The following is an article originally published by Carbon Herald on December 17, 2025.

By Roxby Hartley, Ph.D., Climate Risk Director, EcoEngineers

The interplay between regulatory frameworks and voluntary carbon markets (VCMs), systems in which organizations and individuals buy carbon credits to offset their greenhouse gas (GHG) emissions beyond regulatory requirements, presents both challenges and opportunities for climate action. As political winds change and regulatory landscapes shift, voluntary markets are increasingly serving as effective bridges, helping maintain momentum in emissions-reduction efforts and providing significant risk mitigation for climate projects.

VCMs can effectively fill regulatory gaps, particularly during periods of policy uncertainty or regulatory rollbacks, while providing stability in valuation.

The Shifting Landscape of Climate Regulation

Climate policy exists in a state of constant flux. While the global trajectory has historically pointed toward increased regulation of GHG emissions, recent developments demonstrate that this path is rarely linear and increasingly unpredictable. Administrative changes, legal challenges, and shifting political priorities can create significant uncertainty in regulatory frameworks and project value. This regulatory volatility presents a particular challenge for climate projects, such as renewable energy installations, reforestation efforts, and methane capture projects, which often require long-term planning and substantial upfront investment. However, this challenge also presents an opportunity for VCMs to provide stability and maintain progress toward emissions reduction goals when regulatory frameworks are not reliable.

Regulatory surplus, a key concept in what is known as carbon market additionality, traditionally refers to emission reductions that exceed the regulatory requirements. However, in today’s increasingly volatile policy environment, this concept becomes more complex. When regulations become uncertain or face sudden rollbacks, the definition of what constitutes “surplus” becomes less concrete. Moreover, relying on income from a regulatory structure carries an increased risk rating, which grows over time.

Financial and Regulatory Additionality Arguments

A unique opportunity exists in today’s carbon markets, particularly for U.S.-based projects, due to the policy uncertainty that still exists even after the passage of the One Big Beautiful Big Act (OBBBA). In addition, the White House initiated a withdrawal from the Paris Agreement and revoked established climate commitments. These reversals create opportunities to strengthen additionality claims:

• Enhanced Regulatory Surplus Arguments: The current regulatory uncertainty provides project developers with stronger claims of regulatory surplus. When regulations are in flux or face potential rollbacks, projects can more easily demonstrate they exceed what would otherwise be required by law.
• Clearer Financial Additionality Demonstration: The combination of policy hostility and regulatory uncertainty creates investment conditions that strengthen financial additionality arguments. It is particularly valuable for projects with marginal economics that struggle to demonstrate additionality in more stable policy environments. With elevated risk premiums demanded by investors due to policy uncertainty, projects can more convincingly demonstrate that carbon credit revenue is necessary to overcome investment hurdles that would otherwise prevent implementation. One recent example is the postponement of the International Maritime Organization’s (IMO) Net-Zero Framework, following opposition from the U.S. and Saudi Arabia to the proposed carbon-fee system.

The Temporal Value of Voluntary Markets

VCMs demonstrate value in their ability to act quickly and maintain continuity across regulatory changes. While government regulations often face lengthy implementation timelines and potential delays, voluntary markets can respond more rapidly to emerging opportunities by:

• Earning Benefits Now: Voluntary markets enable projects to begin generating verifiable emission reductions while regulatory frameworks are in flux.
• Grandfathering Methodologies: Typically, methodologies incorporate provisions that allow projects to continue using their original methodologies for extended periods, typically up to 10 years. This grandfathering approach provides stability for project developers and investors.
• Preparing For the Future: By establishing verified emission reductions ahead of regulatory requirements, projects can build track records that may prove valuable under future regulatory scenarios (such as the European Union’s Carbon Removal Certification Framework (CRCF), now adopting carbon dioxide removal methodologies).

Future Perspectives: The Evolving Role of Voluntary Markets

As climate policy continues to evolve, VCMs are likely to remain important, even as regulatory frameworks expand. Their ability to innovate, respond quickly to changing conditions, and maintain continuity during political transitions suggests an enduring role in global climate action.

Looking forward, VCMs may increasingly serve as testing grounds for new methodologies and approaches, helping refine practices that regulatory systems could later adopt. This innovation function complements their role in maintaining progress during regulatory uncertainty.

Key Takeaways

• Regulatory uncertainty creates unique opportunities to strengthen regulatory surplus arguments.
• Policy volatility establishes clear financial barriers that enhance additionality claims.
• Projects can more easily demonstrate that they exceed common practice in unstable policy environments.
• Regulatory reversals provide concrete evidence to support both regulatory and financial additionality arguments.

Conclusion

The current regulatory volatility presents a significant opportunity for project developers to strengthen additionality claims in VCMs. Far from creating barriers, the unpredictable policy environment establishes arguments for both regulatory surplus and financial additionality. When regulations can change abruptly or be reversed entirely, projects can more convincingly demonstrate they exceed regulatory requirements. Similarly, the legitimate investment barriers created by policy uncertainty strengthen financial additionality arguments by providing clear evidence that carbon credit revenue is necessary to overcome these barriers.

About the Expert

Roxby Hartley, Ph.D., is the Climate Risk Director at EcoEngineers. With more than a decade of experience in scientific research, development, and management of low-carbon energy substitutes, Dr. Hartley combines a passion for environmental issues with deep scientific knowledge and a logical ability to analyze regulations for inconsistency and strategic opportunities. He ensures client compliance within regulated markets such as the Renewable Fuel Standard (RFS), California’s Low Carbon Fuel Standard (CA-LCFS), voluntary carbon markets (VCM), and credit monetization requirements. Dr. Hartley’s work applies scientific principles, analytical skills, and critical thinking toward innovative and customized solutions to advance the development and growth of the low-carbon fuels industry.

For more information about our VCM services and capabilities, contact: 

Roxby Hartley, Ph.D., Climate Risk Director | rhartley@ecoengineers.us

About EcoEngineers

EcoEngineers, an LRQA company, is a consulting, auditing, and advisory firm exclusively focused on the energy transition and decarbonization. From innovation to impact, EcoEngineers helps its clients navigate the disruption caused by carbon emissions and climate change. Its team of engineers, scientists, auditors, consultants, and researchers live and work at the intersection of low-carbon fuel policy, innovative technologies, and the carbon marketplace. For more information, visit www.ecoengineers.us.