Upholding the Integrity of the Voluntary Carbon Market: Organizations You Need to Know
When voluntary carbon offsets first rose to prominence, many critics emerged pointing out issues ranging from a lack of transparency to a lack of quality assurance, so in reaction to the criticism, it was determined that projects should meet certain criteria to receive a more legitimate stamp of approval from official standard groups like VCS (Verified Carbon Standard), the Gold Standard, Climate Action Reserve, American Carbon Registry, and the United Nations’ Clean Development Mechanism.
While these standards are all extremely important, they have varying levels of criteria which is why as an organization, Cool Effect goes above and beyond to ensure that all of our projects undergo additional review, including full financial and management due diligence. Essentially, we evaluate where the funds are going and who will actually benefit from the sale of the carbon credits.
This ensures that every carbon project on our platform is not only solid but also has room to continue well into the future. Another key criteria that is a standard for Cool Effect is ensuring the project’s “additionality” and permanence, meaning that the project would not happen without support. Since the official standards do not all ensure additionality, we make sure that’s a sure thing in our internal review.
But while we can guarantee every project on our platform adheres to the Carbon Done Correctly principles, the voluntary carbon market is a big place — and it’s about to get a lot bigger.
Late last year, new data revealed immense growth in the voluntary carbon market (VCM). From May to November 2021, nearly 450 new carbon-reducing projects were created. Nearly 190 million new credits were issued, each representing 1 tonne of CO2-equivalent reduced or removed. At the same time, over 85 million credits were retired.
Ecosystem Marketplace recently confirmed that the voluntary carbon market exceeded more than $1 billion in transactions in 2021, far outpacing any other year. As more and more companies seek to meet voluntary climate commitments, demand for voluntary carbon credits is only expected to continue to grow. And as that demand grows, we simply cannot allow concerns about integrity of the market to diminish its effectiveness as a tool in reducing carbon emissions to grow along with it.
High quality carbon credits can play a critical role in accelerating the transition to Net Zero. Integrity is a key aspect of high-quality credits; credits must be assured to genuinely reduce or remove carbon emissions in order to achieve their purpose.
A high-quality voluntary carbon market encourages participation by the private sector. It is clear from progress so far, that the climate crisis and the goal of keeping temperature rise to 1.5 degrees Celsius requires action on a scale and speed that governments and philanthropy cannot achieve alone. Carbon markets are able to efficiently deliver private sector funding to conserve tropical forests, protect ocean coastlines, capture methane, protect grasslands and promote distribution of energy saving devices, all of which help lower global emissions.
Some basic rules are clear. Businesses must first decarbonize their operations wherever possible by reducing reliance on fossil fuels, creating more efficient supply chains and streamlining manufacturing procedures. High quality carbon credits are complementary to those activities and used to reach more ambitious emission reduction goals. But, exactly how high integrity carbon credits should and can be used as part of a credible net-zero pathway is evolving in discussions with stakeholders.
A number of organizations have formed in order to instill trust and uphold the integrity of the voluntary carbon market by monitoring the market and providing oversight and guidance. They include: 1) the Integrity Council for the Voluntary Carbon Market, 2) the Voluntary Carbon Markets Integrity Initiative, 3) SBTi, 4) CDP and 5) the International Sustainability Standards Board. While it may seem like an alphabet soup, these entities each have a different role to play in the VCM.
- The Integrity Council for the Voluntary Carbon Market (ICVCM): ICVCM’s goal is to create a high integrity supply of carbon credits. This new governance body has been established to set and enforce global standards for the voluntary carbon market, providing oversight over carbon crediting programs. It draws on the best science and expertise available to review and strengthen carbon credit methodologies. In this way, climate finance is channeled into projects that genuinely reduce or remove greenhouse gas emissions and are genuinely additional.
- The Voluntary Carbon Markets Integrity Initiative (VCMI): VCMI’s goal is to ensure that Voluntary Carbon Markets make a meaningful contribution to climate action while supporting the achievement of the UN Sustainability Goals. Immediate priorities include developing high-integrity guidance for buyers of carbon credits on how carbon credits can be used and claimed businesses as a part of credible net-zero strategies. VCMI is closely aligned with the work of the ICVCM.
- SBTi or the Science Based Targets Initiative: SBTi enables businesses to set ambitious emissions reductions targets in line with the latest climate science. It is focused on accelerating companies and financial institutions across the world to halve emissions before 2030 and achieve net-zero emissions before 2050. The role of carbon credits in achievement of goals is still under discussion.
The initiative is a collaboration between CDP (formerly the Carbon Disclosure Project), the United Nations Global Compact, World Resources Institute (WRI) and the World Wide Fund for Nature (WWF) and one of the We Mean Business Coalition commitments.
- CDP collects information on the use of carbon credits as part of its reporting activities. Each year, CDP supports thousands of companies, cities, states and regions to measure and manage their risks and opportunities on climate change, water security and deforestation. CDP takes the information supplied in its annual reporting process and scores companies and cities based on their journey through disclosure and towards environmental leadership.
- The International Sustainability Standards Board (ISSB), formed under International Financial Reporting Standards, was created with the intention to deliver a comprehensive global baseline of sustainability-related disclosure standards that provide investors and other capital market participants with information about companies’ sustainability-related risks and opportunities to help them make informed decisions.
If your business or NPO has purchased renewable energy, is reducing waste and rethinking travel and events, and is now considering using carbon credits to achieve more ambitious climate goals, make sure that you remain educated about their integrity and impact. Seek only the highest-quality carbon-reducing projects to supplement your company’s existing efforts to reduce emissions. It’s crucial that we reduce more and we reduce faster than ever, and what we can’t reduce, we credit with carbon projects.