by John O’Brien
The Ministry for the Environment estimates that the total market size is only about NZ$20 million a year as of 2025. Voluntary carbon market growth in New Zealand has been very slow over many years.
A lack of up-to-date government guidance and existing regulations not being enforced also mean that fraud and reputational risk are a continuing problem for this market.
For the voluntary carbon market to grow, expand, and get stronger in the coming years in New Zealand, these important issues and challenges need to be addressed.
Voluntary carbon markets differ from compliance markets (such as the New Zealand Emissions Trading Scheme) in that they are completely voluntary, meaning there is no legal requirement for companies to offset. Companies buy these credits because they want to, not because they have to. This means that voluntary carbon markets are always going to be smaller than compliance markets and prices are also likely to be lower.
However, there are multiple other reasons that the voluntary carbon market is in a sorry state, both globally and in New Zealand, and has been for some time.
Globally, the voluntary carbon market has been rocked by a number of scandals around the globe. Among others, there was the Kariba companies to offset. Companies buy these credits because they want to, not because they have to. This means that voluntary carbon markets are always going to be smaller than compliance markets and prices are also likely to be lower.
However, there are multiple other reasons that the voluntary carbon market is in a sorry state, both globally and in New Zealand, and has been for some time.
Globally, the voluntary carbon market has been rocked by a number of scandals around the globe. Among others, there was the Kariba REDD+ project scandal in Zimbabwe with South Pole in October 2023, and the C-Quest Capital cookstoves scandal in the United States a year later in October 2024. The C-Quest Capital carbon credits scandal has contributed to greatly decreased demand for credits from “improved cookstove” projects. There have been significant problems with massive over-crediting of this type of project around the world, with numbers of CO2e sometimes exaggerated by as much as 10 times what the real number should be. As a result of these scandals, unfortunately, the voluntary carbon market has developed a bad reputation. This is a bad reputation that needs to be fixed because carbon pricing has an important role in helping lower greenhouse gas emissions.
Monitoring, reporting, and verification for voluntary carbon projects relies on third party auditors, appointed by the project developer, and it is often not done properly. In addition, some project developers do not act in an honorable or ethical manner and the benefits of projects are not shared fairly with the local communities or local authorities who own the land where a project is based.
In most improved cookstoves projects, local communities receive no financial benefit or benefit sharing beyond getting a free cookstove, while over the same period of time the developer makes millions of dollars.
There are also examples of this involving nature based solutions projects and in particular REDD+ projects. REDD stands for Reduced Emissions from Deforestation and Forest Degradation in developing countries. It is based on a counterfactual that in the absence of the carbon credits being sold, the trees would be cut down. This counterfactual is hard to prove and is sometimes not true, as was argued was the case with the Kariba scandal in Zimbabwe a few years ago.
Local communities often get ripped off. You only have to look into the scandals in Papua New Guinea as exposed by Four Corners, to see that a form of carbon colonialism has developed where, in many cases, local communities and companies in developing countries are not receiving proper benefits. This led to the government of PNG putting a moratorium on all REDD+ projects and REDD+ carbon credit sales from PNG until there was much stronger guidance and regulation in place. The moratorium was lifted in 2024.
In Australia, it was reported in early 2025, that some 100 companies have pulled out of the government’s climate active scheme due to concerns over integrity and reporting of scandals.
In New Zealand, Carbon News recently reported that New Zealand’s largest company, Fonterra, had purchased voluntary carbon credits or VERS from a C Quest Capital Improved Cookstoves project. It is possible that Fonterra’s recent decision to pull out of the Toitu Net Carbon Zero Program may be partially linked to this.
In my view, the global voluntary carbon market will not grow from 1.4 billion tonnes CO2e to 7 billion tonnes or more over the coming years, as some analysts have predicted, unless these issues and challenges are addressed. The voluntary carbon market in New Zealand is also unlikely to grow significantly unless integrity challenges can be addressed.
There are efforts such as the Core Carbon Principles (CCP) of the Integrity Council of the Voluntary Carbon Market to bring integrity into the market. These are a positive step but they are not mandatory and in New Zealand there is no requirement that you must purchase ICVCM CCP labelled carbon credits. However, in the Toitu Envirocare programme now, companies that purchase voluntary carbon credits to go carbon neutral must purchase ICVCM CCP labelled carbon credits. This is a step in the right direction.
In New Zealand, three main problems face the voluntary carbon market.
Low demand
Firstly, the level of demand remains quite small and currently is estimated to be no more than 1 million tonnes of CO2e per year.
In order to create demand and help grow the market, the government itself should lead by example. However, in New Zealand to date, the government has taken no steps to ensure that government agencies and local councils and authorities engage in the voluntary carbon market.
The Carbon Neutral Government Programme is currently on hold, although no official announcement has been made. The programme’s goal of government agencies becoming carbon neutral by 2025 has clearly not been met. If the Carbon Neutral Government Programme had required government agencies to purchase only New Zealand voluntary carbon credits as part of their carbon neutral efforts, this would have helped grow the market.
Over-reliance on exotic forests
A second problem is more than 15 years of excessive promotion of the ‘exotic forest only for New Zealand Units’ carbon pricing mechanism, which is the New Zealand Emissions Trading Scheme.
New Zealand is the only country in the world which has a domestic emissions trading scheme centered around forestry creating NZUS for the compliance market, which is worth several billion dollars a year. This makes it much easier in this country to generate revenue and value from a forestry project that generates NZUs in the compliance market than in any other non-forestry type of voluntary carbon market project, where there is much less demand and lower prices. This plantation forestry focussed compliance market is not good government policy as it encourages planting trees over all other options to reduce or remove CO2 in the atmosphere.
As one person told me “Only mad dogs and English men would develop a voluntary carbon market project in New Zealand”.
Despite this, there are still a handful of companies developing or trying to develop voluntary carbon market projects. This is very challenging because when companies face tough economic times, they simply do not buy voluntary carbon credits and that is an easy decision to make because buying them is voluntary and there is no legal requirement. One year they may be in the market buying voluntary carbon credits and then the next year, they may pull out completely. When they do buy them, New Zealand companies often buy offshore voluntary carbon credits which are cheaper than voluntary carbon credits from New Zealand.
‘Toothless’ regulation
Finally, there is a lack of government enforcement of any rules or voluntary carbon market guidance in New Zealand.
A key problem in New Zealand is that, to date, and as far as I am aware, the government takes no action when a ‘carbon cowboy’ creates their own voluntary carbon credits and sells them in the voluntary carbon market. These self-created voluntary carbon market projects could be created by a private company without any proper checks and balances, meaning either no independent methodology and/or carbon standard, and/or no proper additionality test, and/or no third party validation or verification, and/or no third party registry. In the compliance carbon market, of course, it is not possible to do any of this as the government is the regulator and there are rules that need to be followed.
It is challenging to compete in the voluntary carbon market with companies that do any of the above, as their costs to generate carbon credits are much lower. Companies creating voluntary carbon credits themselves, along with doing all their own monitoring, reporting, and verification have a serious conflict of interest issue that cannot be overcome.
It’s a mistake to say that the voluntary carbon market cannot be patrolled by the government due to lack of regulation. The Fair Trading Act in New Zealand (1986) aims to protect consumers from misleading or deceptive conduct by businesses. It prohibits unfair trading practices and ensures businesses are truthful and transparent in their dealings with consumers.
The Commerce Commission is the regulatory body responsible for enforcing this act. So clearly, when a project developer creates its own carbon credits, with no independent methodology or standard, no independent third party validation or verification, and even in some cases creates its own registry, it represents a clear breach of the Fair Trading Act in New Zealand and one would expect the government to take action. Right?
Wrong.
As far as I am aware, the New Zealand government has taken no action to clean up the voluntary carbon market over the past few years. In my discussions over the past several years on this matter, the word “integrity” has been mentioned many times in conversation. However, despite some $2.8 million New Zealand dollars being spent on voluntary carbon market policy since March 2022, when the last voluntary carbon market advice was published by the Ministry for the Environment, no action as far as I am aware has ever been taken against any company who has not followed the principles in the Fair Trading Act when operating in the voluntary carbon market.
No action has yet been taken to create a stronger regulatory structure around the voluntary carbon market which would discourage unethical practices.
I recall a brief conversation I had a few years ago with Rod Carr, at the Climate Change and Business conference in Auckland, when he was the chair of the Climate Change Commission. Carr told me:”The voluntary carbon market is full of cowboys!” and I remember thinking to myself “You are on a big salary and in a position of power and influence, so please do something about it!” Of course nothing was done.
In New Zealand, I have found that there are people who are good at talking but when it comes to taking action to fix matters, well that is a different matter. And when it comes to cleaning up and fixing, improving, and strengthening the voluntary carbon market in New Zealand, there is really a lot of work that needs to be done.
We live in hope.
John O’Brien has worked with climate finance and carbon offsetting in over 40 different countries in both the private sector and with the United Nations. He has worked on developing emission reduction agreements under both the Kyoto Protocol and the Paris Agreement, and also has extensive experience with working in the voluntary carbon market. He founded Carbon Market Solutions at the end of 2003 and the company has successfully brokered carbon credits from three of the first four joint implementation (JI) projects ever from New Zealand into Europe, as well as for New Zealand’s largest ever forestry AAU deal in 2009 from a New Zealand forestry company to Norway.
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