On Tuesday, the Governing Board of the Integrity Council for the Voluntary Carbon Market (ICVCM) announced that issuances from current renewable energy crediting methodologies are ineligible for the Core Carbon Principles (CCP) label. This announcement is notable as the ICVCM has not made any previous rejections. This latest action sheds light on the degree of rigour in their assessments.
The rejection of eight methodologies, which represent a substantial 30.57% of the total available supply across the VCM, has had a significant impact on the market. The 267.86M credits affected cannot receive the label due to their failure to meet ICVCM’s additionality requirements. This rejection has particularly affected ClearBlue Market’s Category 3, with 94.10% of the impacted credits falling under this classification.
The approved methodologies account for 19.70M credits, representing 2.25% of the available supply. Notably, Verra issued a few projects in China, representing 0.8M available credits, using both an approved and rejected methodology (AMS-III.G. and AMS-I.D.).
Below is a table summarizing ICVCM’s decisions from their most recent update and the impacted credits:
This decision comes after ICVCM’s 7 June 2024 approval of the first seven crediting methodologies to be eligible for the CCP label, which amounted to approximately 27M credits, or 2.6% of the market. Since there were no rejections in any other announcements, there was no baseline for market participants to help anticipate ICVCM’s decision. The level of rigour in the ICVCM’s recent decision is expected to provide insight into the CCP-label eligibility for methodologies currently under assessment. However, the ineligibility of these renewable energy projects may not have surprised some since experts have questioned their additionality for over a decade. Some rejected methodologies, such as ACM0002, were first introduced two decades ago. Since then, renewables' economic viability has improved overall for multiple regions.
The first rejections by ICVCM highlight a shift in VCM supply, as critical organizations in the market aim to improve the quality and integrity of carbon credits to grow market confidence and participation. The spread between CCP and non-CCP labelled credits may be expected to grow as more methodologies are rejected. In this particular round of assessments, ICVCM’s decision could further depress Category 3 prices since 70.95% (253.63M) of all available credits from that category fall were deemed ineligible for the CCP label. However, average prices for Category 3 credits have already declined for several months, so the impact of ICVCM’s assessment may seem minimal.
Current pricing for the categories is shown below:
Category 2: Renewable, industrial, and waste/landfill projects from least developed countries (LDCs), Europe, and North America. All household and cookstove projects.
Category 3: Renewable, industrial, and landfill/waste projects from developing countries.
Enforcing stringent requirements provides bullish supply signals, as prices for the CCP-labelled credits may face upward pressure from limited availability. The constrained supply could further differentiate available credits in the short term for the OTC market, leading to diverging trends in price and supply for different categories. This price and quality segmentation from the perception of VCM participants could also impact other project types that have faced scrutiny for their additionality. CCP-approved carbon crediting programs may allocate more resources to ensure alignment with the ICVCM’s approach to additionality, which could lead to those costs being passed down to market participants.
The ICVCM continues to assess additional carbon crediting programs and methodologies. Upcoming decisions on credit categories include those related to Reducing Emissions from Deforestation and Forest Degradation (REDD+), JREDD (Jurisdictional REDD), and clean cookstoves.
You can find more information on the assessment status for the CCP program here. Please reach out to discuss this development and the impact of CCP credits on your position with a ClearBlue analyst. We are standing by to assist you.