Navigating the Voluntary Carbon Market’s regulatory landscape

The voluntary carbon market (VCM) is becoming an increasingly significant component of global climate action, offering companies—and countries—a way to offset their carbon emissions and achieve ambitious climate targets. Acorn, as a prominent player in the VCM, is committed to providing high-quality carbon credits through agroforestry and climate-smart agriculture methods implemented by smallholder farmers across Africa, Latin America and Asia. However, the implementation of carbon programs—like those facilitated by Acorn—faces several substantial challenges related to government regulation and policy.

In this interview Hanna Choa Yu, Acorn's Head of Government Relations, discusses what she sees as the three most prominent hurdles facing the implementation of a global VCM regarding government regulation and policy, and how Acorn is working to overcome them.

Image: Acorn team, Hanna Choa Yu, Martine Jansen (Head of Partnerships) and Joost Hamelink (Africa Partnerships Lead) at NABC Ambassadorial Event with Nigerian Ambassador Eniola Ajayi and Senior Head Counsellor and Head of Chancery, Mr. Olonijolu Olufemi

1. Regulatory Ambiguity on the National Level

One of the most pressing issues Acorn encounters is the lack of clear and comprehensive regulatory frameworks for VCM projects. The VCM is a very new field, and every region is working to build an understanding of how it might function in the context of their own emerging VCM landscapes. "We see that in most countries, there isn't yet a legal framework or carbon policy that gives clear guidance on what we can and can't do," says Choa Yu. If a government lacks a clear framework for carbon offset projects, or if that framework is in the process of shifting, there is a risk. Starting projects without consideration of potential future regulatory changes could be put projects in jeopardy.

Learning from our early projects, Acorn actively engages with governments and national regulatory bodies during the formulation of new policies. "When countries amend existing laws or create new legal frameworks, there is typically a call for external stakeholders to submit inputs and comments on the draft legislation." Choa Yu explains, “Acorn also often has existing relationships with relevant ministries, who will notify us if there is an opportunity for Acorn to participate in legislative processes.” By contributing our perspective to a country’s formation or reassessment of their carbon market policies, Acorn hopes to advocate for as many smallholder farmers as possible so they can, in turn, access the VCM.

In cases where such formal engagement may not be possible, Acorn seeks to engage with governments by communicating the scope and ambitions of our projects to relevant local authorities. This ensures that our agroforestry activities are not operating under the radar, protecting Acorn projects from instability should they fall under any future government regulations.

Drilling down into the details of this country-level need for more regulation, Choa Yu explains that much of what still needs clarifying is around carbon rights: “Right now, one of the challenges is that we sometimes make the assumption that the farmer who owns the land, owns the tree, owns the carbon. But in a lot of countries where we're working, that's not necessarily the case.” Additionally, clearer policies on carbon exports are essential—Acorn is looking to countries to not only give the signal that they’re open for those carbon credits to be purchased outside their country, but also to offer guidance on how the reality of that economic transaction will be handled...bringing us to the second hurdle.

Hanna Choa Yu speaking at the West African Alliance on Carbon Markets.

2. Burdensome Taxation

Another significant challenge for Acorn and other VCM projects is the possible imposition of heavy taxes on carbon projects. While the principle of "polluters pay" is widely accepted, taxing carbon offset projects themselves can be counterproductive. Choa Yu highlights the issue with an example: "In Zimbabwe, they initially announced a 50% tax on all carbon projects (which they later adjusted). This was quite concerning because we worried that other countries might follow suit, creating a snowball effect."

Such high tax rates can slow the growth of carbon offset programs and discourage investment in carbon projects. In Acorn's case, taxes like these would also reduce the financial benefits to our smallholder farmers, who are the main financial beneficiaries of the carbon credits their work generates. "We have an 80% benefit sharing that goes back to smallholder farmers. In cases where there is a heavy tax burden imposed by the government, the revenues of the smallholder farmers would be negatively impacted," Choa Yu emphasizes.

Choa Yu and her team engage with governments to discuss the potential negative downstream effects of high taxes on carbon offset projects. By clearly demonstrating how the projects directly benefit local communities, Acorn hopes to involve governments in a discussion around how incentivizing VCM projects can be more economically favorable than the revenue generated by heavily taxing them.

3. The Need for Clear International Guidance

The third—and perhaps largest—challenge Acorn faces is the lack of clear international guidance and standardized regulations for the VCM. While various independent bodies like the Integrity Council for the Voluntary Carbon Market (ICVCM) and the Voluntary Carbon Markets Integrity Initiative (VCMI) are attempting to establish standards, there is no universally accepted global framework.

"Countries are moving slowly on VCM legislation, but that is further hindered by the fact that the UN has not issued any clear framework. One example is that there’s currently no uniform, globally recognized standard for VCM participation, bringing up issues of integrity and quality for the whole market,” says Choa Yu. This absence of clarity creates an environment where project developers like Acorn must navigate the space with limited direction, complicating efforts to ensure compliance and project integrity.

To address this, Acorn collaborates with local and regional organizations to promote region-wide standardization for carbon market regulations as much as possible. Partnerships between Acorn and entities like the Asian Forest Cooperation organization (AFoCO), The International Emissions Trading Association (IETA), West African Alliance on Carbon Markets and Carbon Finance (WAACMCF), and the Inter-American Institute for Cooperation on Agriculture (IAICA) help create a more cohesive approach to carbon market regulation.

Additionally, Acorn engages with other project developers to share lessons learned and advocate for consistent and fair regulations. “We can't work on a competitive basis when it comes to regulation”, says Choa Yu. “There is room for collaboration when it comes to speaking to the government, so pooling our forces with other VCM project developers has been very useful, hearing their lessons learned when it comes to government relations as well as sharing our own.”

Transforming Challenges into Opportunities for Climate Impact

Acorn's experience of these hurdles in the VCM underscores the complex interplay between carbon markets and government regulation. While these challenges are certainly thorny, proactive engagement with governments, advocacy for fair taxation policies, and collaboration—not only with regional and international bodies but also with our peer organizations—Acorn is helping to shape the future of the VCM. The ultimate goal in addressing these hurdles is to scale up carbon offset projects and contribute effectively to global climate goals. As Choa Yu aptly puts it, "We want carbon policy not for the sake of it, but to reach more smallholder farmers and make a real impact on climate action."

Hanna Choa Yu at the UNFCCC Bonn Climate Conference discussing Paris Agreement Article 6

About Acorn

We help support smallholder farmers in developing countries transition to agroforestry. Together with local partners, we facilitate the funding and training needed by farmers to start their agroforestry transition. Transforming the sequestered CO2 through agroforestry into Carbon Removal Units (CRUs), we offer carbon credits to responsible corporates to help them reach their climate goals. The growth of the trees is measured with satellite imagery, AI and LiDAR, and certified by ICROA-accredited Plan Vivo.

With 80% of the sales revenue going directly to the farmers, it creates an additional income stream and helps them adopt a more climate-resilient way of farming that improves food security, biodiversity, and financial independence.

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Hanna Choa YuHead of Government RelationsLinkedIn
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