The growth of the voluntary carbon market has given many organizations the opportunity to offset their emissions as they work toward more permanent reduction. However, this growth has also coincided with increased confusion, and in some cases criticism, surrounding carbon credits.
With a wide variety of carbon credits for sale and a lack of standardization in the market, many companies are left wondering:
- What’s the impact of carbon credits? Are the ones I’m buying actually helping the environment, or is this just greenwashing? Is there any way to know?
- Even if I know I can buy high-quality carbon credits, how does that fit into my overall carbon footprint goals/sustainability strategy?
While these are reasonable concerns, turning away from carbon credits doesn’t seem like a viable approach either. Not all emissions can be reduced to zero, at least on an immediate basis, so carbon credits can fill this void.
This is particularly important amidst the recent IPCC report that shows the world is not moving fast enough to mitigate climate change. The report states with high confidence that global warming will exceed 1.5°C this century and will be hard to stay below 2°C, based on countries’ current emissions targets.
With that in mind, funding more carbon reduction projects could help mitigate global warming.
“Tracked financial flows fall short of the levels needed for adaptation and to achieve mitigation goals across all sectors and regions,” the report adds with high confidence.
Some low-quality carbon credits do make their way into the market, but that shouldn’t tarnish the validity of high-quality credits that help companies (and the world overall) reach emissions goals.
Fortunately, some much-needed clarity is coming to the market in 2023 to help organizations verify carbon credit quality and gain guidance on how to best use carbon credits.
Specifically, the Integrity Council for the Voluntary Carbon Market (ICVCM) and Voluntary Carbon Markets Integrity Initiative (VCMI) are stepping in as quasi-regulatory bodies to create much needed standards and bring confidence to voluntary carbon market participants.
Unifying Carbon Credit Standards
If you’re buying a car, you might look at IIHS safety ratings. If you’re choosing a high-end restaurant, you might look for one vetted by Michelin. But what authority do you turn to if you’re looking for carbon credits?
While there are some high-quality carbon registries and organizations involved in selling credits, fragmentation in the market creates confusion and can cause low-quality credits to slip through the cracks.
To help bring integrity and clarity to the market, the ICVCM is stepping in to create unifying standards. That way, carbon credit buyers can gain greater assurance that they’re financing carbon reduction measures that have the intended, high-quality impact they’re looking for.
At the end of March 2023, the ICVCM released its Core Carbon Principles (CCPs). These principles were “developed with input from hundreds of organizations throughout the voluntary carbon market,” and they “set out fundamental principles for high-quality credits that create real, verifiable climate impact, based on the latest science and best practice,” the ICVCM explains.
The CCPs are based on three pillars:
- Governance, e.g., providing transparency on mitigation activities in a publicly available manner
- Emissions Impact, e.g., having additionality, in the sense that the emissions reduction or removals would not have happened without the funding from the carbon credits
- Sustainable Development, e.g., meeting or exceeding social and environmental safeguards
This framework provides an important step toward standardization, but the bulk of the impact will likely come in mid-2023 when the ICVCM plans to publish its framework for assessing specific categories of carbon credit projects. Then, carbon registries will be able to apply to become CCP-eligible and will be able to start marking projects with CCP-approved “stamps” later in the year.
This third-party, thorough assessment should help clear up confusion around what makes a carbon credit high-quality or not. In time, companies will be able to fund CCP-approved carbon credit projects, which can carry more weight than buying a carbon credit with lesser-known integrity.
Building Confidence for Carbon Offsetting Strategies
Being able to find high-quality carbon credits is only half the battle. You wouldn’t want to just throw money at credits without knowing what that means in terms of affecting your carbon footprint, for example.
And it’s important to build a verifiable narrative around your sustainability efforts, as you wouldn’t want to make carbon-neutral claims, for example, if customers don’t trust or understand these statements.
So, to address these concerns, the VCMI is stepping in to build credibility and confidence when it comes to carbon credit usage.
“With more businesses setting climate targets and making claims such as ‘net zero’ and ‘carbon neutral’, there is a risk that a lack of clarity about what these commitments and claims mean could hinder truly additional climate action and undermine confidence in the voluntary carbon market and wider corporate action,” the VCMI explains.
In 2022, the group released its Provisional Claims Code of Practice, with an update likely coming soon. This provides a framework for making credible claims, built around four steps:
- Meet Prerequisites, e.g., making science-aligned net-zero public commitments for 2050 or sooner, across Scope 1, 2, and 3 emissions, before using carbon credits and making claims
- Identify Claims, e.g., the highest-level claim, VCMI Gold, requires a company to be on track toward its next science-aligned emissions reduction target while using high-quality carbon credits to offset 100% of remaining emissions
- Purchase High-Quality Credits: While VCMI does not have its own detailed standards for carbon credits, it has some requirements like the credits coming from a recognized, credible standards organization.
- Report Transparently on Carbon Credits: Lastly, companies need to back up their claims by publishing annual reports (such as within an annual sustainability report) that include more detailed information about their carbon credit usage, such as reporting how many credits they purchased and retired to make claims.
A Brighter, Clearer Future for Carbon Credits
While some work still needs to be done to codify these standards—which will continue to go through iterations/reviews rather than being static—the work of the ICVCM and VCMI should help make the carbon credit market easier for everyone to navigate.
If companies can feel confident that they’re making a positive impact by purchasing high-quality carbon credits, then they can reach sustainability goals sooner. They can also minimize risks such as potential reputational harm from funding low-quality credits.
Overall, the future of carbon credits looks brighter, knowing that companies will soon have more trustworthy, standardized frameworks to follow.
Meanwhile, you can get started measuring, managing, and marketing your carbon footprint strategy through Terrapass and our vetted, high-quality partners.
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