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April 3, 2023

Integrity Council launches global benchmark for carbon credits

By Seth O'Farrell
Man planting tree_reforestation
The ICVCM’s framework provides criteria for assessing whether carbon credit programmes are eligible for CCPs. (Photo: Ngampol7380/Envato)

The governance body for the voluntary carbon markets has published a global benchmark, the first of its kind, to build trust and liquidity in this space.

The Integrity Council for the Voluntary Carbon Market has established a global benchmark for what it deems to be “high-integrity” carbon credits in a bid to reduce confusion and fragmentation in the VCM.

Central to the council’s new framework are the core carbon principles, which are intended to build trust and unlock investment flows. The ICVCM has also published the first part of its assessment framework, which provides detailed criteria for assessing whether carbon credit programmes are eligible for core carbon principles. The second part is due to be published in the coming months.

ICVCM chief operating officer William McDonnell told Sustainable Views that the publication of the CCPs provide the “north star” to prospective buyers.

“As CCP-approved credits become available over time, this will help not only buyers buy but it will also help market liquidity and enable the market to function better,” he said.

“We’re asking programmes to publish detailed information on each project,” McDonnell explained, citing the calculations for emission impacts, assessment of additionality and ESG risks. “Scrutiny is important for any healthy market and so we’re raising the bar on transparency and disclosure.”

Carbon credit programmes, otherwise known as registries, are bodies such as Verra or Gold Standard, which issue their own methodologies for specific projects.

“We understand that there is a lot of pent-up demand for credits. Ultimately, this is all about building trust and confidence so that more of that [supply] can be unlocked and the VCM can meet its potential as one of the tools in the fight against climate change,” McDonnell said.

The more it grows, the more it is an effective channel to drive capital to developing countries, he added.

CCP-labelled credits

ICVCM said that eligible programmes must ensure project developers assess the risks of any negative environmental and social impacts, articulate measures to mitigate those impacts, and report on progress. These include impacts on indigenous peoples and local communities, biodiversity, pollution, human rights, labour rights and gender equality. 

The council expects to announce CCP-eligible programmes and CCP-approved categories later this year, and this will give rise to the appearance of CCP-labelled credits in the market. Programmes will also be able to tag both existing and new carbon credits with the CCP label, provided that the category has also been approved by the ICVCM.

Carbon credit projects have recently come under increasing scrutiny, such as the Northern Kenya Grassland Carbon Project, which was found to have “serious failings” by human rights group Survival International.

McDonnell said that the ICVCM’s assessment of additionality and “robust quantification” should address issues of this kind, but he added: “We’re not saying that [potential project failings] are impossible, but rather that they’re much less likely.” He also stressed that the council will not “audit individual projects” but is an umbrella organisation with a purview over carbon credit programmes.

Amy Bann, senior vice-president for supply and ecosystem at Xpansiv, a global marketplace for environmental, social and governance commodities, said that the CCPs are “an important effort to bring greater clarity and standardisation to the voluntary carbon markets”.

When asked what challenges remain for the VCM, Bann said that there are “macroeconomic headwinds beyond carbon markets that are impacting the VCM, along with in-sector factors including a perception of a fragmented landscape”.

“Nonetheless, our data is signalling positive, longer-term indicators: market participants continue to increase; futures and open interests are strong; and corporate ESG targets remain steady,” she added.

Gold Standard chief technical officer Owen Hewlett wrote on LinkedIn that he saw the latest announcement less as a “significant leap” for the market but as “a consolidation of useful norms”.

The Taskforce on Scaling Voluntary Carbon Markets, a precursor to the ICVCM, wrote in its 2021 report that, in order for the VCM to be expanded, “a step change in the scale of supply and demand of high-quality, additional, verifiable and traceable carbon credits will be critical”.

 

A service from the Financial Times