Verra's New Additionality Tools to Align with Core Carbon Principles

Written by Elahe Bigdeli | Oct 23, 2024 4:15:00 AM

On 14 October 2024, Verra released new additionality assessment tools for the Verified Carbon Standard (VCS) Program. Since additionality is one of the foundational principles that underpin the voluntary carbon market (VCM), this development is expected to contribute to the integrity and quality of the market.

The Integrity Council for the Voluntary Carbon Market (ICVCM) has continued to scrutinize the additionality of projects, as seen through their August 2024 announcement of renewable energy projects failing to receive the Core Carbon Principles (CCP) label. As part of the CCP Assessment Framework, the ICVCM describes additionality as:

“The greenhouse gas (GHG) emission reductions or removals from the mitigation activity shall be additional, i.e., they would not have occurred in the absence of the incentive created by carbon credit revenues.”

In assessing these projects, the ICVCM highlighted concerns about the additionality and electricity tools from the Clean Development Mechanism (CDM) used by the rejected projects. Further details can be found in the statement of the ICVCM’s Governing Board, which expands on the additionality concerns of renewable energy projects.

In light of ICVCM’s findings, the organization’s Governing Board encouraged CCP-eligible programs that use CDM Additionality Tools CDM 1, 2, 19, 21 and 32 to evaluate and/or revise their methodologies and tools to align with the CCP Assessment Framework. At the time of the assessment, updates for multiple VCS tools were already underway. Following the completion of the update process for two of the tools, Verra has released the following to further align the VCS program with CCP’s additionality requirements:

These tools are:

These tools, active since 14 October 2024, provide procedures and requirements to conduct analyses related to investment, barriers, and common practices. They also require identifying alternatives to the project activity, as well as identifying the baseline scenario where applicable.

Applicability Conditions for VCS Projects
VT0008	VT0009
The methodology requires or permits the use of the tool
The VCS Program rules and requirements require or permit the use of the tool
Projects using a methodology that uses the CDM TOOL01 Tool for the Demonstration and Assessment of Additionality may apply this new tool until a revision of the underlying methodology is published	Projects using a methodology that uses CDM TOOL02 may apply this new tool until a revision of the underlying methodology is published
Small-scale projects using CDM TOOL19 Demonstration of Additionality of Microscale Project Activities
Projects using CDM TOOL21 Demonstration of Additionality of Small-scale Project Activities

In addition, the new VCS tools supersede below CDM tools and guidelines in the VCS Program by consolidating them and incorporating further updates to ensure they align with the latest version of the VCS Methodology Requirements and the CCP Additionality Requirements:

Projects using a methodology that uses the CDM tools can use the new tools until a revision of the underlying methodology is published. Projects may complete validation using the previous methodology version within a grace period. Existing projects from affected methodologies, per Verra’s upcoming Methodology Change and Requantification Procedure, can update to the newer versions that use the new additionality tools.

If the ICVCM approves the methodologies relying on the new VCS tools, Verified Carbon Units (VCUs) generated by projects using these methodologies will qualify for CCP labels.

Updates to the New VCS Additionality Tools
Eliminated factors from CDM tools	Additional factors to the CDM tools
Elimination of the “first-of-its-kind” test According to this test, a project is additional if it introduces new technology or practice in the host country and removes the need for barriers or investment analysis.	Further refinements and modifications to improve clarity
Elimination of the “simplified cost analysis” Projects should instead apply an investment comparison analysis in the future. The simplified option is to demonstrate that at least one alternative is less costly than the project activity in the absence of financial or economic benefits other than carbon credit revenues.	Projects are required to provide verifiable evidence for each identified barrier hindering the project from being implemented and proof that carbon credit revenues are the key factors in tackling these obstacles
Elimination of the “technological barriers” like insufficient infrastructure for execution	Assumptions, data, and conclusions in the investment analysis must align with the information provided to the entities that fund and execute the project
	The benchmark analysis needs to demonstrate that carbon credit revenues clearly improve the economic performance of the project definitively and raise the financial indicators (like Internal Rate of Return) to meet or exceed the required financial benchmark.

The new additionality tools introduced by Verra will strengthen the VCM’s integrity in several ways:

More rigorous financial justification and stricter benchmarks for financial indicators, such as the internal rate of return (IRR), reduce the risk of over-crediting for projects that would have occurred anyway and ensure that only projects that significantly rely on carbon revenues are considered additional.
The stronger requirements to provide verifiable evidence of barriers add transparency and accountability, ensuring that projects genuinely need the support of carbon markets to proceed.
Replacing the simple cost analysis with an investment comparison analysis increases the accuracy of financial assessments and helps prevent the approval of projects that might otherwise appear viable without carbon credits.
Requiring consistency between the assumptions and data reduces the possibility of manipulating figures to make a project appear eligible for carbon credits.

Overall, the new tools are expected to improve market confidence and simplify the path for project developers to demonstrate high-quality carbon credits. By providing more comprehensive tools to assess the impact of projects, buyers are more likely to trust that the credits they obtain, particularly those with CCP labels, accurately reflect the benefits claimed by the project supplying the credits.

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