A promising start with space for improvement - Compensate’s take on ICVCM’s Draft Core Carbon Principles

Wednesday, September 28, 2022

The Integrity Council for the Voluntary Carbon Market (ICVCM) is an independent governance body for the voluntary carbon market that was recently formed from the Taskforce on Scaling Voluntary Carbon Markets (TSVCM). The main task of the ICVCM is to establish the Core Carbon Principles (CCPs) for high-quality carbon credits, the Assessment Framework and Assessment Procedure. ICVCM aims at setting new threshold standards for high-quality carbon credits which have a real, verifiable climate impact based on science. The CCPs are being developed by the Integrity Council’s Expert Panel supported by eleven subject matter experts in topics ranging from carbon sequestration science to the rights of indigenous peoples and local communities (IPLCs). The Core Carbon Principles and Assessment Framework drafts were open for public consultation from July to September and the final draft will be published in Q4 2022. 

Compensate participated in the public consultation round which closed this week. The draft CCPs and Assessment Framework are already setting high expectations for improving the voluntary carbon market and increasing transparency by tackling the underlying issues which have resulted in mistrust and widespread criticism of the whole field. The Integrity Council is providing new quality criteria that go beyond existing standards in order to challenge both carbon crediting programmes like Verra and Gold Standard and individual carbon projects to do better.

"The market is flooded with low quality credits which are issued based on unrealistic assumptions and don’t achieve much beyond business as usual."

Such an independent organization which will make an impartial judgment on which projects are additional and how robust carbon quantification methodologies are was needed for a very long time. The market is flooded with low quality credits which are issued based on unrealistic assumptions and don’t achieve much beyond business as usual. Using such credits for making corporate offset claims results in net positive emissions as the compensated emissions are not actually counterbalanced by additional removals or emission avoidance.

What can be further improved in the final draft

The draft CCPs and draft Assessment Framework aims to set the minimum threshold criteria and requirements for high integrity carbon credits, called “initial threshold”. In addition, the draft CCPs outline stringency requirements or “full threshold”. The idea is that carbon crediting programs and projects will first comply with the initial threshold which is much easier to achieve and later on adopt the additional requirements outlined in the proposed full stringency requirements.

However, in order to be CCP-eligible in the immediate term, carbon crediting programs and credit types will have to meet the initial threshold and commit to meet the more stringent requirements in a timely manner. This could mislead corporate buyers into thinking that a project has complied also with the stringent requirements. Hence, Compensate recommends that only projects which apply to the stringent requirements should be CCP-labeled. There should be a separate label for projects which only apply to the initial threshold and have committed to achieve the stringent requirements as well, but have not yet done so. This will enhance transparency and avoid confusion for the buyers of the carbon credits.

Additionality

Additionality is a must if carbon projects are to achieve any impact beyond business as usual and if offsets are used for making corporate climate claims. When non-additional credits that don’t go beyond business as usual are used as offsets, the result is net positive emissions as the compensated emissions are not actually counterbalanced by additional removals or emission avoidance.

The current draft leaves the option that a project could be deemed financially additional with “high-likelihood” only based on successful investment analysis. This could provide perverse incentives for potential project developers to demonstrate negative profitability which could just be the result of a bad business model. 

"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 incentivises further inaction."

Alternatively, projects with “medium additionality” are CCP-eligible if they can pass the additionality test by demonstrating low availability of a project activity in a given area and that there are barriers for the project implementation which can be overcome by carbon credit revenues. However, this will only encourage project developers to select the “best” area where there are no similar activities 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 don’t have local knowledge. This is too low a threshold which almost any project can pass.

With regard to legal requirements (policy additionality), the current draft states: “For countries other than high-income counties, legal requirements shall only be deemed to be not enforced if credible and recent evidence is provided that non-enforcement is widespread.” 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 incentivises further inaction. Lack of enforcement is also an indicator of very high risks to permanence.

"Projects should only be allowed to issue carbon credits if they go beyond existing legal requirements and targets."

Compensate recommends that only projects with high-likelihood of additionality should be CCP-eligible. The ”medium” additionality likelihood is set too low and will allow projects with very questionable additionality to be CCP-eligible. Also, investment analysis, barrier analysis and market penetration analysis should always be conducted together not either/or. Projects should only be allowed to issue carbon credits if they go beyond existing legal requirements and targets.

If assessing additionality in the final version is kept in the way it is in the draft -  high likelihood and medium likelihood, this should be transparently communicated and visible as one of the attributes, so buyers could filter only projects with high likelihood of additionality. In order to avoid greenwashing, companies should reflect the likelihood of additionality in their corporate climate claims and communication, for instance being “carbon neutral with medium likelihood”.

Robust quantification

Robust baseline scenario is critical in order for the offset claim to be grounded in truth. In the current draft, the term “conservative baseline” is too vague and can be misused. For example some baselines could be more or less conservative than others. Changing from "conservative baseline" to “most conservative” baseline and adding baseline criteria to show what it means in practice would avoid such misinterpretation or “baseline shopping”.

"This will help avoid the situation where corporate buyers unknowingly buy low quality credits, and later become victims of greenwashing claims."

In the Initial threshold there are two different requirements - for the first one, it is enough that emission reductions and removals are quantified with more than 66% certainty and for the second more than 90% certainty. “Likely” with probability of 66% is not robust enough and should not be eligible for CCP or offset claims. In case this is left in the final draft, it should be transparently communicated e.g. in the form of attributes whether the project has 66% robust quantification or 90% so that the companies can make informed purchasing decisions knowing exactly how good or how bad the project quantification is. This will help avoid the situation where corporate buyers unknowingly buy low quality credits, and later become victims of greenwashing claims.

Alignment with Paris Agreement - No double claiming

Double claiming refers to a situation where two parties claim the same carbon removal or emission reduction. Commonly, the two claiming parties are an organization offsetting its emissions and the host country of the project trying to reach its nationally determined contribution (NDC), or climate target, under the Paris Agreement.

Addressing double claiming should not be optional as it is absolutely critical to the effective functioning of the market. When a compensation claim is made, that statement should be grounded in truth. It is simply not acceptable to make a compensation claim using emission reductions or removals that have already been counted and claimed by the host country of the project. Contrary to the intention, this in fact results in a net increase of emissions in the atmosphere as only 1 tCO2 has been avoided or removed instead of 2 tCO2 - one by the company and one by the host country.

Double counting

If a company claims to be carbon neutral through carbon credits that are also counted into the project’s host country goals, as far as climate ambition is concerned, the company hasn’t actually done anything extra. On the other hand, double claiming can also disincentivize countries from implementing much needed climate action. Offsetting should always be additional to national climate targets for an increase in overall climate ambitions. If corresponding adjustment is not applied, carbon credits should not be used for making offset claims, while companies can still support such projects, they should change the claim to “climate action”, “contribution claim” or “climate finance”.

Compensate supports the idea of having a share of proceeds to meet the cost of climate adaptation and providing a contribution for overall mitigation.


Text: Eftimiya Salo, Head of Carbon Projects at Compensate

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