Why Companies Buy Carbon Credits Voluntarily
Introduction: Beyond Compliance
India's carbon market is often discussed in the context of compliance. The Carbon Credit Trading Scheme (CCTS) mandates emission intensity targets for 490 large industrial entities across nine energy-intensive sectors. Cement manufacturers, steel plants, textile mills, and refineries are legally obligated to reduce emissions or buy Carbon Credit Certificates (CCCs).
But there is another, equally significant dimension to India's carbon market: the voluntary market.
Voluntary carbon markets (VCMs) are markets in which carbon credits are bought and sold without any mandatory regulatory obligation. Participation is driven primarily by corporate sustainability commitments, net-zero pledges, or reputational objectives rather than legal requirements.
In 2025, voluntary carbon credits dominated market activity, capturing a 58.04% share due to early corporate net-zero adoptions. Between 2010 and 2022, India issued a total of 278 million credits in the voluntary carbon market, accounting for 17% of global supply. By 2025, that number had grown to over 375 million carbon credits issued.
This guide explores why companies—both in India and globally—choose to buy carbon credits voluntarily, the legal framework governing voluntary participation, and how your business can benefit from this growing market.
What Are Voluntary Carbon Markets?
The Definition
Voluntary carbon markets (VCMs) are markets in which carbon credits are bought and sold without any mandatory regulatory obligation. Unlike compliance markets, such as the European Union's Emissions Trading System, participation is driven primarily by corporate sustainability commitments, net-zero pledges, or reputational objectives rather than legal requirements.
How Voluntary Credits Are Generated
Carbon credits, typically representing one tonne of reduced, removed, and/or avoided carbon dioxide emission, are generated through projects that:
- Apply approved quantification methodologies
- Undergo independent third-party validation and periodic verification from accredited agencies
- Are issued as serialized units through recognized registry systems such as Verra or Gold Standard
Voluntary vs. Compliance Markets
| Aspect | Compliance Market Voluntary Market |
|---|---|
| Obligation | Mandatory (legally binding) Voluntary (self-initiated) |
| Participants | Obligated entities (490+ large industrial units) Any company, organization, or individual |
| Drivers | Regulatory penalties, legal requirements ESG goals, net-zero pledges, reputation |
| Trading | Platform Power Exchanges (IEX, PXIL) Bilateral agreements, registries, brokers |
| Price | Market-driven with regulatory bands Market-driven, project-specific |
The India Context
In India, the CCTS includes a voluntary offset market open to all entities, enabling projects in renewable energy, biogas, green hydrogen, afforestation, and waste management to register and earn tradable carbon credits.
The Scale of India's Voluntary Carbon Market
India's Dominance in Voluntary Carbon
India has emerged as a significant voluntary carbon market player:
- 278 million credits issued between 2010 and 2022 (17% of global supply)
- Over 375 million credits issued between 2010 and 2025
- 58.04% market share captured by voluntary credits in 2025
Market Growth Projections
The India carbon credit market is estimated to be valued at USD 5.90 billion in 2026 and is expected to reach USD 66.79 billion by 2033, exhibiting a compound annual growth rate (CAGR) of 41.4% from 2026 to 2033.
The global carbon offsets and credit market is projected to grow at a CAGR of 25.18% from 2025 to 2030.
What This Means for Your Business
The voluntary carbon market is not a niche. It is a multi-billion-dollar ecosystem that is growing rapidly. Companies that understand how to participate—whether as buyers or sellers—stand to gain significant competitive advantage.
Reason 1: ESG Ratings and Investor Pressure
The ESG Imperative
Non-obligated companies can participate in the voluntary carbon market to improve ESG ratings.
With SEBI's BRSR Core framework, assurance requirements, and anti-greenwashing rules in force, ESG data has become a compliance and market risk issue. Weak ESG scores are beginning to attract tougher investor scrutiny and affect access to capital.
The Cost of Poor ESG Performance
Companies with weak or unaudited disclosures face significant consequences:
- Higher borrowing costs: Banks are incorporating ESG criteria into lending decisions
- Difficulty accessing capital: Institutional investors are scrutinizing carbon performance
- Lower valuations: Weak ESG scores can move stock prices
- Loss of investor confidence: Poor carbon performance signals inadequate risk management
How Carbon Credits Help ESG Ratings
Purchasing high-quality voluntary carbon credits demonstrates:
- Commitment to climate action
- Proactive risk management
- Alignment with global sustainability standards
- Tangible action beyond mere disclosure
The Strategic Shift
As Akshaya Rath, Co-Founder and CEO of EcoEx, notes: "India's carbon credit market is being framed as a compliance burden, but the real story is that a domestic carbon price is about to become one of the most powerful competitive levers in the system".
Companies that manage carbon like any other cost input will secure lower operating costs and better access to transition finance, while laggards accept weaker margins and valuation.
Reason 2: Net-Zero Pledges and Climate Leadership
The Corporate Net-Zero Movement
Thousands of companies globally have made net-zero pledges. These commitments require companies to:
- Reduce emissions as much as possible through operational changes
- Offset any remaining (residual) emissions through the purchase of carbon credits
The Cost-Effective Alternative
Voluntary carbon offsets provide a cost-efficient alternative to direct emission reductions, enabling full carbon neutrality while meeting consumer expectations.
Companies using carbon offsets can achieve emissions reduction goals in a cost-effective manner.
The Three Corporate Motivations
Research has identified three primary corporate motivations for carbon offset investment:
| Motivation | Description |
|---|---|
| Cost-Effective | Decarbonization Offsets are cheaper than in-house reductions for hard-to-abate emissions |
| Achieving | Carbon Neutrality Offsets help companies reach net-zero targets faster |
| Demonstrating | Commitment Offsets signal to stakeholders that the company takes climate action seriously |
The "Residual Emissions" Problem
Not all emissions can be eliminated through operational changes. For hard-to-abate sectors like cement, steel, and aviation, some emissions will always remain. Voluntary carbon credits provide a legitimate mechanism to address these residual emissions.
Reason 3: Export Competitiveness and CBAM
The Carbon Border Adjustment Mechanism (CBAM)
The European Union's Carbon Border Adjustment Mechanism (CBAM) came into effect on January 1, 2026. It imposes tariffs on carbon-intensive imports like steel and cement.
Why This Matters for Indian Companies
Indian exporters to Europe face significant carbon taxes under CBAM. The sectors exposed to CBAM—steel, cement, refineries, and chemicals—are the backbone of India's manufacturing exports to Europe, accounting for approximately $7.4 billion in exports to the EU.
How Voluntary Credits Help
Notably, the launch of India's carbon market will enable Indian companies to demonstrate compliance with external carbon pricing schemes such as CBAM.
By purchasing voluntary carbon credits, Indian companies can:
- Demonstrate carbon neutrality to international buyers
- Reduce their CBAM liability
- Maintain export competitiveness
The Strategic Advantage
Companies that proactively address their carbon footprint through voluntary credit purchases will be better positioned to:
- Retain European customers
- Avoid CBAM penalties
- Access premium markets that value sustainability
Reason 4: Supply Chain and Green Procurement
The Rise of Green Procurement
Government procurement is emerging as one of the strongest sustainability levers. Indian Railways, NTPC, and other large PSUs are embedding green criteria into tenders, shifting focus from lowest price to lifecycle impact.
The Impact on MSMEs
For private companies, especially MSMEs, sustainability credentials are becoming a condition for eligibility. Large and globally integrated vendors are recalibrating operations because environmental performance now affects commercial eligibility.
Carbon Credits as a Supplier Differentiator
Companies that can demonstrate carbon neutrality through voluntary credit purchases gain a competitive advantage in:
- Government tenders
- Large corporate supply chains
- International procurement
The Future of Procurement
As noted by Dinkar Sharma, Company Secretary and Partner at Jotwani Associates: "Unless green criteria are linked to quantifiable performance metrics, post-award monitoring and enforceable consequences, suppliers have little incentive to make capital-intensive transitions".
Voluntary carbon credits provide a quantifiable, verifiable metric that procurement teams can easily evaluate.
Reason 5: Risk Management and Internal Carbon Pricing
The Rise of Internal Carbon Pricing
Large companies are already assigning internal carbon prices to guide capital expenditure, vendor selection, and long-term contracts.
In 2026, sustainability will decide costs, contracts and corporate survival. Carbon costs are unlikely to appear as a visible tax. Instead, they will show up through higher project risk, tighter financing and export pressures.
Hedging Against Future Regulations
Companies that purchase voluntary carbon credits are effectively:
- Hedging against future carbon price increases
- Building experience in carbon markets before compliance obligations expand
- Demonstrating proactive risk management
The Strategic Pivot
Carbon pricing, ESG liability, green procurement and water stress are no longer future concerns. Emissions trading schemes and voluntary carbon markets are beginning to influence investment decisions in sectors such as energy, cement, steel and transport.
Reason 6: Brand Reputation and Consumer Trust
The Consumer Demand for Sustainability
Consumers are increasingly demanding that companies take climate action. Companies that fail to demonstrate environmental responsibility face:
- Brand damage
- Loss of customer loyalty
- Negative media attention
Carbon Credits as a Signal
Purchasing carbon credits signals to customers, employees, and the public that a company:
- Takes climate change seriously
- Is willing to invest in environmental solutions
- Aligns with global sustainability values
The Co-Benefits of Quality Credits
High-quality carbon credits, particularly nature-based solutions (NbS), offer co-benefits around biodiversity, community development, and ecosystem restoration. These co-benefits enhance brand reputation and provide compelling storytelling opportunities.
The International Dimension
Indian companies with international customers or investors are under particular pressure to demonstrate climate leadership. Voluntary carbon credits provide a credible, verifiable mechanism to do so.
Reason 7: First-Mover Advantage in a Growing Market
The Early Mover Advantage
Companies that enter the voluntary carbon market early gain significant advantages:
| Advantage | Description |
|---|---|
| Better | Pricing Early buyers can secure credits at lower prices before demand surges |
| Stronger | Relationships Early participation builds relationships with project developers and registries |
| Market | Intelligence Early buyers understand market dynamics, pricing, and quality signals |
| Reputational | Leadership Early movers are seen as climate leaders, not followers |
Learning by Doing
Voluntary market participation allows companies to:
- Understand carbon credit quality and verification
- Build internal capacity for carbon accounting
- Develop relationships with brokers and project developers
- Prepare for future compliance obligations
The Value of Experience
Companies that participate in the voluntary market today will be better positioned to:
- Navigate the compliance market when obligations expand
- Identify high-quality credits
- Negotiate favorable prices
- Avoid greenwashing accusations
Indian Companies Leading the Way
The Global Context
International companies are already major buyers of voluntary credits. Amazon retired over 150,000 credits in April 2026 alone, making it the company's most prolific month to date for carbon credit usage. Amazon also agreed to purchase 685,000 credits from Indian rice projects, with 13,000 farmers changing their practices to reduce methane emissions.
India's Growing Buyer Base
While specific Indian buyers are less publicly documented, the Indian voluntary carbon market is expanding rapidly. Key trends include:
- IT and Technology Companies: Indian IT firms are increasingly buying credits to meet global client expectations
- Large Corporates: Companies like Tata, Reliance, and Mahindra are exploring voluntary market participation
- Export-Oriented Sectors: Textile, pharmaceuticals, and auto ancillaries are buying credits to maintain export competitiveness
Project Developers and Sellers
India is not just a buyer of voluntary credits—it is a major seller. Indian projects generate credits in:
- Renewable energy (solar, wind, biomass)
- Afforestation and reforestation
- Agricultural carbon sequestration
- Waste management and biogas
The Supply Side
With over 40 institutions already registered and submitting projects in biogas, hydrogen and forestry, India's voluntary carbon market ecosystem is robust and growing.
The Legal Framework: CCTS and the Voluntary Offset Market
The Statutory Basis
The Carbon Credit Trading Scheme (CCTS) was introduced under the Energy Conservation (Amendment) Act, 2022, empowering the government to issue and regulate Carbon Credit Certificates (CCCs).
The Voluntary Offset Mechanism
The CCTS includes a voluntary offset market open to all entities, enabling projects in renewable energy, biogas, green hydrogen, afforestation, and waste management to register and earn tradable carbon credits.
Key Regulatory Institutions
| Institution | Role |
|---|---|
| Bureau | of Energy Efficiency (BEE) Administrator; responsible for MRV (Monitoring, Reporting, and Verification) |
| Grid | Controller of India Registry; maintains electronic accounts, verifies transactions |
| Central | Electricity Regulatory Commission (CERC) Regulator; sets price bands, oversees market |
| Power | Exchanges Trading platform for CCCs |
The Indian Carbon Market Portal
The government launched the Indian Carbon Market Portal in March 2026, a central platform for the implementation and administration of the CCTS, handling registration, monitoring, reporting, and verification (MRV) of carbon emissions across all participating industries. Formal carbon credit trading on the portal will begin within four months.
Eligibility for Voluntary Participation
Non-obligated entities can voluntarily participate in the carbon market. Trading will mainly take place through Power Exchanges and will be divided into two segments.
Price Controls
To maintain market stability, the CERC has introduced price controls:
- Floor Price: The minimum price for CCCs
- Forbearance Price: The maximum price
Both limits are approved by the CERC. Trading will take place on a monthly basis through Power Exchanges.
The Risks: Greenwashing and Credit Quality
The Greenwashing Concern
Critics argue that carbon offsets may delay deeper operational changes. Companies must ensure that their voluntary credit purchases are part of a broader decarbonization strategy, not a substitute for it.
The Risk of Low-Quality Credits
Not all carbon credits are created equal. Low-quality credits may:
- Not represent real emission reductions
- Double-count reductions already claimed elsewhere
- Fail to deliver promised co-benefits
- Damage brand reputation when exposed
How to Avoid Greenwashing
| Best | Practice Why It Matters |
|---|---|
| Buy | verified credits Use registries like Verra, Gold Standard, or CR-I |
| Conduct | due diligence Assess project quality, additionality, and permanence |
| Integrate | with reduction strategy Credits should offset residual emissions after deep reductions |
| Disclose | transparently Clearly communicate what you are buying and why |
| Avoid | "cheap" credits Low prices often indicate low quality |
The Role of Carboned.in
At Carboned.in, we help companies navigate the voluntary carbon market with clarity and confidence. We conduct rigorous due diligence on every credit we recommend, ensuring:
- Real, verified emission reductions
- No double counting
- Strong co-benefits
- Competitive pricing
How to Buy High-Quality Voluntary Credits
Step 1: Assess Your Carbon Footprint
Before buying credits, understand your emissions:
- Scope 1: Direct emissions from your operations
- Scope 2: Indirect emissions from purchased electricity
- Scope 3: Value chain emissions (suppliers, customers, etc.)
Step 2: Reduce What You Can
Voluntary credits should offset residual emissions—emissions that cannot be eliminated through operational changes. Demonstrate that you have taken serious reduction steps before buying credits.
Step 3: Choose a Registry
| Registry | Best For |
|---|---|
| CR-I | (Carbon Registry India) Indian projects, domestic market |
| Verra | International projects, global buyers |
| Gold | Standard Projects with strong SDG contributions |
Step 4: Select a Project
Consider project type:
- Renewable Energy: Solar, wind, biomass
- Nature-Based Solutions: Afforestation, reforestation, soil carbon
- Methane Capture: Landfill gas, biogas, rice cultivation
- Technology-Based: Direct air capture, carbon utilization
Step 5: Verify Quality
Check for:
- Third-party validation and verification
- Additionality (would the project happen without credit revenue?)
- Permanence (especially for nature-based projects)
- Co-benefits (SDG contributions)
- Registry certification
Step 6: Execute the Purchase
Work with a trusted broker or advisor (like Carboned.in) to:
- Negotiate pricing
- Execute purchase agreements
- Transfer credits to your registry account
- Retire credits for your offset claim
Conclusion: Your Next Move
The voluntary carbon market is not just an environmental initiative—it is a strategic business imperative. Companies that understand and participate in this market will gain significant competitive advantage in ESG ratings, export competitiveness, supply chain access, and brand reputation.
Key Takeaways
| Aspect | What You Need to Know |
|---|---|
| Market | Size USD 5.90 billion in 2026, growing to USD 66.79 billion by 2033 |
| Current | Share 58.04% of India's carbon market is voluntary |
| Key | Drivers ESG, net-zero, CBAM, green procurement, risk management |
| Legal | Framework CCTS includes voluntary offset market open to all entities |
| Trading | Platform Power Exchanges (IEX, PXIL) and bilateral agreements |
| Quality | Matters Buy verified credits from reputable registries (Verra, Gold Standard, CR-I) |
The Choice Is Yours
| Option | Outcome |
|---|---|
| Act | now Improve ESG ratings, maintain export competitiveness, gain first-mover advantage, enhance brand reputation |
| Wait | and see Face higher costs, weaker ESG scores, lost export opportunities, reputational damage |
How Carboned.in Can Help
At Carboned.in, we help companies navigate the voluntary carbon market with clarity and confidence. We offer:
- Carbon Footprint Assessment: Understand your emissions profile
- Credit Due Diligence: Identify high-quality, verified credits
- Registry Coordination: Guide you through CR-I, Verra, or Gold Standard
- Legal Documentation: Draft watertight purchase agreements
- Brokerage: Connect you with trusted sellers at competitive prices
Ready to explore voluntary carbon credits?
Contact Carboned.in today for a free consultation.
📞 Call to Action
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Navigating India's Carbon Credit Trading Scheme (CCTS) and Carbon Registry India (CR-I) can be complex. The penalties for non-compliance are severe. The opportunities for surplus credits are significant.
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- Your CCTS obligations and compliance timeline
- Your emission intensity targets and gap assessment
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- Legal documentation and regulatory filings
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"Let's talk. I'll help you navigate India's carbon market with clarity, compliance, and confidence."
| — | Siddharth Gupta |
|---|---|
| Advocate, | Calcutta High Court |
| Founder, | Carboned.in |
Frequently Asked Questions
What is a voluntary carbon market?+
A market in which carbon credits are bought and sold without any mandatory regulatory obligation. Participation is driven primarily by corporate sustainability commitments, net-zero pledges, or reputational objectives rather than legal requirements.
Why do companies buy carbon credits voluntarily?+
To improve ESG ratings, achieve net-zero pledges, maintain export competitiveness (especially with CBAM), meet green procurement requirements, manage risk, enhance brand reputation, and gain first-mover advantage.
What is the size of India's voluntary carbon market?+
India issued over 375 million carbon credits between 2010 and 2025. The India carbon credit market is estimated to reach USD 66.79 billion by 2033.
What is CBAM and why does it matter?+
The Carbon Border Adjustment Mechanism is the EU's carbon tariff on imports. It imposes taxes on carbon-intensive imports like steel and cement. Indian exporters face significant costs if they cannot demonstrate carbon reduction.
What is greenwashing in the context of carbon credits?+
Greenwashing occurs when companies use carbon credits as a substitute for actual emission reductions, or when they buy low-quality credits that do not represent real, additional emission reductions.
How do I know if a carbon credit is high quality?+
Look for third-party verification, additionality, permanence (for nature-based projects), registry certification (Verra, Gold Standard, CR-I), and strong co-benefits.
Can Indian companies buy voluntary credits under CCTS?+
Yes. The CCTS includes a voluntary offset market open to all entities. Non-obligated entities can voluntarily participate in the carbon market.
What types of projects generate voluntary carbon credits?+
Renewable energy (solar, wind, biomass), nature-based solutions (afforestation, reforestation, soil carbon), methane capture (landfill gas, biogas, rice cultivation), and technology-based solutions (direct air capture).
How does voluntary carbon credit trading work?+
Credits are generated through approved projects, verified by third parties, issued by registries, and traded through bilateral agreements, brokers, or Power Exchanges.
What is the difference between compliance and voluntary carbon markets?+
Compliance markets are legally mandated; voluntary markets are self-initiated. Compliance markets serve obligated entities; voluntary markets serve any company or individual.
What is an internal carbon price?+
An internal carbon price is a shadow price assigned to carbon emissions within a company to guide investment decisions, capital allocation, and strategic planning.
How can Carboned.in help?+
Carboned.in provides end-to-end support for voluntary carbon credit purchasing, including footprint assessment, credit due diligence, registry coordination, and legal documentation.
Siddharth Gupta is the founder of Carboned.in and specialist counsel for India's carbon compliance framework — advising obligated entities, project developers, and buyers on CCTS, CR-I registration, and credit transactions.
