How the Integrity Council’s new global benchmark could prove a watershed moment for the carbon market
Streamlined Program-level Assessment Framework and Assessment Procedure sets out new principles for high-quality credits based on latest science
The Integrity Council for the Voluntary Carbon Market (ICVCM) has announced the launch of its Core Carbon Principles and Program-level Assessment Framework, which it said will establish “rigorous” thresholds for ensuring the development of high-integrity carbon offset projects.
ICVCM said the new Core Carbon Principles (CCPs) have been developed using input from hundreds of organisations throughout the voluntary carbon market and will set out fundamental principles for high-quality credits which deliver real, verifiable emissions reductions based on the latest science and best practices.
The group added it is also publishing the first part of its Assessment Framework, which it said would provide detailed criteria for assessing whether carbon-crediting programs are CCP-Eligible.
The Integrity Council said the new criteria, published this week, mark a “significant” step forward for ensuring consistent transparency across the market by requiring programs to publish comprehensive information in an accessible manner. It said the approach would allow all stakeholders to understand how projects issuing CCP-labelled carbon credits impact emissions, society, and the environment.
The new CCPs and Program-level Assessment Framework will require comprehensive and accessible disclosure by programs on how each project calculates and quantifies its emissions impact, as well as how it assesses additional social and environmental impacts. ICVCM advised such disclosures should include the spreadsheets each project uses to calculate its impact and establish a baseline.
According to ICVCM the criteria break new ground, as they require programs to ensure high-integrity credits come from projects with robust social and environmental safeguards that can demonstrably deliver positive sustainable development impacts.
ICVCM stressed that CCP-Eligible programs must ensure project developers assess the risks of negative environmental and social impacts, articulate measures to mitigate these impacts, and report on progress.
It explained that these include impacts on Indigenous Peoples and Local Communities (IPs & LCs), biodiversity, pollution, human rights, labour rights, and gender equality. These details will need to be captured in validated design documents, which programs will be required to publish along with associated monitoring reports which have been provided by projects.
In addition, it said programs will be required to ensure free, prior, and informed consent (FPIC) from IPs and LCs, as well as be transparent about the sharing of benefits from mitigation activity with IPs and LCs.
In addition, the program-level requirements for governance have been streamlined to build on the existing requirements established through the UN-backed CORSIA aviation carbon offset scheme, a move the ICVCM said had been adopted following extensive consultation with stakeholders.
However, CORSIA-eligible programs, which issue more than 95 per cent of credits in the market, will have to provide evidence they meet additional high-integrity criteria around effective governance, credit tracking transparency and robust, independent third-party validation and verification.
ICVCM also explained that other programs will need to demonstrate that they satisfy the CORISA requirements in these areas, and all programs will need to provide evidence they meet the program-level criteria for other CCPs, including sustainable development benefits and safeguards, as well as no double-counting and robust quantification.
The initial assessment phase for programs is set to launch around mid-year 2023, following the publication of the ICVCM’s criteria for assessing different categories of carbon credits. ICVCM said carbon-crediting programs are expected to be able to label the first credits as CCP-Approved later this year.
The group added it will continue to work with stakeholders to strengthen the CCPs over time and that a series of work programs will feed into the next version of the CCPs, which are due to be launched in 2025 and implemented in 2026.
ICVCM said the next version will explore complex issues such as the implications of Corresponding Adjustments under Article 6 of the Paris Agreement, whether all carbon credit projects should make a contribution towards the UNFCCC Adaptation Fund, and how to further strengthen sustainable development requirements.
Overall, the Integrity Council stressed the CCPs have been designed to build trust, unlock investment, and “channel it at speed and scale to effective climate solutions by providing a readily identifiable benchmark for high-integrity carbon credits, no matter which carbon-crediting program issued them, what kind of credits they are, or where they are generated”.
It added that the hope is that this will reduce confusion, overcome market fragmentation, and give buyers confidence they are funding projects making a genuine impact on emissions.
“It’s clear we are not acting fast enough to address the climate crisis,” said Annette Nazareth, ICVCM chair. “We need every tool available working at full speed to secure a livable future and a high-integrity voluntary carbon market is one of those tools.
“Well-functioning markets and integrity are inextricably linked. Building a widely shared understanding of what high integrity means for carbon crediting programs and categories of carbon credits is a pre-condition for the development and growth of a viable and vibrant VCM.
The CCPs and Program-level criteria we are issuing are an important step towards a transparent, regulated-like market where buyers can easily identify and price carbon credits that meet consistently high-integrity standards that will also increase ambition over time.”
The British Standards Institution (BSI), which has been working with ICVCM as a partner on the CCPs, said that if warming is to be limited to 1.5C as the Intergovernmental Panel on Climate Change (IPCC) has recommended, then a high-integrity voluntary carbon market is a “key step forwards”.
“This is an important development for the voluntary carbon market to build confidence amongst all stakeholders that credit programmes are robust and science-based, and offer genuine environmental impact,” said Scott Steedman, director-general, Standards at BSI. “This can help guard against greenwashing and has the potential to offer substantial benefits to society.”
ICVCM said programs will be expected to apply for assessment following the release of the Category-level Assessment Framework, which ICVCM said it expects to publish towards mid-year 2023. It explained that this will set out its criteria for assessing categories of different carbon projects, such as cookstoves or forestry projects, for different programs.
The updated Assessment Framework has revised CCPs were created following a public consultation which took place last year, in which the ICVCM said it discussed the CCPs with project developers, academics, eNGOs, IPs and LCs, policymakers, carbon credit buyers, and investors.
It said it has taken “particular care” to ensure that IPs and LCs have had a “powerful voice” in shaping the CCPs. It said that this included organising workshops specifically for input form these communities, as well as reserving three of 22 seats on its Board for IPs and LC members.
Dr Francisco Souza, managing director of the FSC Indigenous Foundation and an ICVCM Board member, said IPs and LCs have a “vital” role to play in achieving net zero as they protect and manage around 40 per cent of the planet’s ecologically intact landscapes.
“The CCPs respect their importance and will ensure that high-integrity carbon credits recognise and safeguard their rights, livelihoods and values,” he added. “They can also catalyse robust mechanisms to share the benefits of climate mitigation projects with the communities managing and safeguarding the natural ecosystems connected to those projects.”
In addition to the requirements on transparency and sustainable development, the CCPs state that in order to be considered high-integrity, carbon credits must find emissions reductions and removals which are additional – or generated by projects which would not have gone ahead without carbon credit funding; permanent; measured robustly and conservatively; and counted only once. ICVCM stressed that these must all support the transition to net zero as well as not lock in net zero incompatible activities.
It said that programs which issue them must meet high standards of governance to ensure the overall quality of carbon credits, use a registry to uniquely identify and track each credit from issuance to retirement or cancellation, as well as have emissions reductions and removals which have been verified by independent third-party experts.
In terms of introducing the high-integrity credits to the market, ICVCM indicated it wants to do this “as soon as possible” and expects to begin announcing CCP-Eligible programs and CCP-Approved categories later this year, which it said would enable CCP-labelled, approved credits to appear in market soon after. It added that programs will be able to tag both existing and new carbon credits with the CCP label, provided that it has also approved the category.
In order to ensure the integrity of CCP-labelled credits, ICVCM said its approach will be similar to one a government regulator would take. It explained that programs which have been assessed as CCP-Eligible will be responsible for ensuring that carbon credits meet the high integrity criteria before tagging them with the CCP label.
ICVCM said it will audit programs, undertake spot checks, and respond to complaints as well as have the power to review a program or category if there are concerns about its adherence to the CCPs. If it finds material failings, it said it will be able to suspend or terminate the eligibility of the program or category.
The importance of the VCM in the accelerating progress towards net zero was further highlighted in a separate paper this week by the International Emissions Trading Association (IETA).
According to the new paper, The Evolving Voluntary Carbon Market, the VCM grew at its fastest-ever pace in 2022, but in order to continue to play a central role in driving down emissions, the report argues it must adapt to changing circumstances and evolving science.
Specifically, the report recommended that in order to adapt the VCM market must provide a robust mechanism for corporates to reduce or remove emissions beyond their value chains. Secondly, it advised that the VCM market should channel finance to where it is most needed, including low and lower-middle income countries, and thirdly it advised that the VCM market could pave the way to compliance markets in jurisdictions where they remain nascent.
However, the report recognised that the VCM is “rapidly evolving” to incorporate the latest guidance on how corporates can use offsets in their journey to net zero, and in particular the paper reiterated that “companies should avoid new sources of emissions, reduce internal emissions as much as possible, and then only compensate/offset residual emissions with the use of carbon credits.”
The paper also noted the growing importance of removal credits, which represent net reductions in the atmospheric concentration of carbon dioxide but cautions against the assumption that, because such net reductions are not yet being generated at scale, companies should wait until the removals market has matured before taking action.
“We strongly feel that carbon credits could be a central mechanism to enable stronger interim claims, or address gaps should corporates miss their interim target,” it said. “Missing an interim target is not acceptable when we have a relatively elastic and affordable mechanism at our disposal globally.”
The VCM and carbon offset providers have faced fierce criticism from green groups in recent years, which have questioned the credibility of many projects and uncovered instances where some projects appear to have failed to deliver promised emissions reductions. However, the latest interventions from the ICVCM and IETA underscore how many actors in the market understand the concerns and are working to try and address them through ever greater levels of transparency, reporting, and verification, as well as more robust standards. It remains to be seen whether such standards and their enforcement are able to convince the market’s detractors that carbon offsets can play a key role in mobilising investment in driving down emissions and delivering real world carbon removals.
