Greater transparency the major win from Integrity Council proposals
BeZero shares the goal of the IC-VCM and Core Carbon Principles to raise standards of integrity and promote quality across the VCM.
Raised standards of transparency and disclosure are the ‘lowest hanging fruit’ within the IC-VCM draft: providing a high return for minimal disruption.
Where the IC-VCM can raise the bar for information quality in the VCM, ratings will complement this providing a more detailed understanding of risk and value in the market.
The Integrity Council for the Voluntary Carbon Market (IC-VCM) and its proposed Core Carbon Principles (CCPs) seek to make an important contribution to raise standards of quality and integrity across the VCM. This purpose is very much aligned with BeZero’s own mission: to provide ratings, research and analytics that help market participants assess quality and manage risk; that help to build and scale the VCM; and that ensure the VCM contributes positively to global climate change mitigation goals.
Transparency: the low hanging fruit
From an analytical perspective the major positives in the draft IC-VCM relate to stronger levels of project disclosure, increased rigour in the quantification and audit of carbon accounts, and greater standardisation and transparency across carbon-crediting programs. In combination, these represent the ‘lowest hanging fruit’ within the draft: providing a high return for minimal disruption.
Mandating much stronger minimum standards of disclosure is by far the most important requirement of the draft CCPs. This addresses a key flaw in the VCM as it exists today. BeZero considers the provision of basic project information (e.g. on the project location and proponents) to be essential for all stakeholders and the wider public to gain confidence in the VCM. Moreover, much of the proposed disclosure requirements should not be onerous for developers or standards bodies to implement.
Credible, consistent and comparable data
Ensuring increased rigour in the quantification and auditing of emissions reductions is equally welcome. BeZero’s analytical approach seeks to categorise the carbon accounts of all VCM projects using a standardised data template providing clarity on the building blocks of credit issuance including baselines, project emissions and adjustments for leakage and risk buffers. The IC-VCM proposals are aligned with this approach which we welcome.
Increasing standardisation across registries and programs is another important objective to help scale the VCM. Such efforts represent relatively quick wins. In particular, BeZero would like to see greater consistency across registry data and data reported within project documentation; and to see greater transparency around the calculation and management of non-permanence risk buffer pools.
A trade-off between what's precise, and what's workable
The challenge the CCPs face is around acceptance from existing stakeholders. This is because additional monitoring, reporting and verification (MRV) requirements are viewed as costly, onerous and/or impractical. This could be the case for example with proposed new MRV requirements for sustainable development impacts and safeguards.
The nature of the CCP eligibility label means there is a trade off between achieving an accurate assessment and one that is efficient and workable. BeZero is concerned that in some instances the assessment framework and procedures are overly prescriptive and detailed. Specific criteria within Additionality (e.g. regarding regulation) lack sufficient nuance to provide fair outcomes in all cases. The CCPs may achieve broader acceptance and adoption if the assessment procedure follows a mostly top down approach.
A race to the top?
As a carbon credit rating agency, BeZero’s role is very complementary to that of the CCPs and IC-VCM. Both have a role to play in strengthening the information architecture that the VCM requires to achieve its potential. By their nature, BeZero ratings incorporate a much more detailed due diligence of project specific information that is beyond the scope of the IC-VCM or any similar integrity tag.
Ratings and the IC-VCM can each reinforce their role as promoters of quality in the VCM. By emphasising higher minimum requirements for disclosure, monitoring and reporting at a project level along with increased standardisation and transparency at a program and registry level, the CCPs can help to both raise standards across the VCM and reduce information asymmetry. In turn, rating agencies will improve understanding of risk and value in the market, encouraging a race to the top from all stakeholders.