For more than a decade, the voluntary carbon market has been defined by a persistent supply surplus. Project developers routinely issued significantly more carbon credits than companies retired, creating structural oversupply and keeping prices low. But 2025 marked a decisive shift. For the first time, several real-world data points show retirements rising sharply while issuances slowed, narrowing a gap that has historically dominated the market.
The change was visible early in the year. Sylvera’s Q2 2025 Carbon Data Snapshot reports that organisations retired 95 million credits in the first half of 2025, the highest H1 retirement volume ever recorded. At the same time, issuance momentum slowed down: project developers issued only 130 million credits in H1 2025, down from roughly 144 million during the same period in 2024, according to Climate Focus’ First Half 2025 VCM Review.
By the third quarter, the trend had solidified. Sylvera’s Q3 2025 Snapshot shows year-to-date retirements reaching 128.15 million credits, ahead of the equivalent point in 2024, while Q3 issuance fell to 63.2 million credits, down from 76.9 million in Q2. This marks one of the narrowest issuance-retirement gaps seen in the past decade.
The broader market context reinforces the shift. Ecosystem Marketplace’s State of the Voluntary Carbon Market 2025 notes that although overall transaction volumes in 2024 dropped by around 25%, retirements remained remarkably stable at roughly 175–180 MtCO₂e. Prices declined only modestly, by about 5.5%, indicating that demand for credible, high-integrity credits held firm even as speculative trading waned.
This article unpacks why 2025 became the year the voluntary carbon market’s balance shifted. We begin by clarifying the mechanics of issuance and retirement and why their relationship matters for market health. We then examine the forces that drove retirements to record highs—ranging from corporate environmental commitments to the tightening of integrity standards—and contrast them with the factors slowing new issuance, including methodology revisions and the phase-out of older project types. From there, we explore how this shift reshaped prices, buyer behaviour, and registry dynamics, drawing on verified data. Finally, we look ahead to 2026 and beyond, assessing whether the market is entering a sustained period of tighter supply or poised for a new wave of high-quality credit generation.
To understand why 2025 marked a turning point, it’s essential to revisit what ‘issuance’ and ‘retirement’ actually represent in the voluntary carbon market—and why the balance between them is a fundamental indicator of market health.
Issuance refers to the creation of carbon credits once a project’s emissions reductions or removals are verified by a registry. These units enter the market as available supply. Historically, supply has been abundant: Verra alone accounted for 78% of all new issuances in 2021, but its share fell to 45% in 2023 and 36% in 2024 as methodologies tightened and new standards emerged. Even so, the overall market typically saw issuances outpace retirements by large margins.
Retirement, on the other hand, is what gives a carbon unit its actual environmental claim. A credit is retired when a company or organisation permanently removes it from circulation to compensate for emissions. This is the core measure of true demand. According to Ecosystem Marketplace’s State of the Voluntary Carbon Market 2025, global retirements plateaued between 2021 and 2024, with roughly 180 million tonnes in 2024, even as market volatility grew.
Because issuance adds supply and retirement consumes it, the gap between the two reveals whether the market is oversupplied, balanced, or tightening. For more than a decade, oversupply defined the market: a growing surplus of unused units accumulated as issuances far exceeded retirements.
In 2025, however, that long-standing gap began to narrow. This compression of the issuance–retirement balance signals a system undergoing structural realignment. Fewer units are entering the market, more are being permanently retired, and demand is gravitating towards higher-integrity projects. The result is a market moving closer to equilibrium—one where the volume of new units created is finally starting to resemble the volume that buyers are more than willing to use.
The sharp rise in retirements in 2025 did not happen in isolation. It reflects a convergence of structural, regulatory, and behavioural shifts shaping how companies use carbon units. The underlying theme is consistent across datasets: organisations are retiring fewer, better units—and they are doing so more decisively than in previous years.
One of the strongest drivers behind the retirement surge is the growing number of companies with formal decarbonisation targets. By mid-2025, nearly 11,000 companies had validated or committed to science-based targets, a dramatic rise that signals widening corporate accountability.
As organisations move from target-setting to implementation, many are turning to carbon units to compensate for unabated emissions. MSCI confirms this behavioural shift: corporate credit use in the first eight months of 2025 was already 10% ahead of 2024, matching the highest levels seen in 2022.
After several years of scepticism and high-profile investigations into low-integrity units, many companies are opting to retire carbon units rather than bank them or engage in speculative buying. Studies highlight this: despite a 25% drop in overall transaction volume, retirements remained stable at ~175–180 MtCO₂e—signalling that units are being bought for use, not for trading.
This behavioural shift is driven not just by reputational risk, but by stakeholder pressure: investors, customers, and regulators increasingly expect companies to demonstrate immediate environmental actions alongside long-term emissions cuts.
This clarity is encouraging buyers to choose vetted units and retire them immediately. Sylvera’s analysis finds that 57% of units retired in H1 2025 held a BB rating or above, compared to 52% in 2024—a clear tilt towards higher-integrity units.
In other words: quality is no longer a niche preference; it is becoming the default for market participants who want assurance that their offsetting actions withstand scrutiny.
In May 2025, the VCMI Scope 3 Action Code of Practice introduced new clarity on when and how companies can use offsets to address value-chain emissions. It limits offsetting to up to 25% of a company’s Scope 3 footprint, but crucially requires these offsets to be high-quality and transparently reported.
For many companies, this was the first authoritative signal that offsets have a legitimate, codified role—so long as they meet strict quality criteria. The result has been a measurable uptick in structured offsetting strategies that include regular retirements rather than end-of-year one-off purchases.
2025 retirements also reflect a qualitative shift. As integrity expectations rise, demand is increasingly directed at project types perceived as delivering clearer, more measurable climate benefits:
This shift is not anecdotal. Sylvera reports that forward prices for premium ARR units climbed to $50+/t, while spot prices rose from $14 to $24 between January and September 2025. Such price signals reinforce that buyers are deliberately choosing units that withstand quality scrutiny and retiring them promptly.
As the gap between issuance and retirement narrowed in 2025, the market began to behave differently. Prices for higher-quality units strengthened, reflecting a shift in buyer priorities towards projects that could demonstrate clear, verifiable climate impact. Even as overall transaction volumes softened, demand concentrated around units that met tighter integrity expectations, signalling that buyers were becoming far more selective.
This quality-driven behaviour changed how organisations sourced units. Companies with established climate targets increasingly favoured nature-based solutions, removals, and household energy projects, while steering away from older, lower-integrity categories. The emphasis was no longer on securing the highest volume at the lowest price, but on ensuring that every retired unit could withstand scrutiny from investors, regulators, and the public.
The market also became more competitive. With more companies actively retiring credits despite subdued trading activity, access to high-integrity projects tightened. Registry dynamics added to this pressure: as Verra’s dominance declined and other standards grew their share of new issuances, buyers encountered a more fragmented landscape that required closer evaluation of methodologies and eligibility rules.
Together, these shifts point to a market that is maturing. The era of abundant, undifferentiated supply is giving way to a more disciplined environment where quality, credibility and strategic alignment matter far more than sheer volume.
The dynamics observed in 2025 suggest a voluntary carbon market entering a more disciplined phase. With retirements trending higher and issuances slowing under stricter methodological and quality requirements, the balance is unlikely to return to the wide surplus that characterised the previous decade. Companies with climate commitments continue to expand their use of units, and new integrity frameworks are reinforcing confidence in high-quality supply. At the same time, many project developers are still adapting to updated standards, meaning new volumes will take time to materialise.
Whether 2026 brings a modest easing in supply or a tighter squeeze will depend on how quickly next-generation projects come online and how rapidly demand from corporate climate strategies continues to grow. Early signals point to a market that will remain quality-constrained, with high-integrity carbon units absorbing the bulk of buyer interest. What is clear is that the voluntary carbon market is maturing: transactions are becoming more deliberate, scrutiny is higher, and the gap between issuance and retirement is finally narrowing towards a more balanced—and ultimately more credible—system.