Regional spotlight: Carbon markets & offsets integrity in US — what's different and why it matters

The United States accounts for roughly 24% of global voluntary carbon credit retirements and operates the only subnational compliance carbon market in the Western Hemisphere through California's cap-and-trade program, yet the country lacks a unified federal carbon pricing mechanism. This structural fragmentation creates a market landscape fundamentally different from the EU Emissions Trading System or emerging national schemes in China and Brazil. For engineers designing carbon management systems, procurement teams sourcing credits, and compliance officers navigating overlapping state and federal requirements, understanding US-specific dynamics is not optional. It is the difference between building resilient decarbonization strategies and exposing organizations to regulatory, financial, and reputational risk.

Why the US Market Differs

Regulatory Fragmentation

Unlike the EU, where the Emissions Trading System provides a single compliance framework across 27 member states, the US operates through a patchwork of federal, state, and voluntary mechanisms. California's cap-and-trade program, launched in 2013 and linked with Quebec since 2014, covers approximately 80% of the state's greenhouse gas emissions and generated $5.4 billion in auction revenues during 2024. Washington State launched its own cap-and-invest program in January 2023, with its first compliance period running through 2026. The Regional Greenhouse Gas Initiative (RGGI) covers power sector emissions across 12 northeastern states but excludes transportation, industry, and buildings.

At the federal level, the Inflation Reduction Act of 2022 allocated $369 billion toward clean energy and climate investments but deliberately avoided carbon pricing. The SEC's climate disclosure rules, finalized in 2024 and facing ongoing litigation, require large accelerated filers to report Scope 1 and Scope 2 emissions but do not mandate carbon credit usage or retirement reporting. The Commodity Futures Trading Commission (CFTC) has asserted jurisdiction over carbon credit derivatives but not spot markets, creating a regulatory gap that voluntary market participants must navigate without clear guardrails.

This fragmentation means that a US-headquartered company with operations across multiple states may simultaneously face California compliance obligations, RGGI exposure, federal disclosure requirements, and voluntary market participation, each with distinct rules, registries, and verification standards.

Voluntary Market Dominance

The US voluntary carbon market represented approximately $1.1 billion in transaction value during 2024, making it the largest single-country voluntary market globally. However, this market operates without binding federal oversight. The four major registries serving US projects (Verra's Verified Carbon Standard, Gold Standard, American Carbon Registry, and Climate Action Reserve) each maintain independent methodologies, additionality standards, and verification requirements.

The Integrity Council for the Voluntary Carbon Market (ICVCM) released its Core Carbon Principles (CCPs) assessment framework in 2023, and by late 2025, only approximately 8% of listed credits had received CCP approval. For US buyers, this creates a two-tier market: CCP-labeled credits commanding price premiums of 40-65% over unlabeled credits, with corresponding implications for procurement strategy and portfolio construction.

Key Concepts

Additionality in the US Context requires demonstrating that emission reductions or removals would not have occurred without carbon credit revenues. In the US, this assessment is complicated by the dense web of existing subsidies, tax credits, and renewable portfolio standards. A solar project receiving Investment Tax Credits under Section 48 and state renewable energy credits (RECs) faces legitimate questions about whether carbon credit revenue provides genuinely additional incentive. The California Air Resources Board (CARB) addresses this through conservative additionality screens, but voluntary market registries apply varying standards.

Compliance vs. Voluntary Price Dynamics shape procurement economics differently in the US than elsewhere. California Carbon Allowances (CCAs) traded between $32 and $41 per metric ton during 2024-2025, while RGGI allowances traded between $13 and $16. Voluntary market prices ranged from $2-5 per ton for older avoided-deforestation credits to $400-800 per ton for engineered carbon removal. This 200x price spread within a single national market has no parallel in the EU, where ETS allowances provide a dominant reference price.

Section 45Q Tax Credits for carbon capture and storage, enhanced by the Inflation Reduction Act, provide $85 per metric ton for geological storage and $60 per ton for utilization. These credits interact with carbon markets in complex ways: a direct air capture facility can potentially stack 45Q credits with voluntary carbon credit sales, but the additionality of carbon credits becomes questionable when federal tax credits already cover a substantial portion of costs. Engineers designing carbon capture systems must model these interactions to avoid over-crediting.

State-Level Carbon Border Adjustments represent an emerging US-specific dynamic. California is evaluating mechanisms to address carbon leakage from its cap-and-trade program, and several states are considering aligning with EU Carbon Border Adjustment Mechanism (CBAM) principles for energy-intensive imports. These potential policies would create compliance obligations for manufacturers and importers that differ fundamentally from voluntary market participation.

Market Integrity Challenges

Forestry Offset Controversies

US-based forestry carbon projects have faced sustained integrity scrutiny. A 2023 investigation by CarbonPlan found that California's forest offset program had over-credited projects by an estimated 29 million metric tons, primarily due to flawed baseline calculations that compared project forests to inaccurate regional averages. Improved Forestry Management (IFM) projects, which constitute approximately 80% of California's compliance offsets, are particularly vulnerable to baseline inflation because landowners can claim credit for timber they assert they would have harvested but chose not to.

The buffer pool mechanism, designed to insure against reversal risk from wildfires, drought, and disease, held approximately 28.5 million tons of credits as of 2025. However, record wildfire seasons in 2020 and 2021 consumed buffer credits equivalent to the entire contribution from multiple project years, raising questions about actuarial adequacy under accelerating climate change.

Measurement, Reporting, and Verification Gaps

US voluntary market MRV practices lag behind the standards required in compliance markets. A 2024 survey by the Environmental Defense Fund found that 43% of voluntary offset projects listed on US registries had not undergone desk review or field verification within the preceding 36 months. Remote sensing technologies, including satellite-based biomass estimation and methane detection, are increasingly available but not yet required by most voluntary methodologies.

For engineers building MRV systems, the US market presents a specific technical challenge: integrating data from multiple registries with incompatible data schemas, API standards, and serialization formats. The lack of a centralized national registry means that double-counting prevention relies on bilateral agreements between registries rather than systemic architecture.

Greenwashing Litigation Risk

The US legal environment for carbon credit claims differs materially from other jurisdictions. The Federal Trade Commission's Green Guides, last updated in 2012, provide non-binding guidance on environmental marketing claims but do not specifically address carbon neutrality assertions. However, state consumer protection statutes, particularly California's Unfair Competition Law and New York's consumer protection framework, have enabled private lawsuits challenging corporate carbon neutrality claims based on offset quality.

Delta Air Lines faced a class-action lawsuit in 2023 challenging its "carbon neutral" marketing, alleging that the offsets purchased were not delivering genuine emission reductions. Similar litigation has targeted consumer product companies using "carbon neutral" labeling. For engineering and sustainability teams, this litigation environment demands rigorous documentation of offset quality, clear disclosure of offset types and registries, and careful distinction between emission reductions and carbon removals.

What Engineers Need to Know

Building Carbon Credit Procurement Systems

Organizations purchasing carbon credits in the US market should architect procurement systems around several US-specific requirements. First, compliance credit procurement for California or RGGI must use designated registries (CITSS for California/Quebec, RGGI CO2 Allowance Tracking System for RGGI) with specific account types, holding limits, and transfer protocols. Second, voluntary credit procurement should implement quality screening aligned with ICVCM Core Carbon Principles, with particular attention to additionality assessment given the US subsidy landscape. Third, procurement systems must track credit vintage, project type, and registry of origin to support SEC disclosure requirements and defend against greenwashing challenges.

Integrating Carbon Data with Compliance Obligations

For companies with multi-state operations, carbon data systems must map emissions to the correct regulatory jurisdiction. A manufacturing company with facilities in California, Washington, and a RGGI state faces three distinct compliance calendars, allocation methodologies, and reporting formats. Engineering teams should build modular compliance engines that can accommodate new state programs as they emerge, rather than hardcoding rules for current jurisdictions.

MRV Technology Selection

US-specific MRV technology considerations include compatibility with EPA Greenhouse Gas Reporting Program (GHGRP) methodologies for Scope 1 emissions, alignment with state-specific reporting requirements, and integration with voluntary registry APIs. LiDAR-based forest carbon estimation, satellite methane monitoring (using platforms such as GHGSat and MethaneSAT), and continuous emissions monitoring systems (CEMS) each serve different use cases in the US market. Selection should be driven by the specific credit types and compliance obligations an organization faces.

Benchmark KPIs for US Carbon Market Participation

Metric	Below Average	Average	Above Average	Top Quartile
Credit Quality Score (ICVCM alignment)	<40%	40-60%	60-80%	>80%
Procurement Cost (voluntary, $/tCO2e)	>$25	$12-25	$6-12	<$6
Procurement Cost (removal credits, $/tCO2e)	>$600	$300-600	$150-300	<$150
MRV Verification Frequency	>36 months	24-36 months	12-24 months	<12 months
Registry Integration Time	>6 months	3-6 months	1-3 months	<1 month
Portfolio Reversal Risk Coverage	<80%	80-100%	100-120%	>120%

Action Checklist

• Map all facilities and operations to applicable compliance jurisdictions (California, RGGI, Washington) and identify current and projected obligations
• Audit existing carbon credit portfolio for ICVCM Core Carbon Principles alignment and identify credits at risk of devaluation
• Implement quality screening criteria for new credit procurement that account for US-specific additionality challenges including federal tax credit stacking
• Build or procure MRV systems compatible with EPA GHGRP, state compliance registries, and voluntary registry APIs
• Establish legal review protocols for any public carbon neutrality or net-zero claims under FTC Green Guides and applicable state consumer protection statutes
• Develop a multi-registry tracking system to prevent double-counting across compliance and voluntary holdings
• Monitor emerging state-level carbon pricing proposals and federal regulatory developments through systematic policy tracking
• Engage with ICVCM and VCMI frameworks to align corporate claims methodology with evolving market standards

FAQ

Q: Should US companies prioritize compliance credits or voluntary credits for decarbonization strategies? A: The answer depends on jurisdictional exposure and strategic objectives. Companies with facilities in California or RGGI states have mandatory compliance obligations that must be met first. Beyond compliance, voluntary credit procurement should focus on high-integrity removal credits (biochar, enhanced weathering, direct air capture) that align with Science Based Targets initiative (SBTi) guidance limiting offset use to residual emissions after aggressive direct reduction.

Q: How do I assess forestry offset quality given the controversies around US forest projects? A: Request project-level documentation including: the specific baseline methodology and its assumptions, independent third-party verification reports (not just registry listing), buffer pool contribution rates and adequacy analysis, and permanence guarantees exceeding 40 years. Compare project baselines against CarbonPlan's public ratings database, which provides independent assessment of over-crediting risk for California compliance offsets.

Q: What federal regulatory changes should US companies prepare for? A: Monitor three vectors: the SEC's climate disclosure rules (currently in litigation but potentially requiring Scope 1/2 reporting); potential CFTC regulation of voluntary carbon credit spot markets (proposed rulemaking expected in 2026); and possible IRS guidance on interaction between 45Q tax credits and voluntary carbon credit generation. Build compliance systems that can accommodate any of these outcomes without architectural redesign.

Q: How does the US voluntary market compare to the EU ETS for investment-grade carbon management? A: The EU ETS provides regulatory certainty, liquid secondary markets, and transparent price discovery that the US voluntary market cannot match. EU allowance prices ($60-80/ton in 2024-2025) reflect genuine scarcity pricing, while US voluntary prices remain fragmented and volatile. US companies benchmarking against EU peers should recognize this structural disadvantage and compensate through more rigorous internal carbon pricing, quality screening, and portfolio diversification.

Sources

• California Air Resources Board. (2025). Cap-and-Trade Program: Annual Report to the Legislature. Sacramento, CA: CARB.
• CarbonPlan. (2023). Systematic Over-Crediting in California's Forest Carbon Offsets Program. San Francisco, CA: CarbonPlan.
• Ecosystem Marketplace. (2025). State of the Voluntary Carbon Markets 2025: US Market Analysis. Washington, DC: Forest Trends.
• Environmental Defense Fund. (2024). Voluntary Carbon Market Integrity: Assessment of US-Based Offset Projects. New York, NY: EDF.
• Integrity Council for the Voluntary Carbon Market. (2025). Core Carbon Principles: Assessment Status Report, Q4 2025. London: ICVCM Secretariat.
• US Securities and Exchange Commission. (2024). Final Rule: The Enhancement and Standardization of Climate-Related Disclosures. Washington, DC: SEC.
• Regional Greenhouse Gas Initiative. (2025). RGGI Annual Market Report: Allowance Prices and Auction Results. New York, NY: RGGI Inc.