The Voluntary Carbon Markets Integrity Initiative (VCMI) launched a provisional claims code of practice in early June this year to streamline guidance on how companies can make net zero claims when using voluntary carbon credits.
VCMI1, the leading VCM cross sector initiative founded in early 2021, drafted these guiding principles to enhance demand side transparency in the VCM as there has been a lack of clarity about what different corporate commitments and claims mean. It also addresses the arbitrary terminology for carbon offset use by creating clear guidelines. Both of these challenges have been seen as threatening confidence and integrity in the VCM as well as corporate commitments more broadly.
1. As a first step, the company needs to make public a detailed, science-aligned commitment to reach net zero emissions by 2050, as well as interim targets on emission cuts.
2. Secondly, the companies have to determine feasible claims they can make. Following this trajectory, VCMI developed three tiers to rate companies’ performance: gold, silver and bronze status as outlined in the chart below.
3. The assigned role of high quality offsets: One core message of the claims code is the purchase of exclusively high-quality offsets. VCMI states that the credits must be recognized by a credibly governed standard-setting body, be of high environmental quality and consider, where relevant, social safeguards and human rights. However, VCMI does not provide a more detailed guidance for what constitutes a high-quality carbon credit; instead, it refers to the work of CORSIA and the Integrity Council for the Voluntary Carbon Market (IC-VCM) to identify cross-cutting quality criteria for carbon credit.
4. Lastly, the code expects transparency from businesses of their use of carbon credits by: disclosing the carbon credits bought and making the project ID public, issuance registry and vintage. In result, only verified carbon credits can be used towards making a VCMI aligned claim. Firms will also be expected to disclose whether or not the carbon credit is associated with corresponding adjustments by the host and/or buyer country, in accordance with Article 6 of the United Nations Paris Agreement.
While the draft Code provides clarity on the need for emissions reductions, on messaging and flexible corporate decarbonization efforts , it falls short to define the need for corresponding adjustment, leaving the door open for double claiming.
Bloomberg also stresses for the VCMI code to potentially weaken the Science Based Target Initiative, which views offsets as less favorably, hence emphasizing offsetting rather than favoring internal abatement measures.
As a takeaway, most of the VCM stakeholders have welcomed these much needed guidelines and called it a step in the right direction. According to Trove Research, a credible research firm, the net effect of the draft Code is positive for the voluntary carbon market. The analysis expects companies with ambitious climate commitments to be reassured by the clarity of the guidance and firms with low climate ambition looking to access cheap credits to exit the market. A key ingredient of the code is the industry pilot period, a corporate test run, to make it as practical and implementable as possible. This effort is led by Google and Unilever, serving as a strong signal to various industries, while strengthening collaboration, integrity and ambitious net zero targets across companies and actors in the VCM.
1 The Claims Code is based on several months of deliberation among VCMI’s Expert Advisory Group (EAG), which comprises 37 carbon market technical experts from around the world, as well as input from key stakeholders, including: governments in both the Global South and Global North that have participated in VCMI’s Country Contact Group of government representatives; civil society organizations from around the world; and companies that purchase and retire carbon credits as well as those that develop emissions reduction and removal projects. (VCMI, 2022)