Voluntary carbon market design shapes outcomes under Article 6

Voluntary carbon market design shapes outcomes under Article 6 | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Article Voluntary carbon market design shapes outcomes under Article 6 Mel George, James Edmonds This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-9255934/v1 This work is licensed under a CC BY 4.0 License Status: Under Review Version 1 posted You are reading this latest preprint version Abstract Voluntary carbon markets (VCMs) and Article 6 compliance mechanisms draw from overlapping mitigation supply, yet their interactions remain poorly understood. Using a global integrated assessment model, we examine how VCM design choices affect prices, resource transfers to the Global South, and mitigation distribution when voluntary and compliance markets coexist. We find that VCMs can transfer substantial near-term resources to the Global South ($3–161 billion annually depending on market configuration), but this role diminishes as NDC targets tighten. Design choices matter materially: market sequencing drives a 10–20× price differential, with VCM prices ranging from $2–18/tCO2 when VCMs clear first to $30–287/tCO2 when compliance markets clear first. This “low-hanging fruit” dynamic, where early purchases deplete low-cost mitigation, is real but design-contingent. Authorization rules and market architecture determine whether VCM transactions create additional mitigation or risk double-counting. Our results are illustrative rather than predictive. They suggest that the voluntary-compliance interface deserves deliberate policy attention from host country governments, corporate buyers, and Article 6 negotiators. Earth and environmental sciences/Climate sciences/Climate change/Climate-change mitigation Earth and environmental sciences/Environmental social sciences/Climate-change policy Scientific community and society/Developing world Earth and environmental sciences/Environmental social sciences/Environmental economics Earth and environmental sciences/Environmental social sciences/Climate-change mitigation Figures Figure 1 Figure 2 Figure 3 Figure 4 Figure 5 Introduction Voluntary carbon markets and Article 6 compliance mechanisms are developing in parallel, yet their interactions remain poorly understood. Private actors are purchasing emissions reductions through voluntary markets at increasing scale, with transaction volumes reaching approximately $2 billion in 2021 1 and some projections suggesting growth to $50 billion or more by 2030. 2 Much of this supply originates in Global South countries, where mitigation costs are lower and co-benefits from climate finance are substantial. Simultaneously, governments are operationalizing international cooperation under Article 6 of the Paris Agreement, which enables countries to trade mitigation outcomes toward their Nationally Determined Contributions. The first Internationally Transferred Mitigation Outcomes under Article 6.2 were issued in January 2024, when Switzerland acquired 1,916 ITMOs from Thailand for an electric bus program, 3 marking the transition from negotiation to implementation. These two market systems draw from overlapping pools of mitigation supply, particularly in developing countries. The design choices governing their interface will shape prices, resource transfers, and the distribution of mitigation effort across regions and over time. Yet the literatures on voluntary markets and Article 6 cooperation have developed largely in isolation, leaving the interaction space unexamined. 4,5 This gap matters. Voluntary carbon market transactions in countries that subsequently participate in Article 6 markets may affect the supply and price of mitigation available for compliance purposes. Early voluntary purchases could deplete low-cost mitigation options, raising the marginal cost of meeting NDC commitments for host country governments or later compliance market participants. The treatment of voluntary credits under national emissions accounting affects whether purchases create additional global mitigation or merely relabel reductions that would have occurred anyway. Whether host countries apply corresponding adjustments to voluntary transactions determines this outcome. The sequencing of market operations affects price formation and resource allocation in both markets. Host countries are actively deciding whether to authorize corresponding adjustments for voluntary credits. Corporate buyers are assessing whether credits without corresponding adjustments constitute credible climate claims. Article 6 negotiators are debating how voluntary markets fit within the Paris Agreement architecture. These decisions will be made with or without quantitative guidance on their implications. We address this gap using a global integrated assessment model to explore how alternative market designs affect voluntary and compliance market outcomes. We construct a stylized voluntary carbon market between U.S. private sector buyers and Global South sellers, embedded within scenarios where countries implement their NDCs either independently or cooperatively through Article 6 mechanisms. We vary whether voluntary transactions generate corresponding adjustments and examine the consequences for prices, trade volumes, resource transfers, and the distribution of mitigation effort. Our analysis is illustrative rather than predictive: a structured exploration of design space rather than a forecast. The buyer specification is intentionally stylized to generate meaningful transaction volumes and to isolate the mechanisms through which market design choices propagate to outcomes. We do not predict voluntary market size or Article 6 participation. Rather, we map the design space and identify regularities that hold across plausible configurations. We address four research questions: How do voluntary carbon markets affect resource transfers to the Global South, and how does this role evolve as NDC targets tighten? How do authorization rules and market sequencing affect prices in voluntary and compliance markets? Under what conditions do early voluntary purchases raise host country marginal abatement costs, and how large is this “low-hanging fruit” effect? How does voluntary market design affect the sectoral and regional distribution of mitigation effort? Methods Model Overview. We employ the Global Change Analysis Model (GCAM) version 6. 6 GCAM is a global integrated assessment model that simultaneously resolves energy, land use, water, and economic systems across 32 geopolitical regions, 384 land regions, and 235 water basins. The model solves in 5-year time steps using a dynamic-recursive approach. We set the model horizon to 2050. All scenarios use SSP-2 assumptions, maintaining comparability with other studies in the literature. Full model documentation is available at jgcri.github.io/gcam-doc. Regional Scope. We define the Global South as 19 GCAM regions encompassing developing economies in Africa, Asia, and Latin America. These regions serve as potential sellers in the voluntary carbon market. The remaining regions, including the United States, European Union, and other developed economies, participate in NDC implementation and, in cooperative scenarios, in compliance carbon markets. The full list of regions and their geographic coverage is provided in Supplementary Information (SI-3). NDC Specification. We construct NDC trajectories in two phases. Through 2030, we implement announced Nationally Determined Contributions. Post-2030, we extend commitments building on Ou et al., 7 with countries following Long-Term Strategy trajectories where available and achieving minimum 5% annual decarbonization otherwise. This generates a declining global emissions trajectory broadly consistent with Paris Agreement goals. See SI-4 for details. Voluntary Carbon Market Specification. We model a hypothetical voluntary carbon market in which U.S. energy-intensive industries commit to emissions reductions beyond national policy requirements, with CO 2 emissions declining linearly to net-zero by 2030. This stylized buyer specification generates meaningful transaction volumes and concentrates demand in the period where VCM-NDC interactions are most consequential. The U.S. is modeled as both a compliance market participant (meeting its NDC) and as the source of voluntary buyer demand. The U.S. NDC is implemented per announced targets through 2030 and extended per Ou et al. 7 thereafter; the voluntary buyer commitment is additional to this baseline. U.S. industry meets its voluntary commitment through domestic mitigation and purchases from the Global South via the VCM. We restrict VCM supply to mitigation beyond what seller countries would achieve under their own NDC trajectories, ensuring that VCM transactions create real emissions reductions rather than relabeling compliance mitigation. Compliance Market Specification. We model NDC implementation under two configurations. Under independent implementation (I-NDC), each country meets its NDC through domestic mitigation only, with no international trading of emissions reductions. Under cooperative implementation (C-NDC), all countries participate in a global carbon market that equalizes marginal abatement costs across regions, consistent with the intent of Article 6 of the Paris Agreement. Cooperative implementation is global, not restricted to the Global South. In cooperative scenarios, all compliance market transactions are accompanied by corresponding adjustments to national emissions accounts, ensuring no double counting of mitigation toward multiple NDCs. Sequential Market Implementation. A distinctive feature of our approach is the sequential implementation of voluntary and compliance markets. Rather than solving all market interactions simultaneously, we first clear the VCM and then use those results as inputs to the NDC compliance run. This encodes an assumption that private voluntary actors move before governments fully operationalize Article 6 mechanisms, which reflects current market development where voluntary markets are active while Article 6 infrastructure remains nascent. When VCM transactions occur without corresponding adjustments, the seller retains full credit toward its own NDC despite reduced physical emissions. When VCM transactions occur with corresponding adjustments, the seller’s emissions account is adjusted upward, maintaining atmospheric integrity but reducing NDC headroom. See SI-5 for implementation details. Scenario Design. We examine scenarios spanning three dimensions of market design (Table 1). The full scenario matrix varies: NDC implementation mode (Independent or Cooperative), VCM presence and authorization (No VCM, VCM without corresponding adjustments, or VCM with corresponding adjustments), and sequencing (VCM clears before or after compliance market). For tractability, we focus the main text on seven scenarios that illuminate the core mechanisms. Within the cooperative scenarios, we also distinguish variants (denoted A and B in results figures) that explore different assumptions about VCM timing relative to compliance market clearing; the full 12-scenario matrix is presented in Supplementary Information (SI-2). Table 1: Core Scenario Matrix Scenario NDC Implementation VCM Present Corresponding Adjustment Key Comparison 1. I-NDC baseline Independent No N/A Baseline without international trade 2. C-NDC baseline Cooperative No N/A Article 6 cooperation effect 3. VCM only None Yes N/A VCM in isolation 4. I-NDC + VCM Independent Yes No VCM layered on independent NDCs 5. C-NDC + VCM-noCA (AD) Cooperative Yes No VCM creates additional mitigation 6. C-NDC + VCM-noCA (DS) Cooperative Yes No Double selling risk 7. C-NDC + VCM + CA Cooperative Yes Yes Full market integration Scenarios 1 and 2 provide baselines for NDC implementation without voluntary markets. Scenario 3 isolates VCM dynamics without NDC constraints. Scenarios 4–7 explore the interaction space. The distinction between Scenarios 5 and 6 addresses whether VCM transactions without corresponding adjustments create additional mitigation (AD) or represent double-selling of compliance market reductions (DS). In Scenario 7, VCM transactions carry corresponding adjustments and are fully integrated with compliance market accounting. See SI-2 for detailed scenario specifications and the operationalization of additionality constraints. Metrics. We evaluate scenarios along four dimensions: prices (VCM transaction prices and compliance market carbon prices, in 2020 USD per tonne CO 2 ), volumes (quantities traded, in MtCO 2 per year), resource transfers (financial flows from buyers to sellers, in billion USD per year), and marginal abatement cost dynamics (changes in seller country MACs over time to identify “low-hanging fruit” effects). Results We organize results around our four research questions: resource transfers to the Global South, price dynamics, the low-hanging fruit problem, and distribution of mitigation effort. Resource Transfers to the Global South. Voluntary carbon markets transfer additional resources to Global South countries across all scenarios where they operate, but the magnitude and persistence of these transfers depend on the broader policy context. Under independent NDC implementation without a VCM (Scenario 1), there are no international transfers; each country meets its commitment domestically. Adding a VCM (Scenario 4) generates transfers to the Global South ranging from $3–10 billion annually, with transfers peaking around 2030 at $10 billion before fluctuating and declining as the buyer approaches its voluntary commitment. When NDCs are implemented cooperatively through Article 6 (Scenario 2), the compliance market itself generates substantial transfers to Global South sellers. Adding a VCM that clears after the compliance market (Scenarios 5 and 6, where compliance markets clear first) generates dramatically larger VCM-specific transfers, reaching $49–104 billion annually in 2025–2030 and peaking at $134–161 billion in 2035–2040, before declining to $10–11 billion by 2050. These large transfers reflect the high prices prevailing when VCMs must compete with compliance market demand for the same mitigation supply. Under I-NDC scenarios, VCM transfers are modest but persistent ($3–14 billion annually). Under C-NDC scenarios where VCMs operate at compliance-level prices, transfers peak dramatically in the 2030–2040 period before declining as the buyer’s voluntary commitment is fulfilled and the pool of beyond-NDC mitigation shrinks. This pattern reflects two dynamics. The stylized buyer’s demand falls as it approaches its net-zero commitment. And as NDC targets tighten globally, the pool of beyond-NDC mitigation available for voluntary purchases shrinks. The compliance market grows in scale and price as targets become more stringent, shifting the center of gravity for international carbon transactions from voluntary to compliance channels. Price Dynamics. VCM prices vary substantially across market configurations (Figure 2). When compliance markets clear first (Scenarios 5, 6, and 7), VCM prices rise dramatically, starting at $30–43/tCO 2 in 2025 and exceeding $257–287/tCO 2 by 2050 as they converge toward the C-NDC compliance price. This convergence benefits sellers through higher revenue per unit while raising buyer costs. When VCM transactions include corresponding adjustments (Scenario 7), VCM and compliance markets effectively merge, with prices equalizing and the distinction becoming primarily accounting rather than economic. The Low-Hanging Fruit Dynamic. A central concern about voluntary markets operating ahead of compliance mechanisms is that they may deplete low-cost mitigation, raising host country compliance costs. Our results confirm this dynamic is substantial but design-dependent. When VCMs clear before compliance markets, VCM prices range from $2–18/tCO 2 . When compliance markets clear first, VCM prices range from $30–287/tCO 2 . This 10–20× price differential represents the low-hanging fruit effect (Figure 3). In VCM-first scenarios, voluntary buyers access low-cost mitigation before compliance demand materializes. In C-NDC-first scenarios, the compliance market claims low-cost mitigation, and the VCM must purchase from higher-cost supply. The effect is attenuated when VCM transactions lack corresponding adjustments and additionality requirements bind, since the sold reductions would not have counted toward seller NDCs anyway. Distribution of Mitigation Effort. VCM market design affects not only prices and transfers but also where and when physical mitigation occurs. The regional distribution shifts markedly over time (Figure 5). The Global North transitions from 14 GtCO 2 /yr in 2020 to net-negative emissions (-0.4 GtCO 2 /yr) by 2050, while the Global South reduces from 21.5 to 9 GtCO 2 /yr. The Global South’s share of remaining positive emissions rises from 61% to effectively 100% by 2050, meaning voluntary markets will source mitigation from regions constituting nearly all remaining emissions while buyer regions complete their own transitions. Under independent NDC implementation, adding a VCM shifts mitigation from buyer to seller without changing global totals. Under cooperative implementation, adding a VCM without corresponding adjustments generates additional global mitigation when additionality requirements bind (Scenario 5). Under the double-selling interpretation (Scenario 6), the same reductions count toward both voluntary and compliance purposes, creating no additional mitigation and raising environmental integrity concerns. Adding a VCM with corresponding adjustments (Scenario 7) redistributes mitigation within the NDC-consistent total. VCM design can exacerbate sectoral dynamics where the buyer sector meets ambitious voluntary commitments partly through imports, while other sectors face only NDC-implied carbon prices. Whether this is problematic depends on whether sectoral targets reflect social preferences or private incentives. Discussion Our results map how voluntary carbon market design choices propagate through the broader climate policy architecture. Design choices, particularly market sequencing and authorization rules, generate order-of-magnitude price differentials, with significant implications for project economics and resource allocation. VCMs as Transitional Climate Finance. Voluntary carbon markets can serve as a channel for near-term resource transfers to the Global South, but this role is structurally time-limited. VCM contributions are largest in the early transition period and decline as buyer demand falls and compliance markets grow. The nature of these transfers warrants consideration. Unlike grants, carbon credit payments are transactional: both parties benefit, with buyers meeting targets at lower cost and sellers receiving payment exceeding abatement costs. When corresponding adjustments apply, hosts face tightened constraints, and flows should ideally support increased climate action rather than primarily benefit developed country targets. 8 This temporal pattern contrasts with market projections extrapolating VCM growth indefinitely. Our results suggest supply constraints—the shrinking pool of beyond-NDC mitigation as targets approach net-zero—will limit VCM scale regardless of demand. This aligns with Edmonds et al., 9 who show international cooperation value peaks during the transition and diminishes as targets converge. For host countries, the window for capturing VCM-driven finance is finite. The Authorization Dilemma. Host country decisions about corresponding adjustments involve genuine tradeoffs. Authorizing adjustments protects NDC integrity by preventing double counting but raises seller MACs by tightening effective commitments. Not authorizing preserves flexibility but creates credits that may face buyer skepticism. Countries with ambitious NDCs and limited headroom face higher costs from authorization. Countries with substantial beyond-NDC potential may prefer authorization if it unlocks higher-value market segments where buyers require adjustments for credible claims. Our scenario comparison quantifies the range of outcomes, helping host countries assess which design choice better serves their circumstances. Sequencing and First-Mover Advantage. The sequential structure of market operations creates first-mover advantages with equity implications. When voluntary markets clear before compliance markets, early buyers capture low-cost mitigation at prices below later compliance levels ($2–18/tCO 2 versus $200+/tCO 2 by 2050). This echoes concerns about CDM credit pricing, 10 though our additionality requirement restricts supply to beyond-NDC mitigation. Early buyers take risk and provide early-stage finance that may catalyze mitigation capacity. But if early VCM purchases systematically benefit wealthy-country corporations at developing-country expense, this conflicts with climate finance equity objectives. Implications for Market Integrity Frameworks. The VCM integrity literature focuses on project-level attributes: additionality, permanence, measurement accuracy. Our results suggest credit assessments should also incorporate host country policy context. A credit with strong project-level additionality may still represent double counting if sold without corresponding adjustment from a country using the same mitigation toward its NDC. This suggests rating frameworks and buyer due diligence should attend to host country policy context alongside project attributes. The VCMI Claims Code of Practice moves in this direction, but implementation remains incomplete. 11 Limitations. Several limitations constrain interpretation (see SI-6 for details). We employ a single IAM; results may be sensitive to model structure. Our buyer specification is stylized, likely amplifying price effects relative to heterogeneous buyers. Critically, we assume all VCM credits represent real emissions reductions, abstracting from documented integrity problems where meta-analyses suggest only a fraction of credits represent additional reductions. 12,13 We also abstract from transaction costs, institutional frictions, and governance heterogeneity between market types. Results are illustrative of mechanisms rather than predictive of market outcomes. Concluding Remarks. Voluntary carbon markets and Article 6 compliance mechanisms operate under different logics and serve different actors. Our analysis demonstrates that their interaction is not neutral: design choices governing the VCM-NDC interface shape prices, resource transfers, and the distribution of mitigation effort. Three findings emerge. First, VCMs can channel substantial near-term resources to the Global South, but this role is transitional. As NDC targets tighten and compliance markets mature, the distinctive contribution of voluntary markets diminishes. Second, authorization and sequencing choices are policy-salient. Whether host countries apply corresponding adjustments to VCM transactions affects NDC headroom, marginal abatement costs, and credit values. When voluntary markets clear affects who captures the value of low-cost early mitigation. These are distributional choices with equity implications for the Global South. Third, the low-hanging fruit problem is real but contingent. Early voluntary purchases can raise later compliance costs for host countries, but the magnitude depends on authorization rules, market timing, and the stringency of NDC commitments. Design can attenuate or amplify this dynamic. The voluntary-compliance interface will be designed, whether deliberately or by default. Deliberate design, informed by understanding of how choices propagate through market architectures, can produce better outcomes than allowing the interface to emerge from uncoordinated decisions. The stakes, for the Global South, for efficient resource allocation, for equitable burden sharing, and for credible climate claims, warrant the effort. Declarations Data Availability The scenario outputs generated during this study are available from the corresponding author upon reasonable request. GCAM model input data are available at https://github.com/JGCRI/gcam-core. Code Availability GCAM version 6 is open source and available at https://github.com/JGCRI/gcam-core. Custom scenario configuration files used in this analysis are available from the corresponding author upon reasonable request. Acknowledgments We thank Sha Yu (International Monetary Fund & Center for Global Sustainability, University of Maryland and Pacific Northwest National Laboratory) for early contributions to this work. The work was supported by a research grant from the international Emissions Trading Alliance (IETA). Author Contributions M.G. and J.E. designed the study. M.G. performed the model runs and wrote the manuscript. M.G. and J.E. analyzed the results. J.E. reviewed and edited the manuscript. Competing Interests The authors declare no competing interests. References Ecosystem Marketplace. The Art of Integrity: State of the Voluntary Carbon Markets 2022 Q3. Forest Trends (2022). Taskforce on Scaling Voluntary Carbon Markets Final Report. Institute of International Finance (2021). KliK Foundation. First transfer of Internationally Transferred Mitigation Outcomes under Article 6.2 of the Paris Agreement. Joint statement with Energy Absolute Public Co. Ltd. (2024). Michaelowa, A., Hermwille, L., Obergassel, W. & Butzengeiger, S. Additionality revisited: guarding the integrity of market mechanisms under the Paris Agreement. Climate Policy 19 , 1211–1224 (2019). Schneider, L. & La Hoz Theuer, S. Environmental integrity of international carbon market mechanisms under the Paris Agreement. Climate Policy 19 , 386–400 (2019). Calvin, K. et al. GCAM v5.1: Representing the linkages between energy, water, land, climate, and economic systems. Model Dev. 12 , 677–698 (2019). Ou, Y. et al. Can updated climate pledges limit warming well below 2°C? Science 374 , 693–695 (2021). Climate Action Tracker. Why Article 6 should increase climate action, not delay it. (2025). Edmonds, J. et al. How Much Could Article 6 Enhance Nationally Determined Contribution Ambition Toward Paris Agreement Goals Through Economic Efficiency? Change Econ. 12 , 2150007 (2021). Wara, M. Is the global carbon market working? Nature 445 , 595–596 (2007). Claims Code of Practice: Building Integrity in Voluntary Carbon Markets. (2023). Probst, B. S. et al. Systematic assessment of the achieved emission reductions of carbon crediting projects. Commun. 15 , 9562 (2024). West, T. A. P. et al. Action needed to make carbon offsets from forest conservation work for climate change mitigation. Science 381 , 873–877 (2023). Badgley, G. et al. Systematic over-crediting in California’s forest carbon offsets program. Change Biol. 28 , 1433–1445 (2022). Gill-Wiehl, A., Kammen, D. M. & Haya, B. K. Pervasive over-crediting from cookstove offset methodologies. Sustain. 7 , 191–202 (2024). Trencher, G., Rinscheid, A., Rosenbloom, D. & Koppenborg, F. Demand for low-quality offsets by major companies undermines climate integrity of the voluntary carbon market. Commun. 15 , 6863 (2024). UN High-Level Expert Group. Integrity Matters: Net Zero Commitments by Businesses, Financial Institutions, Cities and Regions. United Nations, COP27 (2022). Core Carbon Principles, Assessment Framework and Assessment Procedure. (2023). Perspectives Climate Group. Analysis of the ICVCM’s Core Carbon Principles and Assessment Framework. (2024). NewClimate Institute. VCMI’s Scope 3 Flexibility Claim Could Turn Back the Corporate Ambition Dial to Business-as-Usual. (2023). Morris, J. et al. Mutual reinforcement of land-based carbon dioxide removal and international emissions trading in deep decarbonization scenarios. Commun. 15 , 7160 (2024). The Economic Potential of Article 6 of the Paris Agreement and Implementation Challenges. (2019). Fujimori, S. et al. Will international emissions trading help achieve the objectives of the Paris Agreement? Res. Lett. 11 , 104001 (2016). Hof, A. F. et al. Global and regional abatement costs of Nationally Determined Contributions (NDCs) and of enhanced action to levels well below 2°C and 1.5°C. Sci. Policy 71 , 30–40 (2017). Carbon Market Watch. FAQ: Fixing Article 6 carbon markets at COP29. (2024). Cullenward, D. & Victor, D. G. Making Climate Policy Work . Polity Press (2020). NewClimate Institute. Serious issues in the negotiations on international carbon markets (Article 6) must be addressed to avoid undermining the Paris Agreement. (2019). The Least Developed Countries Report 2023. (2023). Schneider, L., Duan, M., Stavins, R. et al. Double counting and the Paris Agreement rulebook. Science 366 , 180–183 (2019). Schneider, L., Kollmuss, A. & Lazarus, M. Addressing the risk of double counting emission reductions under the UNFCCC. Change 131 , 473–486 (2015). Streck, C., Bouchon, S., Trouwloon, D., Nuñez, P. & Rocha, M. Double Claiming and Corresponding Adjustments. Climate Focus (2023). Kreibich, N. & Hermwille, L. Caught in between: credibility and feasibility of the voluntary carbon market post-2020. Climate Policy 21 , 939–957 (2021). Schneider, L. Assessing the additionality of CDM projects: practical experiences and lessons learned. Climate Policy 9 , 242–254 (2009). Cames, M. et al. How Additional is the Clean Development Mechanism? Analysis of the Application of Current Tools and Proposed Alternatives. Öko-Institut e.V. (2016). Lo, R. E. & Cong, R. G. How has the Clean Development Mechanism performed? Insights from a meta-analysis. PLOS Climate 1 , e0000046 (2022). West, T. A. P., Börner, J., Sills, E. O. & Kontoleon, A. Overstated carbon emission reductions from voluntary REDD+ projects in the Brazilian Amazon. Natl Acad. Sci. USA 117 , 24188–24194 (2020). West, T. A. P., Bomfim, B. & Haya, B. K. Methodological issues with deforestation baselines compromise the integrity of carbon offsets from REDD+. Environ. Change 87 , 102863 (2024). Stapp, J. et al. Little evidence of management change in California’s forest offset program. Earth Environ. 4 , 331 (2023). Bjørn, A., Lloyd, S., Brander, M. & Matthews, H. D. Renewable energy certificates threaten the integrity of corporate science-based targets. Clim. Change 12 , 539–546 (2022). Montgomery, A. W., Lyon, T. P. & Barg, J. No End in Sight? A Greenwash Review and Research Agenda. Environ. 37 , 231–264 (2024). Long-Term Carbon Offsets Outlook. (2022). McKinsey & Company. A blueprint for scaling voluntary carbon markets to meet the climate challenge. (2021). Additional Declarations There is NO Competing Interest. Supplementary Files vcmNatCommsSIv5.docx Supplementary Information - Voluntary carbon market design shapes outcomes under Article 6 Cite Share Download PDF Status: Under Review Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-9255934","acceptedTermsAndConditions":true,"allowDirectSubmit":false,"archivedVersions":[],"articleType":"Article","associatedPublications":[],"authors":[{"id":615486061,"identity":"73f714a9-7765-4678-81a3-10a2b081d975","order_by":0,"name":"Mel George","email":"data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAZAAAAAyAQMAAABI0h/eAAAABlBMVEX///8AAABVwtN+AAAACXBIWXMAAA7EAAAOxAGVKw4bAAAAw0lEQVRIiWNgGAWjYDADfiCWYGBgJkGLZAPJWgwOEKtF3r352McvFdsSN9/ITrzBUGGd2EBIi+GZY8mzZc7cTtx2I3ezBcOZdCK0zMgxZpZsu21sdiN3mwRj22EitMx/A9Ty77ax8QyQln9EaJGX4DFm/NhwW85AAqSlgQgtBjxpycwMx27LSZx5u9ki4Vi6MWFb2g8fZvxRc5uHvz13440PNdayhG05AIwLHhgvgZBysC1AQxl/EKNyFIyCUTAKRi4AAJnNQJZ2fBFDAAAAAElFTkSuQmCC","orcid":"","institution":"University of Maryland","correspondingAuthor":true,"prefix":"","firstName":"Mel","middleName":"","lastName":"George","suffix":""},{"id":615486062,"identity":"6626c72d-d0c2-4119-ba10-dc5d84b7af2c","order_by":1,"name":"James Edmonds","email":"","orcid":"https://orcid.org/0000-0002-3210-9209","institution":"Pacific Northwest National Laboratory","correspondingAuthor":false,"prefix":"","firstName":"James","middleName":"","lastName":"Edmonds","suffix":""}],"badges":[],"createdAt":"2026-03-29 02:30:42","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-9255934/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-9255934/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":106065988,"identity":"a169363f-362e-4c2d-8388-9a4a433e6c13","added_by":"auto","created_at":"2026-04-03 05:22:39","extension":"png","order_by":1,"title":"Figure 1","display":"","copyAsset":false,"role":"figure","size":151281,"visible":true,"origin":"","legend":"\u003cp\u003e\u003cstrong\u003eVCM transfers to the Global South peak during the transition period and decline as NDC targets tighten.\u003c/strong\u003e VCM transfers in billion USD (2020$) by year (2025–2050) across four scenarios: Scenario 4 (I-NDC+VCM without CA), Scenario 4 with CA (I-NDC+VCM with CA), Scenario 5 (C-NDC then VCM without CA), and Scenario 7 (C-NDC then VCM with CA). Transfers under C-NDC scenarios are an order of magnitude larger than I-NDC scenarios but decline sharply toward 2050.\u003c/p\u003e","description":"","filename":"figure1transfers.png","url":"https://assets-eu.researchsquare.com/files/rs-9255934/v1/4f2d0e1152004423a8a9f971.png"},{"id":106095052,"identity":"acbf9312-525b-409b-8eaf-bf61ffcdc474","added_by":"auto","created_at":"2026-04-03 11:44:07","extension":"png","order_by":2,"title":"Figure 2","display":"","copyAsset":false,"role":"figure","size":212246,"visible":true,"origin":"","legend":"\u003cp\u003e\u003cstrong\u003eVCM prices converge toward compliance market levels when compliance markets clear first.\u003c/strong\u003e Carbon prices (2020 USD/tCO\u003csub\u003e2\u003c/sub\u003e) over 2025–2050 for VCM prices under I-NDC+VCM (Scenario 4), C-NDC then VCM without CA (Scenario 5), C-NDC then VCM with CA (Scenario 7), and C-NDC compliance price. VCM prices under I-NDC remain flat at $2–6/tCO\u003csub\u003e2\u003c/sub\u003e, while VCM prices under C-NDC converge toward the compliance price, reaching $257–287/tCO\u003csub\u003e2\u003c/sub\u003e by 2050.\u003c/p\u003e","description":"","filename":"figure2prices.png","url":"https://assets-eu.researchsquare.com/files/rs-9255934/v1/525191864d815a13e960e8b8.png"},{"id":106065991,"identity":"06d7864d-03d6-428a-ba25-871679e6d0e2","added_by":"auto","created_at":"2026-04-03 05:22:39","extension":"png","order_by":3,"title":"Figure 3","display":"","copyAsset":false,"role":"figure","size":193979,"visible":true,"origin":"","legend":"\u003cp\u003e\u003cstrong\u003eMarket sequencing drives a 10–20× price differential between early and late market entry.\u003c/strong\u003e VCM prices when VCM clears first ($2–18/tCO\u003csub\u003e2\u003c/sub\u003e) versus when C-NDC clears first ($43–257/tCO\u003csub\u003e2\u003c/sub\u003e). The shaded area represents the low-hanging fruit premium driven by market sequencing.\u003c/p\u003e","description":"","filename":"figure3sequencing.png","url":"https://assets-eu.researchsquare.com/files/rs-9255934/v1/fb6ffa02417d8e76a331fffd.png"},{"id":106095079,"identity":"83f1b3d1-a212-4f84-86b5-f85aa3fb5945","added_by":"auto","created_at":"2026-04-03 11:44:12","extension":"png","order_by":4,"title":"Figure 4","display":"","copyAsset":false,"role":"figure","size":244391,"visible":true,"origin":"","legend":"\u003cp\u003e\u003cstrong\u003eAll policy scenarios achieve substantial emissions reductions relative to reference, with divergent trajectories for Global South under different market configurations.\u003c/strong\u003e Global South net CO\u003csub\u003e2\u003c/sub\u003e emissions (GtCO\u003csub\u003e2\u003c/sub\u003e/yr) from 2025–2050 under Reference (no policy), Scenario 1 (I-NDC only), Scenario 2 (C-NDC only), Scenario 5 (C-NDC then VCM without CA), and Scenario 7 (C-NDC then VCM with CA). C-NDC scenarios reach approximately 6 GtCO\u003csub\u003e2\u003c/sub\u003e/yr by 2050 compared to 31 GtCO\u003csub\u003e2\u003c/sub\u003e/yr under reference.\u003c/p\u003e","description":"","filename":"figure4emissions.png","url":"https://assets-eu.researchsquare.com/files/rs-9255934/v1/cbb737019cfc0aaec4f9aee0.png"},{"id":106065993,"identity":"ac0be553-ed6a-4be7-91f9-5e5aeec4ca85","added_by":"auto","created_at":"2026-04-03 05:22:39","extension":"png","order_by":5,"title":"Figure 5","display":"","copyAsset":false,"role":"figure","size":307826,"visible":true,"origin":"","legend":"\u003cp\u003e\u003cstrong\u003eThe Global South’s share of global emissions rises to nearly 100% by 2050 as the Global North decarbonizes.\u003c/strong\u003e Panel (a): Absolute emissions trajectories showing Global South and Global North under reference and Scenario 1 (I-NDC), with Global North reaching net-negative by 2050. Panel (b): Regional share of global emissions under Scenario 1, showing Global South share rising from 61% to nearly 100% as Global North decarbonizes.\u003c/p\u003e","description":"","filename":"figure5northsouth.png","url":"https://assets-eu.researchsquare.com/files/rs-9255934/v1/73269fd5475af56fb92b4ec3.png"},{"id":106095960,"identity":"6748148d-a514-4c99-a712-ecf97959daa5","added_by":"auto","created_at":"2026-04-03 11:51:56","extension":"pdf","order_by":0,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":1787572,"visible":true,"origin":"","legend":"","description":"","filename":"manuscript.pdf","url":"https://assets-eu.researchsquare.com/files/rs-9255934/v1/56482be9-bf56-4bb0-b1de-10a55af43b67.pdf"},{"id":106094366,"identity":"f7d24fae-50c6-4790-894b-a00a77b6bb2d","added_by":"auto","created_at":"2026-04-03 11:42:19","extension":"docx","order_by":1,"title":"","display":"","copyAsset":false,"role":"supplement","size":31608,"visible":true,"origin":"","legend":"Supplementary Information - Voluntary carbon market design shapes outcomes under Article 6","description":"","filename":"vcmNatCommsSIv5.docx","url":"https://assets-eu.researchsquare.com/files/rs-9255934/v1/12275e96aa0ebc82ecab8479.docx"}],"financialInterests":"There is \u003cb\u003eNO\u003c/b\u003e Competing Interest.","formattedTitle":"Voluntary carbon market design shapes outcomes under Article 6","fulltext":[{"header":"Introduction","content":"\u003cp\u003eVoluntary carbon markets and Article 6 compliance mechanisms are developing in parallel, yet their interactions remain poorly understood. Private actors are purchasing emissions reductions through voluntary markets at increasing scale, with transaction volumes reaching approximately $2 billion in 2021\u003csup\u003e1\u003c/sup\u003e and some projections suggesting growth to $50 billion or more by 2030.\u003csup\u003e2\u003c/sup\u003e Much of this supply originates in Global South countries, where mitigation costs are lower and co-benefits from climate finance are substantial. Simultaneously, governments are operationalizing international cooperation under Article 6 of the Paris Agreement, which enables countries to trade mitigation outcomes toward their Nationally Determined Contributions. The first Internationally Transferred Mitigation Outcomes under Article 6.2 were issued in January 2024, when Switzerland acquired 1,916 ITMOs from Thailand for an electric bus program,\u003csup\u003e3\u003c/sup\u003e marking the transition from negotiation to implementation.\u003c/p\u003e\n\u003cp\u003eThese two market systems draw from overlapping pools of mitigation supply, particularly in developing countries. The design choices governing their interface will shape prices, resource transfers, and the distribution of mitigation effort across regions and over time. Yet the literatures on voluntary markets and Article 6 cooperation have developed largely in isolation, leaving the interaction space unexamined.\u003csup\u003e4,5\u003c/sup\u003e\u003c/p\u003e\n\u003cp\u003eThis gap matters. Voluntary carbon market transactions in countries that subsequently participate in Article 6 markets may affect the supply and price of mitigation available for compliance purposes. Early voluntary purchases could deplete low-cost mitigation options, raising the marginal cost of meeting NDC commitments for host country governments or later compliance market participants. The treatment of voluntary credits under national emissions accounting affects whether purchases create additional global mitigation or merely relabel reductions that would have occurred anyway. Whether host countries apply corresponding adjustments to voluntary transactions determines this outcome. The sequencing of market operations affects price formation and resource allocation in both markets.\u003c/p\u003e\n\u003cp\u003eHost countries are actively deciding whether to authorize corresponding adjustments for voluntary credits. Corporate buyers are assessing whether credits without corresponding adjustments constitute credible climate claims. Article 6 negotiators are debating how voluntary markets fit within the Paris Agreement architecture. These decisions will be made with or without quantitative guidance on their implications.\u003c/p\u003e\n\u003cp\u003eWe address this gap using a global integrated assessment model to explore how alternative market designs affect voluntary and compliance market outcomes. We construct a stylized voluntary carbon market between U.S. private sector buyers and Global South sellers, embedded within scenarios where countries implement their NDCs either independently or cooperatively through Article 6 mechanisms. We vary whether voluntary transactions generate corresponding adjustments and examine the consequences for prices, trade volumes, resource transfers, and the distribution of mitigation effort.\u003c/p\u003e\n\u003cp\u003eOur analysis is illustrative rather than predictive: a structured exploration of design space rather than a forecast. The buyer specification is intentionally stylized to generate meaningful transaction volumes and to isolate the mechanisms through which market design choices propagate to outcomes. We do not predict voluntary market size or Article 6 participation. Rather, we map the design space and identify regularities that hold across plausible configurations.\u003c/p\u003e\n\u003cp\u003eWe address four research questions: How do voluntary carbon markets affect resource transfers to the Global South, and how does this role evolve as NDC targets tighten? How do authorization rules and market sequencing affect prices in voluntary and compliance markets? Under what conditions do early voluntary purchases raise host country marginal abatement costs, and how large is this “low-hanging fruit” effect? How does voluntary market design affect the sectoral and regional distribution of mitigation effort?\u003c/p\u003e"},{"header":"Methods","content":"\u003cp\u003e\u003cstrong\u003eModel Overview.\u003c/strong\u003e We employ the Global Change Analysis Model (GCAM) version 6.\u003csup\u003e6\u003c/sup\u003e GCAM is a global integrated assessment model that simultaneously resolves energy, land use, water, and economic systems across 32 geopolitical regions, 384 land regions, and 235 water basins. The model solves in 5-year time steps using a dynamic-recursive approach. We set the model horizon to 2050. All scenarios use SSP-2 assumptions, maintaining comparability with other studies in the literature. Full model documentation is available at jgcri.github.io/gcam-doc.\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eRegional Scope.\u003c/strong\u003e We define the Global South as 19 GCAM regions encompassing developing economies in Africa, Asia, and Latin America. These regions serve as potential sellers in the voluntary carbon market. The remaining regions, including the United States, European Union, and other developed economies, participate in NDC implementation and, in cooperative scenarios, in compliance carbon markets. The full list of regions and their geographic coverage is provided in Supplementary Information (SI-3).\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eNDC Specification.\u003c/strong\u003e We construct NDC trajectories in two phases. Through 2030, we implement announced Nationally Determined Contributions. Post-2030, we extend commitments building on Ou et al.,\u003csup\u003e7\u003c/sup\u003e with countries following Long-Term Strategy trajectories where available and achieving minimum 5% annual decarbonization otherwise. This generates a declining global emissions trajectory broadly consistent with Paris Agreement goals. See SI-4 for details.\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eVoluntary Carbon Market Specification.\u003c/strong\u003e We model a hypothetical voluntary carbon market in which U.S. energy-intensive industries commit to emissions reductions beyond national policy requirements, with CO\u003csub\u003e2\u003c/sub\u003e emissions declining linearly to net-zero by 2030. This stylized buyer specification generates meaningful transaction volumes and concentrates demand in the period where VCM-NDC interactions are most consequential. The U.S. is modeled as both a compliance market participant (meeting its NDC) and as the source of voluntary buyer demand. The U.S. NDC is implemented per announced targets through 2030 and extended per Ou et al.\u003csup\u003e7\u003c/sup\u003e thereafter; the voluntary buyer commitment is additional to this baseline. U.S. industry meets its voluntary commitment through domestic mitigation and purchases from the Global South via the VCM. We restrict VCM supply to mitigation beyond what seller countries would achieve under their own NDC trajectories, ensuring that VCM transactions create real emissions reductions rather than relabeling compliance mitigation.\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eCompliance Market Specification.\u003c/strong\u003e We model NDC implementation under two configurations. Under independent implementation (I-NDC), each country meets its NDC through domestic mitigation only, with no international trading of emissions reductions. Under cooperative implementation (C-NDC), all countries participate in a global carbon market that equalizes marginal abatement costs across regions, consistent with the intent of Article 6 of the Paris Agreement. Cooperative implementation is global, not restricted to the Global South. In cooperative scenarios, all compliance market transactions are accompanied by corresponding adjustments to national emissions accounts, ensuring no double counting of mitigation toward multiple NDCs.\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eSequential Market Implementation.\u003c/strong\u003e A distinctive feature of our approach is the sequential implementation of voluntary and compliance markets. Rather than solving all market interactions simultaneously, we first clear the VCM and then use those results as inputs to the NDC compliance run. This encodes an assumption that private voluntary actors move before governments fully operationalize Article 6 mechanisms, which reflects current market development where voluntary markets are active while Article 6 infrastructure remains nascent.\u003c/p\u003e\n\u003cp\u003eWhen VCM transactions occur without corresponding adjustments, the seller retains full credit toward its own NDC despite reduced physical emissions. When VCM transactions occur with corresponding adjustments, the seller’s emissions account is adjusted upward, maintaining atmospheric integrity but reducing NDC headroom. See SI-5 for implementation details.\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eScenario Design.\u003c/strong\u003e We examine scenarios spanning three dimensions of market design (Table 1). The full scenario matrix varies: NDC implementation mode (Independent or Cooperative), VCM presence and authorization (No VCM, VCM without corresponding adjustments, or VCM with corresponding adjustments), and sequencing (VCM clears before or after compliance market). For tractability, we focus the main text on seven scenarios that illuminate the core mechanisms. Within the cooperative scenarios, we also distinguish variants (denoted A and B in results figures) that explore different assumptions about VCM timing relative to compliance market clearing; the full 12-scenario matrix is presented in Supplementary Information (SI-2).\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eTable 1: Core Scenario Matrix\u003c/strong\u003e\u003c/p\u003e\n\u003ctable border=\"1\" cellspacing=\"0\" cellpadding=\"0\" width=\"100%\"\u003e\n \u003cthead\u003e\n \u003ctr\u003e\n \u003ctd valign=\"bottom\"\u003e\n \u003cp\u003eScenario\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"bottom\"\u003e\n \u003cp\u003eNDC Implementation\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"bottom\"\u003e\n \u003cp\u003eVCM Present\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"bottom\"\u003e\n \u003cp\u003eCorresponding Adjustment\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"bottom\"\u003e\n \u003cp\u003eKey Comparison\u003c/p\u003e\n \u003c/td\u003e\n \u003c/tr\u003e\n \u003c/thead\u003e\n \u003ctbody\u003e\n \u003ctr\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003e1. I-NDC baseline\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003eIndependent\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003eNo\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003eN/A\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003eBaseline without international trade\u003c/p\u003e\n \u003c/td\u003e\n \u003c/tr\u003e\n \u003ctr\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003e2. C-NDC baseline\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003eCooperative\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003eNo\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003eN/A\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003eArticle 6 cooperation effect\u003c/p\u003e\n \u003c/td\u003e\n \u003c/tr\u003e\n \u003ctr\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003e3. VCM only\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003eNone\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003eYes\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003eN/A\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003eVCM in isolation\u003c/p\u003e\n \u003c/td\u003e\n \u003c/tr\u003e\n \u003ctr\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003e4. I-NDC + VCM\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003eIndependent\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003eYes\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003eNo\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003eVCM layered on independent NDCs\u003c/p\u003e\n \u003c/td\u003e\n \u003c/tr\u003e\n \u003ctr\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003e5. C-NDC + VCM-noCA (AD)\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003eCooperative\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003eYes\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003eNo\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003eVCM creates additional mitigation\u003c/p\u003e\n \u003c/td\u003e\n \u003c/tr\u003e\n \u003ctr\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003e6. C-NDC + VCM-noCA (DS)\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003eCooperative\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003eYes\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003eNo\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003eDouble selling risk\u003c/p\u003e\n \u003c/td\u003e\n \u003c/tr\u003e\n \u003ctr\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003e7. C-NDC + VCM + CA\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003eCooperative\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003eYes\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003eYes\u003c/p\u003e\n \u003c/td\u003e\n \u003ctd valign=\"top\"\u003e\n \u003cp\u003eFull market integration\u003c/p\u003e\n \u003c/td\u003e\n \u003c/tr\u003e\n \u003c/tbody\u003e\n\u003c/table\u003e\n\u003cp\u003eScenarios 1 and 2 provide baselines for NDC implementation without voluntary markets. Scenario 3 isolates VCM dynamics without NDC constraints. Scenarios 4–7 explore the interaction space. The distinction between Scenarios 5 and 6 addresses whether VCM transactions without corresponding adjustments create additional mitigation (AD) or represent double-selling of compliance market reductions (DS). In Scenario 7, VCM transactions carry corresponding adjustments and are fully integrated with compliance market accounting. See SI-2 for detailed scenario specifications and the operationalization of additionality constraints.\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eMetrics.\u003c/strong\u003e We evaluate scenarios along four dimensions: prices (VCM transaction prices and compliance market carbon prices, in 2020 USD per tonne CO\u003csub\u003e2\u003c/sub\u003e), volumes (quantities traded, in MtCO\u003csub\u003e2\u003c/sub\u003e per year), resource transfers (financial flows from buyers to sellers, in billion USD per year), and marginal abatement cost dynamics (changes in seller country MACs over time to identify “low-hanging fruit” effects).\u003c/p\u003e"},{"header":"Results","content":"\u003cp\u003eWe organize results around our four research questions: resource transfers to the Global South, price dynamics, the low-hanging fruit problem, and distribution of mitigation effort.\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eResource Transfers to the Global South.\u003c/strong\u003e Voluntary carbon markets transfer additional resources to Global South countries across all scenarios where they operate, but the magnitude and persistence of these transfers depend on the broader policy context.\u003c/p\u003e\n\u003cp\u003eUnder independent NDC implementation without a VCM (Scenario 1), there are no international transfers; each country meets its commitment domestically. Adding a VCM (Scenario 4) generates transfers to the Global South ranging from $3\u0026ndash;10 billion annually, with transfers peaking around 2030 at $10 billion before fluctuating and declining as the buyer approaches its voluntary commitment.\u003c/p\u003e\n\u003cp\u003eWhen NDCs are implemented cooperatively through Article 6 (Scenario 2), the compliance market itself generates substantial transfers to Global South sellers. Adding a VCM that clears after the compliance market (Scenarios 5 and 6, where compliance markets clear first) generates dramatically larger VCM-specific transfers, reaching $49\u0026ndash;104 billion annually in 2025\u0026ndash;2030 and peaking at $134\u0026ndash;161 billion in 2035\u0026ndash;2040, before declining to $10\u0026ndash;11 billion by 2050. These large transfers reflect the high prices prevailing when VCMs must compete with compliance market demand for the same mitigation supply.\u003c/p\u003e\n\u003cp\u003eUnder I-NDC scenarios, VCM transfers are modest but persistent ($3\u0026ndash;14 billion annually). Under C-NDC scenarios where VCMs operate at compliance-level prices, transfers peak dramatically in the 2030\u0026ndash;2040 period before declining as the buyer\u0026rsquo;s voluntary commitment is fulfilled and the pool of beyond-NDC mitigation shrinks.\u003c/p\u003e\n\u003cp\u003eThis pattern reflects two dynamics. The stylized buyer\u0026rsquo;s demand falls as it approaches its net-zero commitment. And as NDC targets tighten globally, the pool of beyond-NDC mitigation available for voluntary purchases shrinks. The compliance market grows in scale and price as targets become more stringent, shifting the center of gravity for international carbon transactions from voluntary to compliance channels.\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003ePrice Dynamics.\u003c/strong\u003e VCM prices vary substantially across market configurations (Figure 2).\u003c/p\u003e\n\u003cp\u003eWhen compliance markets clear first (Scenarios 5, 6, and 7), VCM prices rise dramatically, starting at $30\u0026ndash;43/tCO\u003csub\u003e2\u003c/sub\u003e in 2025 and exceeding $257\u0026ndash;287/tCO\u003csub\u003e2\u003c/sub\u003e by 2050 as they converge toward the C-NDC compliance price. This convergence benefits sellers through higher revenue per unit while raising buyer costs.\u003c/p\u003e\n\u003cp\u003eWhen VCM transactions include corresponding adjustments (Scenario 7), VCM and compliance markets effectively merge, with prices equalizing and the distinction becoming primarily accounting rather than economic.\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eThe Low-Hanging Fruit Dynamic.\u003c/strong\u003e A central concern about voluntary markets operating ahead of compliance mechanisms is that they may deplete low-cost mitigation, raising host country compliance costs. Our results confirm this dynamic is substantial but design-dependent.\u003c/p\u003e\n\u003cp\u003eWhen VCMs clear before compliance markets, VCM prices range from $2\u0026ndash;18/tCO\u003csub\u003e2\u003c/sub\u003e. When compliance markets clear first, VCM prices range from $30\u0026ndash;287/tCO\u003csub\u003e2\u003c/sub\u003e. This 10\u0026ndash;20\u0026times; price differential represents the low-hanging fruit effect (Figure 3).\u003c/p\u003e\n\u003cp\u003eIn VCM-first scenarios, voluntary buyers access low-cost mitigation before compliance demand materializes. In C-NDC-first scenarios, the compliance market claims low-cost mitigation, and the VCM must purchase from higher-cost supply. The effect is attenuated when VCM transactions lack corresponding adjustments and additionality requirements bind, since the sold reductions would not have counted toward seller NDCs anyway.\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eDistribution of Mitigation Effort.\u003c/strong\u003e VCM market design affects not only prices and transfers but also where and when physical mitigation occurs.\u003c/p\u003e\n\u003cp\u003eThe regional distribution shifts markedly over time (Figure 5). The Global North transitions from 14 GtCO\u003csub\u003e2\u003c/sub\u003e/yr in 2020 to net-negative emissions (-0.4 GtCO\u003csub\u003e2\u003c/sub\u003e/yr) by 2050, while the Global South reduces from 21.5 to 9 GtCO\u003csub\u003e2\u003c/sub\u003e/yr. The Global South\u0026rsquo;s share of remaining positive emissions rises from 61% to effectively 100% by 2050, meaning voluntary markets will source mitigation from regions constituting nearly all remaining emissions while buyer regions complete their own transitions.\u003c/p\u003e\n\u003cp\u003eUnder independent NDC implementation, adding a VCM shifts mitigation from buyer to seller without changing global totals. Under cooperative implementation, adding a VCM without corresponding adjustments generates additional global mitigation when additionality requirements bind (Scenario 5). Under the double-selling interpretation (Scenario 6), the same reductions count toward both voluntary and compliance purposes, creating no additional mitigation and raising environmental integrity concerns. Adding a VCM with corresponding adjustments (Scenario 7) redistributes mitigation within the NDC-consistent total.\u003c/p\u003e\n\u003cp\u003eVCM design can exacerbate sectoral dynamics where the buyer sector meets ambitious voluntary commitments partly through imports, while other sectors face only NDC-implied carbon prices. Whether this is problematic depends on whether sectoral targets reflect social preferences or private incentives.\u003c/p\u003e"},{"header":"Discussion","content":"\u003cp\u003eOur results map how voluntary carbon market design choices propagate through the broader climate policy architecture. Design choices, particularly market sequencing and authorization rules, generate order-of-magnitude price differentials, with significant implications for project economics and resource allocation.\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eVCMs as Transitional Climate Finance.\u003c/strong\u003e Voluntary carbon markets can serve as a channel for near-term resource transfers to the Global South, but this role is structurally time-limited. VCM contributions are largest in the early transition period and decline as buyer demand falls and compliance markets grow.\u003c/p\u003e\n\u003cp\u003eThe nature of these transfers warrants consideration. Unlike grants, carbon credit payments are transactional: both parties benefit, with buyers meeting targets at lower cost and sellers receiving payment exceeding abatement costs. When corresponding adjustments apply, hosts face tightened constraints, and flows should ideally support increased climate action rather than primarily benefit developed country targets.\u003csup\u003e8\u003c/sup\u003e\u003c/p\u003e\n\u003cp\u003eThis temporal pattern contrasts with market projections extrapolating VCM growth indefinitely. Our results suggest supply constraints—the shrinking pool of beyond-NDC mitigation as targets approach net-zero—will limit VCM scale regardless of demand. This aligns with Edmonds et al.,\u003csup\u003e9\u003c/sup\u003e who show international cooperation value peaks during the transition and diminishes as targets converge. For host countries, the window for capturing VCM-driven finance is finite.\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eThe Authorization Dilemma.\u003c/strong\u003e Host country decisions about corresponding adjustments involve genuine tradeoffs. Authorizing adjustments protects NDC integrity by preventing double counting but raises seller MACs by tightening effective commitments. Not authorizing preserves flexibility but creates credits that may face buyer skepticism.\u003c/p\u003e\n\u003cp\u003eCountries with ambitious NDCs and limited headroom face higher costs from authorization. Countries with substantial beyond-NDC potential may prefer authorization if it unlocks higher-value market segments where buyers require adjustments for credible claims. Our scenario comparison quantifies the range of outcomes, helping host countries assess which design choice better serves their circumstances.\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eSequencing and First-Mover Advantage.\u003c/strong\u003e The sequential structure of market operations creates first-mover advantages with equity implications. When voluntary markets clear before compliance markets, early buyers capture low-cost mitigation at prices below later compliance levels ($2–18/tCO\u003csub\u003e2\u003c/sub\u003e versus $200+/tCO\u003csub\u003e2\u003c/sub\u003e by 2050). This echoes concerns about CDM credit pricing,\u003csup\u003e10\u003c/sup\u003e though our additionality requirement restricts supply to beyond-NDC mitigation.\u003c/p\u003e\n\u003cp\u003eEarly buyers take risk and provide early-stage finance that may catalyze mitigation capacity. But if early VCM purchases systematically benefit wealthy-country corporations at developing-country expense, this conflicts with climate finance equity objectives.\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eImplications for Market Integrity Frameworks.\u003c/strong\u003e The VCM integrity literature focuses on project-level attributes: additionality, permanence, measurement accuracy. Our results suggest credit assessments should also incorporate host country policy context. A credit with strong project-level additionality may still represent double counting if sold without corresponding adjustment from a country using the same mitigation toward its NDC.\u003c/p\u003e\n\u003cp\u003eThis suggests rating frameworks and buyer due diligence should attend to host country policy context alongside project attributes. The VCMI Claims Code of Practice moves in this direction, but implementation remains incomplete.\u003csup\u003e11\u003c/sup\u003e\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eLimitations.\u003c/strong\u003e Several limitations constrain interpretation (see SI-6 for details). We employ a single IAM; results may be sensitive to model structure. Our buyer specification is stylized, likely amplifying price effects relative to heterogeneous buyers. Critically, we assume all VCM credits represent real emissions reductions, abstracting from documented integrity problems where meta-analyses suggest only a fraction of credits represent additional reductions.\u003csup\u003e12,13\u003c/sup\u003e We also abstract from transaction costs, institutional frictions, and governance heterogeneity between market types. Results are illustrative of mechanisms rather than predictive of market outcomes.\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eConcluding Remarks.\u003c/strong\u003e Voluntary carbon markets and Article 6 compliance mechanisms operate under different logics and serve different actors. Our analysis demonstrates that their interaction is not neutral: design choices governing the VCM-NDC interface shape prices, resource transfers, and the distribution of mitigation effort.\u003c/p\u003e\n\u003cp\u003eThree findings emerge. First, VCMs can channel substantial near-term resources to the Global South, but this role is transitional. As NDC targets tighten and compliance markets mature, the distinctive contribution of voluntary markets diminishes.\u003c/p\u003e\n\u003cp\u003eSecond, authorization and sequencing choices are policy-salient. Whether host countries apply corresponding adjustments to VCM transactions affects NDC headroom, marginal abatement costs, and credit values. When voluntary markets clear affects who captures the value of low-cost early mitigation. These are distributional choices with equity implications for the Global South.\u003c/p\u003e\n\u003cp\u003eThird, the low-hanging fruit problem is real but contingent. Early voluntary purchases can raise later compliance costs for host countries, but the magnitude depends on authorization rules, market timing, and the stringency of NDC commitments. Design can attenuate or amplify this dynamic.\u003c/p\u003e\n\u003cp\u003eThe voluntary-compliance interface will be designed, whether deliberately or by default. Deliberate design, informed by understanding of how choices propagate through market architectures, can produce better outcomes than allowing the interface to emerge from uncoordinated decisions. The stakes, for the Global South, for efficient resource allocation, for equitable burden sharing, and for credible climate claims, warrant the effort.\u003c/p\u003e"},{"header":"Declarations","content":"\u003ch2\u003eData Availability\u003c/h2\u003e\n\u003cp\u003eThe scenario outputs generated during this study are available from the corresponding author upon reasonable request. GCAM model input data are available at https://github.com/JGCRI/gcam-core.\u003c/p\u003e\n\u003ch2\u003eCode Availability\u003c/h2\u003e\n\u003cp\u003eGCAM version 6 is open source and available at https://github.com/JGCRI/gcam-core. Custom scenario configuration files used in this analysis are available from the corresponding author upon reasonable request.\u003c/p\u003e\n\u003ch2\u003eAcknowledgments\u003c/h2\u003e\n\u003cp\u003eWe thank Sha Yu (International Monetary Fund \u0026amp; Center for Global Sustainability, University of Maryland and Pacific Northwest National Laboratory) for early contributions to this work. The work was supported by a research grant from the international Emissions Trading Alliance (IETA).\u0026nbsp;\u003c/p\u003e\n\u003ch2\u003eAuthor Contributions\u003c/h2\u003e\n\u003cp\u003eM.G. and J.E. designed the study. M.G. performed the model runs and wrote the manuscript. M.G. and J.E. analyzed the results. J.E. reviewed and edited the manuscript.\u003c/p\u003e\n\u003ch2\u003eCompeting Interests\u003c/h2\u003e\n\u003cp\u003eThe authors declare no competing interests.\u003c/p\u003e"},{"header":"References","content":"\u003col\u003e\n\u003cli\u003eEcosystem Marketplace. The Art of Integrity: State of the Voluntary Carbon Markets 2022 Q3. Forest Trends (2022).\u003c/li\u003e\n\u003cli\u003eTaskforce on Scaling Voluntary Carbon Markets Final Report. Institute of International Finance (2021).\u003c/li\u003e\n\u003cli\u003eKliK Foundation. First transfer of Internationally Transferred Mitigation Outcomes under Article 6.2 of the Paris Agreement. Joint statement with Energy Absolute Public Co.\u0026nbsp;Ltd.\u0026nbsp;(2024).\u003c/li\u003e\n\u003cli\u003eMichaelowa, A., Hermwille, L., Obergassel, W. \u0026amp; Butzengeiger, S. Additionality revisited: guarding the integrity of market mechanisms under the Paris Agreement. \u003cem\u003eClimate Policy\u003c/em\u003e \u003cstrong\u003e19\u003c/strong\u003e, 1211\u0026ndash;1224 (2019).\u003c/li\u003e\n\u003cli\u003eSchneider, L. \u0026amp; La Hoz Theuer, S. Environmental integrity of international carbon market mechanisms under the Paris Agreement. \u003cem\u003eClimate Policy\u003c/em\u003e \u003cstrong\u003e19\u003c/strong\u003e, 386\u0026ndash;400 (2019).\u003c/li\u003e\n\u003cli\u003eCalvin, K. et al.\u0026nbsp;GCAM v5.1: Representing the linkages between energy, water, land, climate, and economic systems. \u003cem\u003e Model Dev.\u003c/em\u003e \u003cstrong\u003e12\u003c/strong\u003e, 677\u0026ndash;698 (2019).\u003c/li\u003e\n\u003cli\u003eOu, Y. et al.\u0026nbsp;Can updated climate pledges limit warming well below 2\u0026deg;C? \u003cem\u003eScience\u003c/em\u003e \u003cstrong\u003e374\u003c/strong\u003e, 693\u0026ndash;695 (2021).\u003c/li\u003e\n\u003cli\u003eClimate Action Tracker. Why Article 6 should increase climate action, not delay it. (2025).\u003c/li\u003e\n\u003cli\u003eEdmonds, J. et al.\u0026nbsp;How Much Could Article 6 Enhance Nationally Determined Contribution Ambition Toward Paris Agreement Goals Through Economic Efficiency? \u003cem\u003e Change Econ.\u003c/em\u003e \u003cstrong\u003e12\u003c/strong\u003e, 2150007 (2021).\u003c/li\u003e\n\u003cli\u003eWara, M. Is the global carbon market working? \u003cem\u003eNature\u003c/em\u003e \u003cstrong\u003e445\u003c/strong\u003e, 595\u0026ndash;596 (2007).\u003c/li\u003e\n\u003cli\u003eClaims Code of Practice: Building Integrity in Voluntary Carbon Markets. (2023).\u003c/li\u003e\n\u003cli\u003eProbst, B. S. et al.\u0026nbsp;Systematic assessment of the achieved emission reductions of carbon crediting projects. \u003cem\u003e Commun.\u003c/em\u003e \u003cstrong\u003e15\u003c/strong\u003e, 9562 (2024).\u003c/li\u003e\n\u003cli\u003eWest, T. A. P. et al.\u0026nbsp;Action needed to make carbon offsets from forest conservation work for climate change mitigation. \u003cem\u003eScience\u003c/em\u003e \u003cstrong\u003e381\u003c/strong\u003e, 873\u0026ndash;877 (2023).\u003c/li\u003e\n\u003cli\u003eBadgley, G. et al.\u0026nbsp;Systematic over-crediting in California\u0026rsquo;s forest carbon offsets program. \u003cem\u003e Change Biol.\u003c/em\u003e \u003cstrong\u003e28\u003c/strong\u003e, 1433\u0026ndash;1445 (2022).\u003c/li\u003e\n\u003cli\u003eGill-Wiehl, A., Kammen, D. M. \u0026amp; Haya, B. K. Pervasive over-crediting from cookstove offset methodologies. \u003cem\u003e Sustain.\u003c/em\u003e \u003cstrong\u003e7\u003c/strong\u003e, 191\u0026ndash;202 (2024).\u003c/li\u003e\n\u003cli\u003eTrencher, G., Rinscheid, A., Rosenbloom, D. \u0026amp; Koppenborg, F. Demand for low-quality offsets by major companies undermines climate integrity of the voluntary carbon market. \u003cem\u003e Commun.\u003c/em\u003e \u003cstrong\u003e15\u003c/strong\u003e, 6863 (2024).\u003c/li\u003e\n\u003cli\u003eUN High-Level Expert Group. Integrity Matters: Net Zero Commitments by Businesses, Financial Institutions, Cities and Regions. United Nations, COP27 (2022).\u003c/li\u003e\n\u003cli\u003eCore Carbon Principles, Assessment Framework and Assessment Procedure. (2023).\u003c/li\u003e\n\u003cli\u003ePerspectives Climate Group. Analysis of the ICVCM\u0026rsquo;s Core Carbon Principles and Assessment Framework. (2024).\u003c/li\u003e\n\u003cli\u003eNewClimate Institute. VCMI\u0026rsquo;s Scope 3 Flexibility Claim Could Turn Back the Corporate Ambition Dial to Business-as-Usual. (2023).\u003c/li\u003e\n\u003cli\u003eMorris, J. et al.\u0026nbsp;Mutual reinforcement of land-based carbon dioxide removal and international emissions trading in deep decarbonization scenarios. \u003cem\u003e Commun.\u003c/em\u003e \u003cstrong\u003e15\u003c/strong\u003e, 7160 (2024).\u003c/li\u003e\n\u003cli\u003eThe Economic Potential of Article 6 of the Paris Agreement and Implementation Challenges. (2019).\u003c/li\u003e\n\u003cli\u003eFujimori, S. et al.\u0026nbsp;Will international emissions trading help achieve the objectives of the Paris Agreement? \u003cem\u003e Res. Lett.\u003c/em\u003e \u003cstrong\u003e11\u003c/strong\u003e, 104001 (2016).\u003c/li\u003e\n\u003cli\u003eHof, A. F. et al.\u0026nbsp;Global and regional abatement costs of Nationally Determined Contributions (NDCs) and of enhanced action to levels well below 2\u0026deg;C and 1.5\u0026deg;C. \u003cem\u003e Sci. Policy\u003c/em\u003e \u003cstrong\u003e71\u003c/strong\u003e, 30\u0026ndash;40 (2017).\u003c/li\u003e\n\u003cli\u003eCarbon Market Watch. FAQ: Fixing Article 6 carbon markets at COP29. (2024).\u003c/li\u003e\n\u003cli\u003eCullenward, D. \u0026amp; Victor, D. G. \u003cem\u003eMaking Climate Policy Work\u003c/em\u003e. Polity Press (2020).\u003c/li\u003e\n\u003cli\u003eNewClimate Institute. Serious issues in the negotiations on international carbon markets (Article 6) must be addressed to avoid undermining the Paris Agreement. (2019).\u003c/li\u003e\n\u003cli\u003eThe Least Developed Countries Report 2023. (2023).\u003c/li\u003e\n\u003cli\u003eSchneider, L., Duan, M., Stavins, R. et al.\u0026nbsp;Double counting and the Paris Agreement rulebook. \u003cem\u003eScience\u003c/em\u003e \u003cstrong\u003e366\u003c/strong\u003e, 180\u0026ndash;183 (2019).\u003c/li\u003e\n\u003cli\u003eSchneider, L., Kollmuss, A. \u0026amp; Lazarus, M. Addressing the risk of double counting emission reductions under the UNFCCC. \u003cem\u003e Change\u003c/em\u003e \u003cstrong\u003e131\u003c/strong\u003e, 473\u0026ndash;486 (2015).\u003c/li\u003e\n\u003cli\u003eStreck, C., Bouchon, S., Trouwloon, D., Nu\u0026ntilde;ez, P. \u0026amp; Rocha, M. Double Claiming and Corresponding Adjustments. Climate Focus (2023).\u003c/li\u003e\n\u003cli\u003eKreibich, N. \u0026amp; Hermwille, L. Caught in between: credibility and feasibility of the voluntary carbon market post-2020. \u003cem\u003eClimate Policy\u003c/em\u003e \u003cstrong\u003e21\u003c/strong\u003e, 939\u0026ndash;957 (2021).\u003c/li\u003e\n\u003cli\u003eSchneider, L. Assessing the additionality of CDM projects: practical experiences and lessons learned. \u003cem\u003eClimate Policy\u003c/em\u003e \u003cstrong\u003e9\u003c/strong\u003e, 242\u0026ndash;254 (2009).\u003c/li\u003e\n\u003cli\u003eCames, M. et al.\u0026nbsp;How Additional is the Clean Development Mechanism? Analysis of the Application of Current Tools and Proposed Alternatives. \u0026Ouml;ko-Institut e.V. (2016).\u003c/li\u003e\n\u003cli\u003eLo, R. E. \u0026amp; Cong, R. G. How has the Clean Development Mechanism performed? Insights from a meta-analysis. \u003cem\u003ePLOS Climate\u003c/em\u003e \u003cstrong\u003e1\u003c/strong\u003e, e0000046 (2022).\u003c/li\u003e\n\u003cli\u003eWest, T. A. P., B\u0026ouml;rner, J., Sills, E. O. \u0026amp; Kontoleon, A. Overstated carbon emission reductions from voluntary REDD+ projects in the Brazilian Amazon. \u003cem\u003e Natl Acad. Sci. USA\u003c/em\u003e \u003cstrong\u003e117\u003c/strong\u003e, 24188\u0026ndash;24194 (2020).\u003c/li\u003e\n\u003cli\u003eWest, T. A. P., Bomfim, B. \u0026amp; Haya, B. K. Methodological issues with deforestation baselines compromise the integrity of carbon offsets from REDD+. \u003cem\u003e Environ. Change\u003c/em\u003e \u003cstrong\u003e87\u003c/strong\u003e, 102863 (2024).\u003c/li\u003e\n\u003cli\u003eStapp, J. et al.\u0026nbsp;Little evidence of management change in California\u0026rsquo;s forest offset program. \u003cem\u003e Earth Environ.\u003c/em\u003e \u003cstrong\u003e4\u003c/strong\u003e, 331 (2023).\u003c/li\u003e\n\u003cli\u003eBj\u0026oslash;rn, A., Lloyd, S., Brander, M. \u0026amp; Matthews, H. D. Renewable energy certificates threaten the integrity of corporate science-based targets. \u003cem\u003e Clim. Change\u003c/em\u003e \u003cstrong\u003e12\u003c/strong\u003e, 539\u0026ndash;546 (2022).\u003c/li\u003e\n\u003cli\u003eMontgomery, A. W., Lyon, T. P. \u0026amp; Barg, J. No End in Sight? A Greenwash Review and Research Agenda. \u003cem\u003e Environ.\u003c/em\u003e \u003cstrong\u003e37\u003c/strong\u003e, 231\u0026ndash;264 (2024).\u003c/li\u003e\n\u003cli\u003eLong-Term Carbon Offsets Outlook. (2022).\u003c/li\u003e\n\u003cli\u003eMcKinsey \u0026amp; Company. A blueprint for scaling voluntary carbon markets to meet the climate challenge. (2021).\u003c/li\u003e\n\u003c/ol\u003e"}],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":true,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":true,"hideJournal":false,"highlight":"","institution":"","isAcceptedByJournal":false,"isAuthorSuppliedPdf":false,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":false,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"nature-portfolio","isNatureJournal":true,"hasQc":false,"allowDirectSubmit":false,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"","title":"Nature Portfolio","twitterHandle":"","acdcEnabled":false,"dfaEnabled":false,"editorialSystem":"ejp","reportingPortfolio":"","inReviewEnabled":true,"inReviewRevisionsEnabled":false},"keywords":"","lastPublishedDoi":"10.21203/rs.3.rs-9255934/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-9255934/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"\u003cp\u003eVoluntary carbon markets (VCMs) and Article 6 compliance mechanisms draw from overlapping mitigation supply, yet their interactions remain poorly understood. Using a global integrated assessment model, we examine how VCM design choices affect prices, resource transfers to the Global South, and mitigation distribution when voluntary and compliance markets coexist.\u003c/p\u003e\n\u003cp\u003eWe find that VCMs can transfer substantial near-term resources to the Global South ($3–161 billion annually depending on market configuration), but this role diminishes as NDC targets tighten. Design choices matter materially: market sequencing drives a 10–20× price differential, with VCM prices ranging from $2–18/tCO2 when VCMs clear first to $30–287/tCO2 when compliance markets clear first. This “low-hanging fruit” dynamic, where early purchases deplete low-cost mitigation, is real but design-contingent. Authorization rules and market architecture determine whether VCM transactions create additional mitigation or risk double-counting.\u0026nbsp;\u003c/p\u003e\n\u003cp\u003eOur results are illustrative rather than predictive. They suggest that the voluntary-compliance interface deserves deliberate policy attention from host country governments, corporate buyers, and Article 6 negotiators.\u003c/p\u003e","manuscriptTitle":"Voluntary carbon market design shapes outcomes under Article 6","msid":"","msnumber":"","nonDraftVersions":[{"code":1,"date":"2026-04-03 05:22:35","doi":"10.21203/rs.3.rs-9255934/v1","editorialEvents":[],"status":"published","journal":{"display":true,"email":"[email protected]","identity":"nature-communications","isNatureJournal":true,"hasQc":false,"allowDirectSubmit":false,"externalIdentity":"NCOMMS","sideBox":"Learn more about [Nature Communications](http://www.nature.com/ncomms/)","snPcode":"","submissionUrl":"https://mts-ncomms.nature.com/","title":"Nature Communications","twitterHandle":"","acdcEnabled":true,"dfaEnabled":true,"editorialSystem":"ejp","reportingPortfolio":"Nature Communications","inReviewEnabled":true,"inReviewRevisionsEnabled":false}}],"origin":"","ownerIdentity":"025700d0-5648-459d-b019-e2f3429ee049","owner":[],"postedDate":"April 3rd, 2026","published":true,"recentEditorialEvents":[],"rejectedJournal":[],"revision":"","amendment":"","status":"under-review","subjectAreas":[{"id":65491946,"name":"Earth and environmental sciences/Climate sciences/Climate change/Climate-change mitigation"},{"id":65491947,"name":"Earth and environmental sciences/Environmental social sciences/Climate-change policy"},{"id":65491948,"name":"Scientific community and society/Developing world"},{"id":65491949,"name":"Earth and environmental sciences/Environmental social sciences/Environmental economics"},{"id":65491950,"name":"Earth and environmental sciences/Environmental social sciences/Climate-change mitigation"}],"tags":[],"updatedAt":"2026-04-16T12:12:21+00:00","versionOfRecord":[],"versionCreatedAt":"2026-04-03 05:22:35","video":"","vorDoi":"","vorDoiUrl":"","workflowStages":[]},"version":"v1","identity":"rs-9255934","journalConfig":"researchsquare"},"__N_SSP":true},"page":"/article/[identity]/[[...version]]","query":{"redirect":"/article/rs-9255934","identity":"rs-9255934","version":["v1"]},"buildId":"XKTyCvWXoU3ODBz1xrDgd","isFallback":false,"isExperimentalCompile":false,"dynamicIds":[84888],"gssp":true,"scriptLoader":[]}