ETS vs Voluntary Market — Key Differences
Those approaching the carbon market often find themselves confused between two profoundly different systems: the regulated market — of which the EU ETS is the most well-known example — and the voluntary market. They operate with different logics, address different subjects and produce non-interchangeable instruments.
The Regulated Market — EU ETS
The EU Emissions Trading System (ETS) is the European Union's main instrument for reducing industrial emissions. Introduced in 2005, it is based on the "cap and trade" principle: a maximum ceiling (cap) is set on total emissions from regulated sectors, and companies receive or purchase emission allowances (EUA — European Union Allowances). Those who emit less can sell excess allowances; those who emit more must purchase additional ones on the market or at auction.
The ETS applies to specific high-emission intensity sectors: electricity and heat production, heavy manufacturing industry (steel, cement, aluminum, chemicals), intra-European aviation and — from 2024 with ETS2 — also road transport and buildings.
Participation is mandatory for entities falling within regulated sectors. Penalties for non-compliance are significant.
The Voluntary Market — VCM
The voluntary carbon market (VCM) operates on completely different bases. There is no public authority imposing obligations — companies autonomously choose to measure and offset their emissions for strategic, reputational reasons or in anticipation of future regulatory obligations.
The instruments of the voluntary market are carbon credits: each credit represents the reduction, removal or avoidance of one tonne of CO₂ equivalent, certified by independent standards such as VCS (Verra) or Gold Standard. The credit is "retired" on the international registry in the company's name, which thus obtains an official certificate of its offsetting.
Unlike ETS allowances, voluntary credits have no regulatory value — they cannot be used to fulfill ETS obligations. They have instead reputational, strategic and increasingly broadly regulatory value (European green claim regulations, CSRD).
The Differences in Summary
| EU ETS | Voluntary Market | |
|---|---|---|
| Participation | Mandatory | Voluntary |
| Instrument | EUA Allowances | VCU / GS-VER Credits |
| Sectors | Energy, heavy industry, aviation | All sectors |
| Objective | Regulatory compliance | ESG strategy, reputation, carbon neutrality |
| Authority | European Union | Private standards (Verra, Gold Standard, ICVCM) |
| Interchangeability | Not usable in VCM | Not usable in ETS |
Why a Company Subject to ETS is Still Interested in the Voluntary Market
This is a frequent question. If a company is already subject to the ETS and purchases allowances to cover its regulated emissions, why should it also be interested in the voluntary market? The reasons are concrete:
The ETS copre only part of emissions. ETS allowances concern Scope 1 emissions from regulated sectors. Scope 2 emissions (purchased energy) and Scope 3 emissions (value chain, suppliers, transport, sold products) remain completely outside the ETS — and are often the most relevant part of a company's emission profile.
ETS allowances do not allow carbon neutrality claims. Purchasing ETS allowances is a compliance obligation, not a communicable voluntary choice. You cannot claim to be "carbon neutral" based on ETS allowances — it is neither provided for nor recognized by European green claim regulations.
High-quality voluntary credits have reputational value. A CCP-labelled credit on a reforestation project in Africa or renewable energy in Asia tells a story — it has measurable social and environmental co-benefits that ETS allowances do not have. It is a communication tool as well as a compliance one.
The supply chain and clients demand more. Clients subject to CSRD require Scope 3 emissions data from suppliers and, increasingly, evidence of a pathway towards carbon neutrality. A VCM strategy responds to this pressure in a structured way.
Anticipating regulation. The ETS perimeter is expanding with ETS2. Companies that today build an integrated carbon strategy — compliance + voluntary — are better positioned to manage the increase in future compliance costs.