The voluntary carbon market (VCM) is showing tentative signs of revival, with retirements in July and August 2025 climbing 9% year-on-year (YoY) despite a sharp drop in issuances. This uptick, drawn from registry data, points to growing buyer confidence after a period of stagnation, though lingering oversupply in low-quality credits could exert downward pressure on prices in the near term. As corporations ramp up net-zero commitments, understanding these dynamics is crucial for investors and policymakers alike.
What Are VCM Retirements and Why Do They Matter?
In the VCM, retirements refer to the permanent removal of carbon credits from circulation, typically when a buyer uses them to offset their emissions. Unlike compliance markets (e.g., EU ETS), the VCM is driven by voluntary actions from companies seeking to demonstrate climate responsibility. Retirements are a key indicator of market health: higher volumes suggest demand is translating into actual use, fostering credibility and encouraging project development.
Historically, the VCM has faced scrutiny over integrity issues, leading to a slowdown in 2024. However, recent data indicates a rebound, with retirements signaling that buyers are increasingly prioritizing high-quality credits amid evolving standards like the Integrity Council for the Voluntary Carbon Market (ICVCM) Core Carbon Principles (CCP).
Key Data from July-August 2025
According to analysis of registry data, VCM retirements for July and August 2025 increased by 9% compared to the same period in 2024. This growth occurred even as issuances—new credits entering the market—plummeted nearly 40% YoY, highlighting a mismatch between supply and demand.
For context, first-half (H1) 2025 retirements hit record highs, ranging from 93 million to 95 million credits, representing a 7-9% YoY rise and a 32% increase in total value. Issuances in Q2 2025 showed mixed signals: up 39% quarter-on-quarter to 77 million but down 10% overall for H1 compared to 2024. July saw retirements nearly 40% higher YoY, though August experienced a sharp drop due to seasonal summer slowdowns.
Project types also shifted: older vintages (>3 years) dominated retirements, particularly in nature-based solutions (NBS) at 87%, while renewable energy and household devices contributed significantly.
Drivers of the Recovery
This YoY uptick in retirements reflects recovering market confidence. The AlliedOffsets (AO) 500 index, tracking the most retired credits, reached $4.86 in late August—its highest since January 2023—driven by rallies in NBS credits. New buyers are entering the fray, compensating for those who reduced exposure amid past scandals. Additionally, a decline in “greenhushing”—companies shying away from public climate claims—from 42% in 2024 to 23% in Q2 2025 signals greater transparency and willingness to engage.
Regulatory tailwinds, such as ICVCM’s CCP labelling and compliance demands from programs like CORSIA, are steering buyers toward high-integrity credits. Over 120 new projects listed under ICVCM-approved methodologies in H1, potentially improving overall quality.
Challenges: Oversupply and Price Pressures
Despite positive signals, oversupply remains a thorn. The market’s surplus grew by 36 million credits in H1, though at a slower pace than previous years, with projections for 70 million by year-end—the lowest recent net growth. Low-quality credits continue to flood the market, depressing bulk trade and prices. Retirements outpacing issuances could lead to negative net issuance for 2025, pressuring developers to deliver premium credits.
Prices slipped in early August despite healthy retirements, with US registry credits surging while avoidance types dipped. Compliance-grade REDD+ credits command premiums due to scarcity, but liquidity is low. Experts warn that without sustained integrity reforms, short-term volatility could hinder long-term growth.
Future Outlook
The 9% YoY rise in July-August retirements is a promising harbinger for the VCM, potentially thawing after 2024’s chill. As demand for high-quality, CCP-labelled credits grows, the market could stabilize, with premiums rewarding durable projects. However, addressing oversupply and seasonal dips will be key. Stakeholders should monitor upcoming ICVCM developments and corporate pledges ahead of COP30.
For those navigating the VCM, focusing on verified, high-integrity offsets remains essential to avoid greenwashing risks and capitalize on this recovery.
References
- Carbon Removal in 2025: Are You Investing in the Right Climate Credits? – https://carboncredits.com/carbon-removal-in-2025-are-you-investing-in-the-right-climate-credits/ (Published: Jul 3, 2025)
- VCM Reports – Carbon Pulse – https://carbon-pulse.com/category/insights/vcm-reports/ (Accessed: Sep 2025, with reports from Jul-Sep 2025)
- First Half 2025 VCM Review and Outlook – https://climatefocus.com/wp-content/uploads/2025/07/First-Half-2025-VCM-Review-and-Outlook.pdf (Published: Jul 2025)
- Carbon Credit Retirements Hit All-time High – https://decarbonfuse.com/posts/carbon-credit-retirements-hit-all-time-high-quality-drives-market-evolution (Published: Jul 3, 2025)