25 July 2023
Crunch time for the Core Carbon Principles
Director of Policy & Markets
The core challenge of the voluntary carbon market (VCM) is ensuring that carbon credits are high quality - in other words, they deliver real emissions reductions.
The Integrity Council for the Voluntary Carbon Market (ICVCM) was set up to address this. In March, after an extended consultation with businesses, NGOs and others, it introduced the Core Carbon Principles (CCPs) which aims to set a benchmark for credits in the VCM.
In the wake of recent media criticism of carbon credits and a slowdown in growth of the VCM, the new global initiative marks a possible turning point for the market. Could the CCPs help to address the carbon quality challenge and return the market to growth?
It is too early to tell as the CCPs are only half complete. The first part of the CCPs assessed accreditors, setting out governance and other requirements and positioning the body as a de-facto regulator for the standard bodies.
The second part, expected this week, will set out requirements for the methodologies that determine how carbon credits are produced. This will include carbon efficacy issues such as how baselines are set and how risk factors such as additionality and non-permanence are determined.
Recap: the Core Carbon Principles
The documents released to launch the Core Carbon Principles are extensive. We’ve summarised the key points below.
What are the CCPs?
The CCPs are a set of ten principles for the development of high-quality carbon credits. These principles are intended to provide thresholds for the environmental and social integrity of carbon credits.
What will the CCPs assess?
The CCPs cover aspects across governance, emissions impact, and sustainable development. The CCPs will assess standards bodies and methodologies but they will not assess individual projects. The initiative also includes requirements for verification bodies, which provide third-party assessment during the accreditation process. Only carbon credits which meet the requirements of both assessments will be labelled as ‘CCP-eligible’. CCP-eligible carbon credits can also be tagged with CCP attributes, which refer to the co-benefits delivered by the project.
How will the CCPs change the market?
If standards bodies want to apply for the CCP label, they will have to ensure they - and the methodologies they use to produce carbon credits - meet the criteria set out by the CCPs. Once a standards body is approved, credits issued under specific, approved methodologies will be awarded a CCP label. If the initiative is successful at providing a new benchmark for the sector, CCP eligible credits will become integrated in other market initiatives, such as the VCMI, and demand for these credits will increase.
What happens next?
So far, the ICVCM has released the 10 principles and criteria for the assessment of standards bodies. In the coming days they are expected to release criteria for carbon credit methodologies. This will address aspects such as baseline setting, additionality and non-permanence.
How can the CCPs maximise impact?
The CCPs mark a significant opportunity to improve confidence in the VCM, but there are ongoing challenges to ensuring they build a sustainable and resilient market. Ahead of the publication of part two of the CCPs this week, here are four ways in which the CCPs can ensure they are a success.
CCPs should advocate for project-level assessment
The CCPs represent an important step in raising the bar for carbon credit projects. But as market participants know, selecting a project type or methodology does not guarantee project quality. Media and academic criticism of the sector boils down to how individual projects perform and in turn, buyers care about project impact - as well as the risk this has on their reputation.
A sustainable solution for the market needs to acknowledge past failures and anticipate future weakness. CCPs could help to address this by acknowledging the importance of project-level assessment in their guidance. Market innovations such as ratings are one way to do this.
The ICVCM must be transparent and accountable
By its own admission, the ICVCM wants to act as a regulator in the market, but unlike a government regulator, market players have to opt-in to its approach. To win buy-in, the ICVCM needs to have robust and transparent governance processes to ensure accountability. Encouragingly, the organisation has indicated it is willing to adopt an open approach, but there is currently a lack of clarity on a range of issues. This includes setting out clear procedures for assurance and monitoring of programs and methodologies, and specifying timeframes for reviewing carbon credit categories. While the ICVCM will review programs on the receipt of a complaint, they do not specify regular review periods or exact steps taken to independently carry out monitoring activities. Getting these measures right is essential for the success of the initiative.
The CCPs must work for the Global South
To reach net zero, substantial climate financing is needed in the Global South, yet there is a risk that, as requirements are modernised, significant carbon reduction opportunities could be excluded from the CCP framework. The ICVCM should build on its impressive engagement to date to ensure that the new requirements are not overly prescriptive, particularly for developing countries. As part of releasing the new standard, it should assess what impact the new guidelines are likely to have on project development in developing countries and work with other partners to ensure there are measures in place to build capability to improve access to CCP eligibility over time.
The CCPs must require greater information disclosure
The CCPs need to ensure information disclosure at the program, registry, and project levels. It is reassuring to see that projects should report emissions impact, however, this needs to go further and consider risk buffer usage, baselining data, and thresholds for permanence. The use of standardised templates across the VCM will enable the market to become more efficient, helping organisations - from NGOs to rating agencies - to scrutinise the market and build confidence over time.
Solutions to the challenge of carbon integrity must be sustainable and must learn from the failures of the past. The CCPs could play an important role in the future of the voluntary carbon market, but to do so they will need to address the concerns raised above. We look forward to continuing to work with the ICVCM on this challenge in the months ahead.
Get in touch to learn more about carbon ratings, or to request a demo of the BeZero Carbon Markets platform: firstname.lastname@example.org