The Integrity Council for the Voluntary Carbon Market’s latest guidelines provide a set of much-needed incremental improvements but fail to raise the quality of carbon credits sufficiently and leave too much wiggle room to truly tackle the climate crisis. The ICVCM has the opportunity to clear up the loopholes and ambiguities when it issues its first assessments of carbon market programmes.
Today, the Integrity Council for the Voluntary Carbon Market (ICVCM) published its final rules that are intended to separate the wheat from the chaff in the voluntary carbon market. The ICVCM’s assessment framework and broader package of rules and guidance have been highly anticipated by carbon market actors who hope it will restore trust and confidence in the market by encouraging buyers to purchase higher quality credits and raise the carbon price.
Although the framework could filter out some of the worst credits on the market, it falls short of setting the high bar for effective climate action (often referred to as ‘environmental integrity’) that buyers and observers so desperately need. Overall, many buyers will be left with a sense of uncertainty as the assessment framework leaves many questions unanswered regarding the eligibility of projects on the market.
“The ICVCM is slowly pushing the market in the right direction. But small incremental changes are not enough to curb the current trend in which the climate impact of low-quality credits is exaggerated,” said Gilles Dufrasne, policy lead on global carbon markets at Carbon Market Watch.
The ICVCM seems to be pursuing a strategy of incremental progress. While this is too slow at a time of climate emergency, it does push the VCM forward with some meaningful improvements, as was the case with the first release earlier this year.
For example, the assessment framework provides good requirements on the robust quantification of emission reductions and removals, for example by strengthening rules to reduce the likelihood of overestimating activities’ impacts.
Too much wiggle room
The eligibility of specific activities remains unclear, including for ‘Reducing emissions from deforestation and forest degradation’ (REDD+) projects which have been the subject of controversy due to recent revelations that many projects are generating “phantom credits”, or for renewable energy and cookstoves projects which have also faced criticism for their exaggerated claims.
That is because many sections of the framework proposed by the ICVCM include a provision for programmes to provide an “explanation” to justify how their different rules are equivalent to the requirements of the ICVCM, which opens the door to potential misuse. How many programmes might make use of this flexibility and how these “explanations” will be treated by the ICVCM when assessing eligibility remains unclear.
A permanent problem
The ICVCM’s most obvious weakness lies in its treatment of activities that rely on the storage of carbon in non-permanent sinks, such as forests. The requirements for permanence are not in line with scientific evidence that carbon dioxide in biological systems and CO2 released from the combustion of fossil fuels are not equivalent or interchangeable.
In addition, exceptions have been approved specifically to make these rules even weaker for Jurisdictional REDD+ (J-REDD) programmes, which are regional or national initiatives that receive carbon credits for claimed reductions in deforestation. For example, while ICVCM guidelines state that all activities at risk of losing the carbon they store must commit to monitoring and compensating for any releases of stored carbon for at least 40 years after they receive their first carbon credit, J-REDD initiatives are exempted from such monitoring obligation.
In addition, programmes are given a high level of flexibility in determining how many credits a project must contribute to a buffer pool to insure against the risk of reversal. Projects should be required to use either a fixed 20% contribution rate, or to contribute a share of credits that is commensurate with the risk of reversal during that project’s monitoring and compensation period, i.e. a minimum of 40 years. As a comparison, the VCS, the largest issuer of REDD+ credits to date, requires measuring the reversal risk over a 100 year period, not just 40 years.
“The ICVCM requirements on permanence are not only weak and scientifically unsound, they are also below best practice in the market, and include specific exemptions for J-REDD that are even weaker than CORSIA, the UN’s inadequate carbon market for aviation,” said Inigo Wyburd, policy expert on global carbon markets at Carbon Market Watch. “This is a big disappointment, as the market urgently needs a course correction to ensure that the long-term impact of CO2 emissions are not incorrectly compensated for with short-term parking of carbon in natural ecosystems.”
Another weak point of the assessment framework is the absence of meaningful requirements for activities to have a positive effect on the Sustainable Development Goals (SDGs), or even to avoid harm through the implementation of robust safeguards. Many activities will only need to demonstrate compliance with the existing and weak requirements set by CORSIA.
The VCM is still missing a strong regulator
Overall, the ICVCM is stopping short of sending a clear signal that a large share of the market is of insufficient quality to receive its label. As it starts vetting programmes and activity types, it will become clear whether ICVCM is willing to take concrete steps and live up to its motto of “Build integrity and scale will follow”.
“The coming months will be the ICVCM’s most important test so far. We will see how far it is willing to go to exclude problematic activities from eligibility under its label,” emphasises Dufrasne.