The Voluntary Carbon Market (“VCM”) plays a crucial role in facilitating the flow of capital to fund important climate-saving projects such as protecting forests, funding high efficiency cookstoves, and removing carbon from the atmosphere utilizing a variety of nature-based and technological solutions. Yet with a total value of only ~$2 billion, the VCM pales in size compared to what is needed to make a material global impact on the problem of climate change.
A multitude of technological improvements are required to scale the VCM–many of which Flowcarbon is actively working on. Yet a critical short-mid term “fix” is to align on a commonly accepted definition of (1) what is a high quality carbon credit and (2) what type of environmental claims corporates should be able to make under what circumstances. As the VCM eagerly awaits guidance on (2) from the Voluntary Carbon Market Integrity Initiative (the “VCMI”), progress towards defining a high quality carbon credit took an important step forward as the Integrity Council for the Voluntary Carbon Market (“ICVCM”) released their much-anticipated Core Carbon Principles and associated documents. Below is a brief summary of the ICVCM’s recent announcement, what’s next, and why it matters to organizations like Flowcarbon.
The ICVCM is an independent governance body for the VCM with an objective of setting and enforcing a definitive global threshold of high-quality carbon credits so finance can be effectively mobilized toward urgent mitigation and climate resilient development. After reviewing 5,000 comments and 350 submissions during a 2-month consultation last year, the ICVCM recently released:
Some of the important advances contained in the ICVCM’s release include requiring programs to publish comprehensive information in an accessible manner, ensuring credits come from projects with robust social and environmental safeguards that deliver positive sustainable development impacts, and requiring free, prior and informed consent from Indigenous Peoples and Local Communities.
The proverbial rubber will truly hit the road when the ICVCM releases the “Category-level Assessment Framework” that will set out specific criteria for assessing different categories of carbon credits, such as cookstoves or forestry projects. Expected to be published in mid-2023, this will lay out the detailed rules for how the ICVCM will consider whether to approve the “CCP” label for each methodology under each approved Standards Body.
Following this, the ICVCM will go about the painstaking process of evaluating essentially the entire VCM, project type by project type. The less complex project types, like those that rely on clear and incontrovertible baselines and robust data flows rather than counterfactual scenarios and a multitude of assumptions, should relatively quickly receive approval to attach the CCP label as early as Q3 of 2023. The more complex project types, such as most nature based solutions projects, will more likely only complete their evaluation in 2024.
The ICVCM has already committed to improve and strengthen their framework every 2-3 years, with the first process launching in 2025 to be implemented in 2026.
Separately, the VCMI should be releasing its guidance on corporate claims later in 2023.
The process of consensus building in a market as complex as the VCM is both challenging and critical. There exists a wide range of views on how the market should evolve, and what guidance should be followed.
Flowcarbon’s objective is to facilitate the flow of capital to fund important climate saving projects. Corporations should be encouraged to–and even celebrated for–voluntarily investing in the VCM. Yet this investment must not come at the expense of the important internal decarbonization work that must be done–“greenwashing” must be avoided. It is this fine line–amongst several others–that international multi-stakeholder initiatives such as the ICVCM and the VCMI are trying to walk.
The VCM is poised to deliver meaningful climate impact when corporations are able to easily purchase carbon credits they can rely on without being afraid of “greenwashing” accusations. The ICVCM’s release of the CCPs is a critical first step to achieving this important objective.