Thursday, June 29, 2023
The Voluntary Carbon Markets Integrity Initiative (VCMI) published its long-awaited
The Code aims to provide requirements, recommendations, and guidance to organizations on using carbon credits in their near-term emissions reductions and long-term net-zero commitments. It guides the employment of climate claims that are based on the use of carbon credits. The Code includes a four-step process for making robust company-wide claims.
VCMI states carbon neutrality claims lack clarity which undermines the confidence in the voluntary carbon markets. As a solution, VCMI proposes three tiers of claims, which represent a company’s ambition of their climate commitments:
VCMI Silver is the most accessible tier, requiring the purchase and retirement of high-quality credits in an amount equal to or greater than 20%, and less than 60%, of a company's remaining emissions once it has demonstrated progress towards its near-term targets;
VCMI Gold requires the purchase and retirement of high-quality carbon credits in an amount equal to or greater than 60%, and less than 100%, of a company's remaining emissions once it has demonstrated progress towards its near-term targets;
VCMI Platinum is the most aspirational tier, requiring the purchase and retirement of high-quality carbon credits equal to or greater than 100% of the remaining emissions.
The Code improves the transparency of claims
The Compensate Foundation welcomes the Code’s ambition in demanding strict transparency of the VCMI Claims.
The Code requires the claimants to maintain and disclose annual GHG inventories, set validated emission reduction targets (near-term and net zero by 2050), and demonstrate that the organization is on track to meet the near-term targets.
Disclosing emissions, emissions reduction targets, and use of credits ensures that offsetting is in the right place in the mitigation hierarchy. Also, it enables assessing the proportionality of the use of carbon credits compared with caused emissions.
The Compensate Foundation appreciates the requirement to demonstrate that the company’s public policy advocacy supports the goals of the Paris Agreement and does not represent a barrier to ambitious climate regulation. Misalignments between companies’ policy advocacy and actual climate actions are common. For example, a fossil fuel company may be advocating for 1.5 °C targets but, in reality, continue increasing the use of fossil fuels and having ambiguous near-term targets.
According to the Code, companies should use the highest quality carbon credits and transparently report relevant information about retired credits. Also, third-party assurance of information is required. The Monitoring, Reporting and Assurance Framework of the Code will be released in November 2023.
The Compensate Foundation agrees these requirements are necessary to guarantee genuine climate impact and transparency.
Scarcity of high-quality credits on the market
The Code brings clarity to corporate climate claims in the complex and rapidly changing voluntary carbon market. However, some open questions remain.
Regarding the quality of the carbon credits used for claims, the Code relies on the Core Carbon Principles, developed by the Integrity Council for the Voluntary Carbon Market (ICVCM).
The ICVCM published the first half of its assessment framework in the spring of 2023. The second half of the framework will be published towards the end of the year. The document will cover criteria for assessment including additionality, quantification, baselines, permanence, and the degree to which offsets contribute to a net zero transition.
In theory, these requirements are necessary to guarantee genuine climate impact and transparency but in practice, it is difficult to find additional and high-quality carbon credits which are not double-claimed.
The risk of double claiming remains
According to the Code, carbon credits with or without associated corresponding adjustments can be used to underpin all VCMI Claims.
In the Core Carbon Principles, corresponding adjustments will be an attribute, but not a requirement for a high-quality carbon credit. Therefore, it will be up to the credit buyer to demand corresponding adjustments, to avoid double claiming.
It is problematic if a company makes a climate claim based on double-claimed carbon credits, which are also counted into the project host country’s climate targets. In this situation, the use of credits does not have a real added climate impact beyond the country’s national climate targets.
Through corresponding adjustments, double claiming is avoided, as CO2 reductions or removals do not contribute to the host country’s national climate targets.
The Compensate Foundation believes that securing the robustness of claims goes hand in hand with the quality of credits. The Code leaves the door for double claiming open unless corresponding adjustments are required by carbon crediting programs, credit buyers, and other stakeholders. It remains to be seen to what extent different actors will demand corresponding adjustments from the credits.
Overall, the Code is a significant improvement in demanding better integrity and transparency of climate claims. Whether the Code succeeds in improving the integrity and transparency of claims, also depends on other actors, such as project developers, carbon market standards, and independent third parties responsible for the quality of carbon credits offered on the market.
Text: Janne Rinne and Eftimiya Salo