The Integrity Council for Voluntary Carbon Market (ICVCM) has released a highly anticipated framework that aims to define the qualities of high-quality carbon credits. This framework is part of the ICVCM’s Core Carbon Principles (CCPs), which were published in March of this year. The Assessment Framework will be used to assess whether carbon credits adhere to the high-integrity CCPs, which include 10 codes across three areas: governance, emissions impact, and sustainable development. By the end of the year, buyers will have access to CCP-labeled credits. The ICVCM believes that this framework will establish a global standard for quality in the voluntary carbon market (VCM), addressing issues of confidence and integrity. Executives from the ICVCM emphasize the importance of high-quality credits in reducing emissions and achieving global climate goals.
The release of this guidance is timely, as the $2 billion carbon market has faced criticism and experienced a decline in liquidity and prices due to concerns over certain carbon offset projects. Nature-based carbon credit prices, in particular, have been significantly impacted. However, with the introduction of various initiatives, carbon credit prices have started to recover slowly. According to S&P Global Commodity Insights’ Platts assessment, nature-based credit prices (Platts CNC) increased from a record low of $1/mtCO2e in May to $2.45/mtCO2e in July. S&P Global data indicates that prices for the same credit reached an average of $9.55/mtCO2e last year. Many industry experts hope that this development will inspire more efforts in carbon removal and reduction, bringing certainty to the VCM. To earn a CCP label, a carbon credit must undergo two assessment levels.
The first level is the Program Level, which was released alongside the CCP guidelines. The Assessment Platform, included in this release, is designed for crediting programs seeking CCP eligibility. These programs, referred to as “standard-setting programs,” register mitigation activities and issue carbon credits. Examples of established programs include the Gold Standard, American Carbon Registry, and Verra’s Verified Carbon Standard (VCS).
The second level is the Carbon Credit Category Level, which is the newly released assessment guidance. However, the framework does not yet define what a ‘Category’ means. To address this, the Integrity Council will establish a Categories Working Group (CWG) to finalize the definition based on data from rating agencies and publicly available information. The CWG will recommend which categories should be prioritized for approval, which ones require further assessment, and which carbon credits should not receive the CCP label. According to the framework, carbon credits must support projects that align with net-zero goals, demonstrate additionality, permanence, and robust quantification.
The goal of this framework is to ensure that only the highest quality carbon credits prevail in the market and command premium prices. Some carbon crediting programs and standards are already revisiting and making changes to their methodologies. For example, Verra’s Verified Carbon Standard (VCS), the world’s leading carbon registry, is improving the quality of its forest carbon credits. The program plans to finalize its REDD+ methodology by the end of this year.
While improvements are being made, some experts caution that quality issues still persist in carbon offset projects. They argue that initiatives like the one introduced by the ICVCM are not a “silver bullet” that can instantly resolve the issue of quality. The scrutiny of the VCM has shed light on significant failures at the project level, which has impacted the supply of carbon credits. However, as major initiatives focus on improving the quality of credits in the market, further improvements are expected. The Integrity Council will establish multi-stakeholder working groups to clarify and strengthen the framework. They will also continue updating their guidelines and frameworks over time, incorporating new developments, technological advances, and lessons learned.
This initiative follows the recent launch of the VCMI’s Claims Code of Practice, which aims to enhance the credibility of the demand side of the VCM. This separate guideline will assist companies in using carbon credits to voluntarily offset their emissions. Both the VCMI and ICVCM share the goal of bringing integrity to the VCM and are working together to create an integrated market integrity framework that improves the quality of carbon offsets.
The ICVCM plans to announce CCP-Eligible programs and CCP-Approved categories later in 2023, making CCP-labeled credits available to buyers before the end of the year. It remains to be seen whether this new quality threshold will elevate the prices of carbon credits to a premium level.