Wednesday, August 2, 2023
Last week, the Integrity Council of the Voluntary Carbon Markets (ICVCM) released the much anticipated final Core Carbon Principles (CCPs) and complete Assessment Framework. The CCPs are seen as a landmark effort to “fix” the voluntary carbon market, which has lost the trust of corporate buyers after a series of reports revealing that most of the credits on the market are worthless.
The CCP Assessment Framework includes criteria regarding governance, emissions impact, sustainable development, and credit attributes. The framework is not meant for evaluating individual projects or carbon credits. Programs can apply for assessment by submitting evidence that they meet the CCPs through the ICVCM’s application portal. The first CCP-eligible carbon credits are expected to be in the market before the end of 2023.
Despite the high expectations, the CCPs and Assessment Framework at best can weed out the worst projects on the market, but in its current shape will not be able to fix the fundamental issues of the VCM. Hopefully, in time, the CCPs will evolve and the next iterations will close the loopholes left in the current release.
Compensate Foundation’s key takeaways:
1. Challenges with robust quantification
One of the current obstacles to assessing the quantification of avoided emissions and removals is that in most cases data e.g. on deforestation levels provided by the project cannot be trusted. The term “robust” is also open for interpretation - something which can be misused. The Compensate Foundation considers “robust” to mean that drivers of the deforestation and baseline used for credit issuance correspond to the actual deforestation threat the project is preventing. Overcrediting is one of the market’s current pain points. To avoid it, the core assumptions of the project need to be independently evaluated.
2. Big loopholes for additionality assessment
The additionality test can be passed by not even providing an investment analysis - only a barrier analysis combined with market penetration/common practice analysis will suffice. Why is this problematic? Demonstrating low availability of project activity in a given area and barriers could lead project developers to “shop” for “best” areas to pass the low availability requirement. Choosing the project location based on commercial interests will have negative impacts on equality, leaving certain regions and their residents at a disadvantage. Similarly, barriers are easy to fudge and difficult to verify especially if the Validation and Verification Bodies do not have local knowledge. This is too low a threshold that almost any project can pass.
On the other hand, the CCPs introduce stricter requirements for additionality by requiring evidence of the consideration of carbon credits before the program’s inception. This may turn out to be a challenge for many projects on the VCM, including REDD+, ARR, and clean cooking stoves according to a
3. Creating double standards with regard to permanence
When it comes to permanence, the new CCPs and Assessment Framework are creating double standards by having different requirements for REDD+ and Jurisdictional REDD+ projects, the latter considered the “future” of REDD+.
REDD+ projects are required to assure permanence for 40 years by monitoring and compensating for avoidable reversals and refraining from issuing further carbon credits until avoidable reversals have been compensated. This is improvement from the current situation, where many projects have shorter crediting periods, usually 30 years, and are not required to assure permanence after the end of the crediting period.
Unlike REDD+ projects, Jurisdictional REDD+ are exempted from this requirement and instead will simply access the buffer pool in case of any reversals.
4. Not exceeding legal requirements
Legal requirements are only strict for high-income countries. Other than high-income countries can be exempt if they prove that the legal requirements are not enforced based on authoritative and up-to-date information of non-enforcement that is relevant and applicable to the mitigation activities.
This exception suggests that carbon projects in developing countries will pass the legal requirements even if they overlap with an already existing policy if enforcement is lacking. The Voluntary Carbon Market’s role is not to displace needed governmental action as this will only prolong the lack of enforcement by providing a short-term solution to a very deep and fundamental problem. The role of the carbon projects is to increase ambition beyond the baseline of what countries have already committed and when projects are used for fixing a failed enforcement this sends the wrong message and incentivizes further inaction. Lack of enforcement is also an indicator of very high risks to permanence.
5. No ex-ante
Ex-ante credits, which issue credits based on the promise that removals will happen in the future, will be ruled out from being CCP-eligible. This is a positive development since until now early stage reforestation projects were able to sell future removals realizing in 60 years despite the many uncertainties related to the survival of newly planted trees and the risks of logging once the trees mature.
6. Credits double-claimed with NDCs will be eligible - at least for now
The CCPs consider credits that are double claimed - once by the buyer of the credits and once in the host countries' Nationally Determined Contributions (NDCs), as CCP-eligible. One of the main reasons for that is the ongoing debate on whether double claiming should be avoided by applying a corresponding adjustment when carbon credits are used on the voluntary carbon market. Many actors on the VCM, including ICVCM are awaiting more clarity on the need for corresponding adjustment at the next COP28. Thus, for now, double claiming with NDCs is not an assessment criteria, but one of the attributes or additional features some credit might have. ICVCM plans to reconsider CCP’s stance towards Paris Agreement Article 6 in the next iteration, to be published in 2025.
The Compensate Foundation emphasizes that for making robust carbon neutrality and net zero claims, it is crucial to use non-double-claimed carbon credits, whose mitigation outcomes are not included in the project host countries NDCs (more about this in our earlier
In its current formulation of CCPs, it is the buyers’ responsibility to be aware of the double-claiming issue and demand non-double-claimed credits. However, often buyers are not aware of the topic of double claiming and why it is problematic to buy credits which also contribute to NDCs.
7. The actual program and category assessments will define the impact
The CCPs and the Assessment Framework outline the criteria and the process for acquiring the CCP label for high-quality credits. The impact of the CCP will depend on how the criteria will be applied to carbon crediting programs and categories submitted for assessment.
The Assessment Framework does not provide detailed information about some key aspects of carbon credits’ actual climate impact. For example, the robustness of carbon quantification is not described in detail. Similar flexibility - or ambiguity - is present in demonstrating sustainable development benefits and safeguards. Often community benefits presented in project documentation are greatly exaggerated and do not correspond to the actual situation on the ground.
We do not know how strict the criteria will be interpreted in the assessment process. Therefore, the actual assessments, to be conducted by ICVCM and its working groups, will play a critical role in defining how individual requirements will be interpreted and how comprehensive documentation will be required to comply with them. Also, we do not know what type of explanations and exceptions will be approved, when carbon crediting programs and categories are not fully compliant with the criteria and instead provide their evidence that their projects are meeting the required criteria.
CCPs as a tool for weeding out the worst projects
In some parts, CCPs include requirements that go beyond the current common practice in the Voluntary Carbon Market, making them effective to weed out the worst projects. As noted by Trove Research in their
However, in its current state, the CCPs and Assessment Framework leave many loopholes that allow projects with low integrity to be eligible for the CCP label. Hopefully, these loopholes will be closed in the next iterations.
Text: Eftimiya Salo and Janne Rinne