CARBON crediting programmes will soon have to quantify the uncertainty in their emissions reduction measurements to be seen as credible. The hosting registry will also have to identify users of the carbon credits and what they are retiring the credits for.

These are some of the conditions set by the voluntary carbon market’s key governance body, the Integrity Council for the Voluntary Carbon Market (ICVCM), as it attempts to address overestimation and double-counting issues rampant in the crediting market today. 

These rules, published on Thursday (Mar 29), are in conjunction with the release of its long-anticipated global benchmark for carbon credit quality called Core Carbon Principles (CCP), along with part one of its assessment framework for what could make categories of carbon credits “CCP approved”. Part two is expected in the second quarter of 2023.

ICVCM was established in September 2021 to help the voluntary carbon market scale by enabling participants in the market to more easily identify high-quality carbon credits.

ICVCM was supposed to launch the benchmark governing what a good and acceptable credit looks like last year, but its release was delayed repeatedly as what “quality” means proved to be a major source of contention.

A significant step forward

With Thursday’s launch, the standard should start impacting the voluntary market within 2023. ICVCM said that it would begin assessing programmes around the middle of the year, for the first batch of credits to be labelled as “CCP approved” later in the year.

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In its statement, ICVCM said that the criteria is “a significant step forward for consistent transparency” as it requires programmes to publish comprehensive information in an accessible manner. The goal is for all stakeholders to understand how projects issuing CCP-labelled carbon credits impact emissions, society and the environment.

Under the framework, programmes are required to come up with disclosures of how each project calculates and quantifies its emissions impact, and how it assesses additionality and social and environmental impact. This should include the spreadsheets used by each project to calculate its impact and set a baseline, the governance body noted.

Programmes must also ensure that project developers assess the risk of any negative environmental and social impact, articulate measures to mitigate the impact, and report on progress. These include impact on indigenous peoples and local communities, biodiversity, pollution, human rights, labour rights and gender equality. 

ICVCM said that the details must be captured in validated design documents that are required to be published along with associated monitoring reports provided by the projects.

On top of that, programmes are required to obtain free, prior informed consent from indigenous peoples and local communities and be transparent about the sharing of benefits from the mitigation activity with these parties, it added.

It also stated that forestry projects under Redd+ – a United Nations framework created to guide activities in the forest sector that reduces emissions from deforestation and forest degradation – must also conform to the Cancun safeguards.

Cancun safeguards are a set of seven provisions to ensure that Redd+ initiatives adequately address sensitive issues surrounding such projects, including the rights of indigenous peoples and traditional communities and permanence of achieved Redd+ results.

Agreement might still be a while away, though, as at least one non-profit organisation has pointed that some loopholes remain even with the new criteria.

Carbon Market Watch, which scrutinises carbon markets and advocates for fair and effective climate protection, on Thursday said that the efforts to improve the quality of carbon credits must be accompanied by clear guidelines on how to use them.

“Selling ‘carbon neutral’ goods and services, for example, should not be considered an acceptable use of carbon credits,” it said, listing reasons including the temporary nature of much of the carbon storage involved.

Besides, it promotes a culture among wealthy corporations and countries that they can continue to pollute with impunity rather than slashing their real emissions, it added.

It also pointed out that ICVCM’s criteria include “virtually nothing” on raising the level of transparency of revenues from credit sales. “This is highly problematic at a time when, as we uncovered in recent research, most intermediaries in the voluntary carbon market do not release information on their commission rates and markups,” it said.

Adaptation finance

ICVCM’s criteria also do not have a mandatory requirement for a share of carbon market finance to be channelled to adaptation finance, despite it being a requirement for the market that is being set up under Article 6.4 of the Paris Agreement, it noted.

Article 6.4 refers to the mechanism for trading emission reductions between countries.

ICVCM addressed this by stating that the CCPs would be strengthened over time. It noted that the next version of the CCP will be launched in 2025 for implementation in 2026.

It added that “complex issues” – such as the implications of corresponding adjustments under Article 6 of the Paris Agreement, and whether all projects should make a contribution to the United Nations Framework Convention on Climate Change’s Adaptation Fund – will be considered then.

Mikkel Larsen, the chief executive officer of Singapore-based carbon marketplace Climate Impact X (CIX), which is gearing up for the launch of its spot exchange, sees no immediate impact for its work at this stage.

“It is still early days but when further guidance is released, it will provide valuable additional input to our project curation process,” he told The Business Times.

“We believe that CCP-eligibility will be an important project attribute for buyers,” he added, stating that CIX welcomes all efforts that bring enhanced rigour, standardisation and trust to the carbon market.