, they will be freely available to any project developer.
- Establishment of a carbon farming database. In connection with the previous point, based on the commitment in the Bioeconomy Strategy, the EU will establish a central and unified carbon management database that, in addition to applicable soil carbon and biomass models, will also contain an approved list of emission databases and remote sensing tools certified by the EU that can be used to determine baselines. The measurement methodology to be developed by the EU Joint Research Centre (JRC) will include, in addition to emission factors, standardized baseline values and Scope 3 benchmarks, as well as pre-calculated carbon farming impact metrics, while ensuring the quality of Member State inventories. Through these measures, the EU aims to reduce related project development costs, thereby ensuring that as much of the resulting value as possible remains with project developers.
- Establishment of a Central EU Carbon Registry. The EU intends to establish its own carbon registry by 2028 at the latest, which will record all CRFC-accredited carbon credits and their entire lifecycle to ensure authenticity. This central registry is planned to be built on blockchain technology and linked to international certification systems. In other words, according to the Commission’s objective, the EU will provide a quality guarantee to buyers who offset their residual emissions using the carbon credits registered in the EU Carbon Registry. The EU is currently funding several major projects in this area under the Horizon program, such as the Open Geospatial Carbon Registry (OGCR), a geospatial project aimed at providing an open-source measurement framework for tracking and certifying carbon sequestration in European agriculture and forestry. Another example is the Carbon Farming Monitoring and Registry (CAFAMORE) project, which aims to accelerate the uptake of carbon farming in Europe by developing a reliable, digital, and standardized Monitoring, Reporting, and Verification (MRV) system for the standardized tracking, reporting, and verification of agricultural carbon sequestration.
Supporting the sale of carbon credits
This brings us to the most critical point, as the Voluntary Carbon Market has essentially been struggling with a lack of demand for years. Therefore, the EU has placed demand generation at the center of its strategy as an explicit goal, for which several possible approaches are available.
- Linked to the compliance market. Initially, the EU clearly stated that it was exploring the possibility of allowing project developers to convert CRCF-accredited carbon credits into carbon allowances (EUAs) through the EU Carbon Registry under a specific regulatory framework. In this case, following the conversion, the credits could also be sold within the EU Emissions Trading System (EU ETS), allowing obligated companies to offset not only voluntarily undertaken but also legally mandated obligations. This would have several advantages, as it would open access for agricultural project operators to a much larger market characterized by significantly higher unit prices through the legal reclassification of the product. The conversion would significantly increase the return on carbon farming project developments and adequately ensure that farmers are compensated for lost income (in the event of a land use change) or for rising costs (in the case of regenerative techniques). On the other hand, it would also mitigate the potential “price shock” for obligated parties resulting from the gradual phase-out of free EUA allocation by 2035 and the parallel introduction of the EU ETS2. However, this conversion option now appears to have been taken off the agenda due to the global economic crisis and the competitiveness challenges facing the European economy. The EU is already considering “watering down” the tightening of the EU ETS, and is thus considering extending free allowance allocation rather than pursuing the conversion option.
- Establishment of an EU Buyers’ Club. If the conversion sought by market participants does not work, the next best option is to support voluntary compensation efforts and emphasize EU quality assurance. This is clearly a new situation; the EU is striving to find a solution to the dilemma of how to effectively persuade the corporate sector to engage in voluntary offsetting amid a deteriorating global economic situation. Therefore, this spring, a study will be launched among the relevant companies and along the value chains, the results of which, along with the planned demand-generating measures, will be presented at the CRCF Days event to be held in Brussels on May 21–22. Once that happens, I will return to analyzing the topic to determine whether the measures are sufficient to achieve the goals.
Overall, I currently believe we are heading in the right direction. The Voluntary Carbon Market truly needs legal recognition, clear guidelines, quality assurance, methodologies that are easy and accessible to everyone, and, of course, project development support. However, without adequate demand generation – more specifically without the conversion of CRCF carbon credits into EUAs - this is merely a “stopgap,” delivering only a fraction of the ambitions, and even that with a much slower and more arduous ramp-up. Thus, it is easy to imagine that the happy ending will ultimately fail to materialize due to a lack of interest, and in this new-wave artistic adaptation, despite all of Petruchio’s good intentions, he will ultimately be daunted by the difficulties, take a step back, and thus fail to win Catherine’s trust; the shrew will remain alone.
