When a company makes a net-zero goal, it commits to emit less carbon dioxide (CO2) than it removes from the atmosphere by a specified date. Many companies first prioritize reducing emissions from their value chains and then look to fund projects to offset any remaining emissions. Voluntary carbon markets (VCMs) facilitate the purchase and sale of emissions reduction credits for these projects, which come in the form of carbon offsets and renewable energy certificates (RECs).

In recent years, stakeholders, including environmental NGOs, have raised concerns about the integrity of offsets and RECs, pointing out that their quality is highly variable and that many projects may not reliably cut emissions. To empower investors and consumers to understand more about offsets and RECs that companies buy, the Securities and Exchange Commission (SEC) and the state of California will require companies to disclose information about their participation in VCMs.

This analysis reviews the new VCM disclosure requirements, explains the SEC’s and California’s requirements, considers how the regimes’ intended audiences and purposes may differ, and presents a summary table that compares the two disclosure regimes. For the latest SEC disclosure regulation updates visit our financial regulation tracker page.