Since the adoption of the Paris Agreement under the United Nations Framework Convention on Climate Change (UNFCCC) in 2015, a significant number of companies have committed to achieving net-zero emissions, often through the use of carbon credits. The Voluntary Carbon Market (VCM) has facilitated these corporate carbon goals by enabling the trade of carbon credits, thereby mobilizing private capital for innovative energy and environmental projects globally. However, the credibility of this market has been subject to criticism and scrutiny. While projects have generated local jobs and economic development opportunities, concerns persist regarding the quality, standardization, financing, and transparency of these projects and associated carbon credits. These publicized criticisms and challenges have hindered the VCM from fully realizing its potential. Numerous standards have been developed to address market quality and bolster confidence in the VCM.
Several prominent organizations have launched initiatives aimed at enhancing VCM credibility. Amazon, ExxonMobil, and Microsoft, for example, have partnered to introduce more rigorous standards, leveraging advanced tracking tools, satellite and AI-driven technology, and increased transparency throughout the carbon credit supply chain. This project includes forest management companies like Weyerhaeuser, environmental advocates, tribal groups, and companies involved in carbon offset projects. A key element of this initiative is the formation of a 17-member independent panel tasked with improving verification processes and ensuring that carbon offset projects genuinely contribute to emissions reductions. The Bipartisan Policy Center (BPC) has assembled the 17-member panel and includes members from project developers, registry companies, rating agencies, credit purchasers, and non-governmental organizations, with the objective to explore the creation of a certification system tentatively named “Carbon Star.” This initiative aims to identify potential reforms and verify the adequacy of verification processes, ensuring that carbon offset projects effectively reduce emissions and that processes and results are transparent.
Last year, the Integrity Council for the Voluntary Carbon Market (ICVCM), an independent multi-party governance body, launched the Core Carbon Principles (CCPs). The CCPs provide a label for carbon credits, assessing the Governance, Emissions Impact, and Sustainable Development of various carbon credit program methodologies. Regarding Emissions Impact, the ICVCM emphasizes criteria such as additionality, ensuring that GHG emissions reductions from mitigation activities would not have occurred without the financing derived from carbon credits. Permanence, guaranteeing long-term carbon storage of removals or reductions, and requiring measures to address reversal risks and provide compensation if reversals occur. Robust quantification of emission reductions and removals, along with the prevention of double-counting, are also stressed.
As detailed in one of our December 2024 articles, Isometric became the sixth Carbon Crediting Program approved as CCP-Eligible, joining ACR, ART TREES, CAR, Gold Standard and Verra’s VCS. In addition, Verra’s VM0047 Afforestation, Reforestation and Revegetation (ARR) methodology was the first ARR methodology to receive the CCP label, with credits expected to be issued starting in 2025. While the ICVCM initially set ambitious targets to evaluate nearly the entire VCM, announcements have been delayed, and market participants eagerly await decisions on cookstove and additional forestry methodologies.
To address the demand side of the market, the Voluntary Carbon Market Integrity Initiative (VCMI) has developed the Claims Code of Practice to bring confidence and credibility to carbon claims that involve the use of carbon credits.
It is clear that VCM market participants are striving to bolster confidence from both the supply and demand perspectives. However, challenges remain, as many believe that the ICVCM and the VCMI, while important, are insufficient to fully restore confidence in the VCM. While frameworks exist, their enforcement and adoption are inconsistent. New frameworks may emerge if the ICVCM and VCMI fail to gain credibility and trust. However, an excessive number of overlapping frameworks could lead to market fragmentation. Therefore, the critical question is: Do we truly need more certifications? The focus should be on strengthening and enforcing existing frameworks, rather than introducing further complexity.