Verra, a key player in the voluntary carbon market, has provided an update on the compensation process for carbon credits associated with 37 rice cultivation projects in China that were rejected in August 2024. This development sheds light on the steps taken to address over-issued Verified Carbon Units (VCUs) and outlines the remaining actions needed to rectify the situation.
In August 2024, Verra made the decision to reject the 37 rice cultivation projects in China following a comprehensive review that raised concerns about their management. The organization discovered that these projects did not adhere to proper methodologies, and there were issues with the audits conducted by validation and verification bodies (VVBs). These discrepancies resulted in the issuance of more carbon credits than the projects had actually earned. Out of the 37 projects rejected, 25 were found to have over-issued VCUs, which are crucial units in the carbon offsetting market. Such discrepancies compromise the integrity of the entire carbon market, eroding trust among companies and organizations utilizing these credits to offset their carbon emissions. Consequently, Verra took swift action by imposing sanctions on the companies and VVBs involved to ensure accountability and uphold the credibility of its registry.
As of January 2025, Verra has confirmed the compensation for the first batch of over-issued VCUs. Two project proponents, Vitol (China) Energy Co. Ltd. and Timing Carbon Asset Management Co. Ltd., have collaborated directly with Verra to compensate for 480,000 VCUs from five affected projects. While this marks progress in rectifying the issue, there are still 4,080,000 VCUs awaiting compensation. These credits are associated with projects managed by Search CO2 (Shanghai) Environmental Science & Technology Co. Ltd. and Hefei Luyu Agriculture Technology Co. Ltd.
Verra has taken a firm stance against non-compliant parties, suspending the registry account of Search CO2, responsible for 10 rejected projects and 2,220,000 outstanding VCUs. Failure to compensate for the over-issued VCUs could lead to the permanent closure of the company’s account. Similarly, the remaining 1,860,000 VCU credits linked to projects managed by Hefei Luyu Agriculture Technology Co. Ltd. are pending resolution. Following the termination of its agreement with Shell Energy (China) Limited, Verra has moved these projects to an administrative account, requiring Hefei to address the issue before opening a new account or registering new projects.
Verra’s response to the rejected rice cultivation projects underscores its dedication to upholding the integrity, transparency, and quality of the voluntary carbon market. According to Justin Wheler, Verra’s Chief Program Management Officer, the organization’s decisive actions demonstrate a commitment to enhancing integrity, transparency, and quality in the market. Verra’s proactive measures aim to address inappropriate marketplace conduct and continually improve its standards programs. In addition to working with project proponents, Verra is finalizing its review of responses from the four VVBs involved in the rice cultivation projects, with potential sanctions pending based on the findings. These measures could include suspending the VVBs’ validation and verification privileges, significantly impacting their operations in the carbon market and emphasizing the importance of quality audits and transparency in issuing carbon credits.
Verra’s handling of the rejected rice projects in China reflects its dedication to maintaining carbon market integrity. The organization’s approach to this situation will influence the future of the carbon credit market, especially as more companies seek to utilize carbon credits to achieve their decarbonization goals. By addressing discrepancies, ensuring the accuracy of carbon credits, and holding VVBs accountable, Verra aims to foster trust in the market. Its emphasis on transparency and quality will shape carbon credit standards, supporting global climate objectives and the transition to a low-carbon future.
