It is urgent to scale up private sector finance for climate action, but the current state of the voluntary carbon market is not fit for purpose. The TSVCM should first focus on addressing the serious quality shortcomings before the market can be scaled up.
In particular, the future governance body of the TSVCM will be highly important. No active market participant or industry associations should be involved or represented on this body. Members of the expert panel should not be requested to support the objective of scaling up the system, because their first priority should be to ensure quality. The proposed governance body will also need to adopt clearer rules on how carbon credits will be assessed, and how any “quality label” attributed to a credit could be withdrawn ex-post.
Further to this, assessing the quality of credits through an assessment of methodology types is not appropriate because there are many different methodologies, and projects, under a given methodology type, and therefore the high-level assessment will not be able to capture specific problems. Most often, the devil is in the details.
There is a need for reviewing some of the basic elements of carbon markets. For example, the setting of baselines should be taken out of the hands of project developers in cases where there is a high risk of gaming, e.g. in most nature-based projects. In addition, rules around permanence must be strengthened, to ensure that monitoring for reversals continues beyond a crediting period. Ideally, forestry credits should not be used for compensation at all.
Finally, the TSVCM should not ignore the issue of double counting, and simply marking as a co-benefit whether or not a credit is associated with the application of a corresponding adjustment by the host country is not sufficient.