Two leading international efforts to improve the integrity and accountability of corporate carbon offsetting programs have joined forces, unveiling plans to launch a series of new voluntary carbon market standards throughout 2023.
The Integrity Council for the Voluntary Carbon Market (ICVCM) and the Voluntary Carbon Markets Integrity Initiative (VCMI) announced a joint commitment, as they pledged to help ensure firms are able to invest in CO2 offset projects that deliver strong environmental outcomes and are backed by robust accountability and transparency mechanisms.
The two organizations plan to more closely coordinate their work and resources to define best practice and credibility with regards to both the use and sourcing of carbon credits by companies, while stressing that firms should prioritize decarbonization efforts ahead of purchasing carbon offsets, they said.
The move follows long-standing criticism of the carbon offset market in recent years, amid reports some carbon credit projects have not delivered promised emissions reductions and may have even resulted in environmental and social harms. As a result, many firms have become increasingly concerned about the reputational risks of investing in carbon credits, even as they maintain that so-called negative emissions projects have an essential role to play in ensuring net zero targets are met.
Both the ICVCM and the VCMI are among a host of initiatives established in recent years to try to improve standards, transparency and accountability across the market, in the hope that more robust mechanisms for ensuring projects deliver promised emissions savings and carbon removals could help catalyze billions of dollars of much-needed private investment in climate and environmental projects.
However, the proliferation of standards has fueled confusion in some quarters over how businesses can best ensure the projects they fund are credible and are adhering to best practices.
The move follows long-standing criticism of the carbon offset market in recent years, amid reports some carbon credit projects have not delivered promised emissions reductions and may have even resulted in environmental and social harms.
As such the ICVCM and VCMI announced they plan to jointly release new standards and guidance in 2023 and beyond, which they stressed would adhere to and align with existing, well-established corporate climate guidelines such as the Greenhouse Gas Protocol, the Science Based Targets initiative, CDP's reporting platform and the We Mean Business Coalition's "4As of Climate Leadership" guidance.
New convergent industry standards due to be launched this year include the VCMI Claims Code of Practice, due out next week, as well as the ICVCM Core Carbon Principles (CCP) Category-level Announcement expected this summer. The first assessment decisions and labels for CCP-approved carbon credits are expected to be announced later in 2023.
"We have a shared vision of end-to-end high integrity throughout the voluntary carbon market, from the supply of credits, to the markets they trade in, and ultimately how they are used," said Annette Nazareth, chair of the governing board of the ICVCM. "We are joining forces to create a high-integrity voluntary carbon market that delivers real impact at speed and scale. By building an effective, trusted market, we can unlock investment and exponentially increase the positive impact it creates."
Several figures already sit on the board of both initiatives, which have been in close contact since both began their work.
ICVCM was born out of the Mark Carney-led Taskforce on Scaling Voluntary Carbon Markets, which had originally set out to rapidly build a $100 billion carbon offset market after its high-profile launch at COP26 in Glasgow.
However, amid concerns over the environmental credentials of many offsets traded on the voluntary carbon market, the former Bank of England governor's Taskforce disbanded in 2021 and instead turned its focus towards improving the integrity and standards in the market so as to help scale up levels of finance and trading.
As such, the ICVCM was set up in its wake, with a remit to develop standards and enhance transparency over carbon offset projects themselves, as well as plans to establish enforcement powers to tackle bad actors in the market. It brings together scores of global experts, advisers and board members, including Carney as well as several Indigenous Peoples and local community representatives.
The VCMI, meanwhile, is focused more on the demand side of the carbon credit market through the development of standards to improve the integrity of the claims companies and organizations can make when investing in CO2 credits.
The ICVCM and VCMI said they aim to build trust among market participants as well as other key stakeholders, including corporates, investors, governments, civil society, Indigenous peoples and local communities in emerging markets.
Established in 2021, the VCMI is led by co-chairs Rachel Kyte — former CEO of the UN Sustainable Energy for All initiative and former vice president of the World Bank Group — and Tariye Gbadegesin, managing director and CEO of ARM-Harith Infrastructure Investment Ltd.
WWF International's global climate and energy lead Manuel Pulgar-Vidal — who as Peru's Environment Minister previously served as president of the COP20 UN Climate Summit in 2014 — is also a member of the VCMI steering committee.
By coordinating their expertise, resources and influence, the ICVCM and VCMI said they aim to build trust among market participants as well as other key stakeholders, including corporates, investors, governments, civil society, Indigenous Peoples and local communities in emerging markets.
The ambition is to create a market integrity framework that can allow corporates to use high quality carbon offsets as part of their net zero strategies, providing a means of boosting investment in carbon removal and nature protection projects, while also helping to bring decarbonization trajectories into line with the 1.5-degrees Celsius warming goal contained in the Paris Agreement.
They argue that high quality carbon credits could play a key role in helping to accelerate global climate action while unlocking crucial finance for urgently needed green efforts — whether through nature-based solutions or engineered carbon removals — that might not otherwise be viable.
However, they emphasized that companies should still look to decarbonize their own operations and value chains as far as possible before investing in carbon credits, which they clarified should play a "complementary" role in aiding corporate climate strategies and not be relied on as the primary mechanism for reducing emissions.
To that end, Kyte — who alongside her role at VCMI is dean of The Fletcher School at Tufts University in the U.S. — said the collaboration with ICVCM would help to provide critical, clear guidance for companies looking to invest in the voluntary carbon market.
"It is essential that companies have clarity and consistency in how they can credibly use high-quality carbon credits and how this fits into their broader decarbonization strategies," she said. "What is needed is clear guidance, policy direction and a focus on quality. This collaboration will deliver a robust voluntary climate action framework that companies can follow, with the forthcoming launch of VCMI's Claims Code of Practice a critical part of this, alongside the important work to raise the bar on corporate climate action from other organizations."
The partnership follows the related news last week that corporate carbon offset certification firm Gold Standard has teamed up with the Global Green Growth Institute (GGGI), the inter-governmental organisation established at the UN Rio Earth Summit in Brazil in 2012, as part of a similar effort to bolster confidence in the offset market.
The partnership is aimed at enabling the certification and trade of carbon offsets through global policy efforts, most notably the drive to establish a global carbon offset market under Article 6 of the Paris Agreement.
Gold Standard said the collaboration marked a significant step towards supporting governments in accelerating their climate efforts through the establishment of a Paris Agreement-aligned carbon market.
"Gold Standard is always looking for new ways to leverage the expertise we have built up over the last 20 years to drive impact at an ever-greater scale," said Margaret Kim, CEO of Gold Standard. "Through the creation of a first-of-its-kind framework to certify and issue credits for the policy changes of governments, this collaboration with GGGI will facilitate a new era of international cooperation."
Many environmental campaigners remain deeply skeptical of the ability of voluntary schemes to ensure integrity in a carbon market that they insist is in desperate need of more robust regulation and oversight.
The new partnerships are likely to be welcomed by many corporates and other stakeholders in the voluntary carbon market, who have long been frustrated by both the "Wild West" tag that has clung to parts of the voluntary carbon offset and the proliferation of standards that have sprung up in response. The move makes sense because linking demand and supply side standards more closely is a mission critical for developing a carbon credit market that investors can trust will not end up tarnishing their reputation and the environment at the same time.
The moves are also likely to be welcomed by governments, which maintain that carbon offsets have a critical role to play in accelerating decarbonization and nature protection efforts in emerging and developing economies. A group of world leaders, including France's Emmanuel Macron, the U.K.'s Rishi Sunak and President Joe Biden, backed an open letter ahead of the climate finance summit in Paris where they called for a renewed effort to boost private investment in climate-related projects, including through carbon offset markets.
However, many environmental campaigners remain deeply skeptical of the ability of voluntary schemes to ensure integrity in a carbon market that they insist is in desperate need of more robust regulation and oversight. Meanwhile, concerns persist that too many companies continue to use offsets to distract from the need to cut their emissions at source. Consequently, some corporates have publicly distanced themselves from the use of offsets, opting instead to ramp up investment in their own emission reduction projects.
It remains to be seen whether pooling the efforts of the VCMI and the ICVCM can help usher in the robust, trustworthy and effective offset market that policymakers and corporates are desperate to see. But if the groups can bolster confidence and credibility across the still expanding market it could go a long way towards tackling the climate and nature finance gap that world leaders gathered in Paris this week are still struggling to bridge.