The Crucial Role(s) of Integrity in the Voluntary Carbon Market
Integrity is currently the linchpin of the voluntary carbon markets (VCMs), a crucial factor due to its direct impact on mobilising urgently needed finance for emission reduction initiatives.As global warming projections align with a concerning 2.6°C increase by 2100 (source: IEA - International Energy Agency), the urgency for effective solutions has never been more pressing. Within this challenging climate landscape, a high-integrity voluntary carbon market emerges as a vital instrument, potentially accelerating the shift towards the coveted 1.5°C pathway.
But what establishes this so-called "high-integrity" within the carbon market?
The answer lies, of course, in the meticulous application of standards and registries, that do their best to provide the most robust framework to certify quality carbon credits. This evidence is then rigorously evaluated by a third-party audits—known as Validation/Verification Bodies (VVBs)- to ensure all standards are precisely met, forming a basis for real transparency and effectiveness in carbon offsetting.
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However, we notice that ensuring true integrity requires an additional layer—robust frameworks and high-level accreditation, establishing clear guidelines for accountability and Integrity for standards.
Today, the VCM is bustling with initiatives aimed at ensuring integrity, slowly but surely shaping more and more quality initiatives. On both the supply and demand side, these initiatives generally uphold similar values, yet they distinguish themselves through unique focuses or methods in providing guidance and accreditation.
Let's have a deeper look at the key regulatory frameworks.
The International Carbon Reduction and Offset Alliance - ICROA
For over ten years, the International Carbon Reduction and Offset Alliance (ICROA) has played a pivotal role in shaping the voluntary carbon market. Operating under the International Emissions Trading Association (IETA), ICROA has established itself as a beacon of quality assurance and a guide for best practices in emissions reduction and the utilisation of high-quality carbon credits.It stands as a highly renowned and rigorous framework within the voluntary carbon market's benchmark for offsetting practices. Proof is, in 2024 this reputation has attracted over 20 new programs seeking ICROA's endorsement, adding to the 15 programs already under its wing.
ICROA's influence extends through its comprehensive framework, designed to ensure responsible corporate climate action. This framework emphasises the integrity of carbon credit usage, the quality of the carbon credit supply, and the delivery of impactful results to foster greater environmental ambition.
At the heart of ICROA's operations is its Code of Best Practice, which accredits exemplary practices in greenhouse gas (GHG) emissions reduction and the strategic use of high-quality carbon credits for offsetting. With the voluntary carbon market (VCM) growing and changing, ICROA's robust and flexible standards are more crucial than ever. Through its annual review, ICROA keeps pace with legislative changes, market shifts, and the evolving needs of the VCM, as evidenced by its latest Code of Best Practice released in February 2024.
Additionally, ICROA's Carbon Crediting Endorsement Procedure evaluates the thoroughness of Standards and Registries for inclusion in its Code of Practice. This evaluation, carried out by independent third-party assessors, scrutinises aspects such as independence, governance, registry systems, validation processes, carbon crediting principles, and environmental/social impacts, ensuring that endorsed programs meet the highest standards of quality and impact.
ICROA released a new procedure for standards endorsement in late 2023, aiming to answer the credibility challenges that the VCM faced in 2022 and 2023 and bring more rigor.
CORSIA - The Carbon Offsetting and Reduction Scheme for International Aviation
CORSIA, an acronym for Carbon Offsetting and Reduction Scheme for International Aviation, is a global initiative orchestrated by the International Civil Aviation Organization (ICAO), a United Nations specialized agency. While fundamentally linked to the aviation industry, it plays a critical role in the Voluntary Carbon Market (VCM), notably by driving demand for premium carbon credits.CORSIA represents a crucial market-based strategy to mitigate emissions from international aviation. Aircraft operators with yearly emissions exceeding 10,000 tonnes of CO2 are mandated to both monitor and disclose their emissions and to purchase carbon credits to offset any amount surpassing their 2019 emission levels.
The scheme sets specific offsetting requirements for the aviation industry and delegates the responsibility of meeting these requirements to airlines. The establishment of the Technical Advisory Body (TAB) by ICAO plays a key role in ensuring the eligibility and integrity of carbon offset programs under CORSIA.
Following its pilot phase from 2021 to 2023, CORSIA is now advancing into a more rigorous phase from 2024 to 2026. The commencement of CORSIA's first operational phase from January 1 2024, marks a significant milestone for the aviation sector and is expected to significantly influence the dynamics within the Voluntary Carbon Market (VCM).
The Integrity Council for the Voluntary Carbon Market (IC-VCM)
The younger Integrity Council for the Voluntary Carbon Market (IC-VCM) is also taking significant steps to improve the carbon credit market by setting new, high-quality standards and benchmarks.More oriented on the supply side (how credits should be certified), they have establish a collaborative approach with a wide range of industry stakeholders to develop these standards, encapsulated in what are called the Core Carbon Principles (CCPs). These principles define the criteria for what makes a carbon credit high-quality and determine which programs and methodologies qualify.
Note that the IC-VCM's role goes beyond just setting these standards; it also includes overseeing their implementation and ensuring that organisations adhere to them. Importantly, the ICVCM doesn't evaluate individual projects. It assesses the broader programs and the categories of credits, looking at the type of environmental activity and the methods used to achieve it. Credits must meet the CCP standards at both the program and category level to be considered eligible.
Recently, the ICVCM announced it started evaluating more than 100 active carbon credit methodologies to see if they comply with the CCP's strict requirements. The organization plans to announce its first set of decisions by the end of March, marking a crucial step in its effort to make the carbon credit market more reliable and transparent.
THE EMERGING ONES
VCM Integrity Initiative (VCMi)
The younger Voluntary Carbon Markets Integrity Initiative (VCMI), is also has taking a significant stride to ensure the integrity of the voluntary carbon market.Mainly focused on the demand side and with a name very similar (and confusing let’s admit) to IC-VCM, this additional non-profit organization has introduced the Claims Code of Practice, setting a benchmark for companies wishing to make responsible and credible assertions regarding their carbon credit usage. To qualify for a VCMI-approved claim, organizations must commit to a science-based net-zero target and adhere to a strict mitigation hierarchy.
Simultaneously, VCMI is making waves with the launch of the VCM Access Strategy Toolkit. This innovative toolkit is designed to assist countries in engaging with voluntary carbon markets (VCMs) in a manner that not only maintains high integrity but also supports their national climate objectives and promotes economic prosperity.
In their latest development, VCMI has unveiled a beta version of a new claim known as "Scope 3 Flexibility." Scheduled for finalization in the third quarter of 2024, this groundbreaking claim will enable companies to offset up to half of their scope 3 emissions using carbon credits. This move is part of VCMI's broader vision that anticipates the phased reduction of carbon credit reliance to zero by 2035, or within a decade, underlining the principle of "whichever Scope comes first."
CARBON CREDIT QUALITY INITIATIVE - CCQI
Founded by the Environmental Defense Fund, World Wildife Fund (WWF-US) and Oeko-Insitut , CCQI offers a free, user-friendly tool to score different types of carbon credits against seven quality criteria. Compared to IC-VCM for instance, it has a focus on environmental and social impacts.Its scoring system ranges from 1 to 5, with higher scores indicating a higher confidence that a carbon credit meets specific quality objectives. For each criterion or sub-criterion, their assessment methodology identifies which of these factors are most significant for carbon credit quality, and then evaluates the criterion or sub-criterion at these levels.While this initiative only publishes scores for types of carbon credits, the methodology can also be applied to individual projects.
Integrity in the Voluntary Carbon Market is essential and a collective duty that demands ongoing vigilance and teamwork. With the rising demand for carbon credits, the critical need to guarantee the VCM's reliability and efficiency becomes more evident. By committing to transparency, following established standards, embracing technological progress, and working together, we can strengthen the VCM's base and contribute significantly to the worldwide effort to combat climate change.
Sources :IEA - International Energy Agency
https://www.icao.int/environmental-protection/CORSIA/Pages/default.aspx
https://vcmintegrity.org/vcmi-claims-code-of-practice/
https://carboncreditquality.org/
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