A new global guide aimed at helping governments and financial authorities test and refine carbon market regulations has been launched.

The Clean Cooking Alliance (CCA) and the Voluntary Carbon Markets Integrity Initiative (VCMI) released the guide to support the establishment of regulatory frameworks that balance financial innovation, environmental integrity and risk protections for investors and consumers.

They developed the guide on the use of regulatory sandboxes, a practical tool that allows governments to trial regulatory approaches to carbon finance before committing them to law.

Carbon markets hold significant potential for financial innovation and growth, with voluntary carbon markets projected to reach $5 billion (£3.76bn) – $20 billion (£15.1bn) by 2030 and $60 billion (£45.2bn) – $270 billion (£203bn) by 2050. 

However, carbon markets are constrained by structural challenges such as inconsistent credit quality, limited transparency, high transaction costs and regulatory uncertainty, undermining market confidence and limiting the flow of capital to high-impact climate mitigation projects.

Mark Kenber, Executive Director of VCMI said: “Carbon markets hold significant opportunities for climate-positive growth in emerging markets and developing economies, but accessing growing demand for carbon credits requires specialist knowledge and tailored policies and regulations that have been tested in real world contexts.

“This guide provides policymakers with a transformational tool to drive innovation in carbon markets, while upholding environmental and social integrity through robust oversight. This can help EMDEs [Emerging Markets and Developing Economies] to accelerate credible climate finance solutions and position themselves as investment-ready sources of high-quality carbon credits.”