The Integrity Council for the Voluntary Carbon Market (ICVCM), a governance group seeking to instil quality and trust in the beleaguered corporate offsetting space, is ready to reject applicants seeking endorsement should they fall short of expectations.
But ICVCM board member Kavita Prakash Mani told Eco-Business that the council will first seek to get carbon credit certifiers to improve their governance and methodologies, given the group’s aim to create as big a high-quality market segment as possible.
The ICVCM had earlier this month approved the first three certifiers, which can soon affix “Core Carbon Principles” labels – a quality stamp – to the carbon credits they issue. The clearances did not include Verra, which covers nearly 70 per cent of the market, nor methodologies on contentious forest protection projects, of which several have come under fire in recent years.
A ruling by the council on Verra is expected by May, while the assessments on methodologies – rulebooks on how carbon credits can be generated – will take at least months more. Overall, at least three more certifiers – ART, Isometric, Social Carbon – and some 100 methodologies will be evaluated.
The review of methodologies for “reducing emissions from deforestation and forest degradation”, or REDD+ projects, is the “most challenging” part of ICVCM’s work, Mani said.
Businesses buy carbon credits that each represent a tonne of carbon dioxide saved to advance their own decarbonisation goals. A media investigation early last year alleged that most REDD+ projects do not live up to their climate credentials, which led to a dramatic drop in the price of carbon credits.
Kavita Prakash Mani currently sits on the standards oversight committee and board of the Integrity Council for the Voluntary Carbon Market. Image: Kavita Prakash Mani.
The ICVCM scrutinises the work of carbon credit certifiers, which verify individual projects before they can trade on the market. The council is not failsafe, so the focus has to be on identifying and plugging gaps when problematic carbon projects are called out in the future, Mani said.
On the back of ICVCM’s first approvals, and as the council heads into more heated territory, Eco-Business spoke with Mani, a veteran conservationist, about its future work plan, engagements with Asian policymakers, and views on reputational risks in a polarised market.
How much traction is there among Asian countries and financiers in getting companies to buy carbon credits cleared by the ICVCM?
Our main aim is to ensure the integrity of the supply side of the market. But alongside that, we are obviously keen to make sure that demand for high-quality carbon credits exists.
Here in Southeast Asia, we’re working with Singapore, which allows part of its carbon tax to be fulfilled with carbon credits. We are trying to see if companies can use ICVCM’s Core Carbon Principles (CCPs) as part of their standard setting. The CIX carbon exchange is using the ICVCM framework as the basis for their analyses and due diligence.
In other Asian markets, such as Japan, South Korea, India and China, there are no specific commitments to the ICVCM, but we have a lot of engagements in those markets. Companies are trying to make sure that they are not caught out with buying credits from programmes that lack integrity.
What we are now pushing for is more government engagements, for them to set standards aligned to the ICVCM. Businesses in China can also use some carbon credits to offset taxes. We have board members and groups in senior positions in the Chinese system – they bring both the Chinese perspective into ICVCM and help take the ICVCM into the government system.
What we would love is also for organisations developing carbon projects to use the ICVCM standards to craft high-quality projects.
There is concern that ICVCM’s work could lead to a two-tiered market where the high-quality tier is inaccessible or unpalatable for emerging-market buyers. How do you prevent that?
We hope there is no two-tier market, that is definitely not the aim. The point is that the entire market should be lifted to one standard that is really high in quality and integrity.
We will work with all carbon credit programmes to ensure that we have the highest coverage of the market. Then everyone will have similar pricing. In a market with credits of varying quality, any project that goes wrong will start influencing everything else and drag the market down. We can’t make programmes apply for CCP eligibility, but we would really encourage all of them to do so.
We will probably end up covering 98 per cent of the market, with Verra under assessment, and the other major programmes – Gold Standard, ACR, Climate Action Reserve – having already been approved.
Carbon offsetting platform Abatable said last month that only about 6 per cent of historical supply can confidently pass ICVCM’s assessment. What is your response to this?
I think the operative word there is “historical”. Markets evolve and get stronger, so it is very possible that the earliest carbon credit standards do not meet the quality thresholds tody. Even now, as we are assessing programmes, we are seeing some that are starting to close loopholes.
This journey will take time. Take for example Verra, which has now changed their methodology on REDD+ in response to all the feedback and learning. The most used methodology in carbon offsetting has now been improved.
Obviously all the projects under the previous methodology now need to make sure they meet the new standards, and that may entail massive improvements. We need to help projects transition as methodologies improve, and not just leave them behind because they are no longer good enough.
One sign of a high-quality standard could be that not all applicants pass the test. Is the ICVCM prepared to fail programmes or methodologies?
We would be absolutely willing to fail applicants. I think that is the whole point. But we also want to help them meet our standards.
What we have seen, at least in the three programmes that have been validated, is that they are using the ICVCM framework to improve their own processes first even before applying to us.
We would not hesitate to say something doesn’t meet the standard, but there is also a lot of engagement with applicants as part of the assessment so they can improve, before we have to make a decision that the gap on quality is too wide.
In the end, we can issue three results for programmes and methodologies: approved, approved with provisions, and not approved. Where changes are needed, the board has discretion to set a timeline and clarify what needs to be addressed.
In recent years the bulk of criticism has been on REDD+ projects. How is the ICVCM approaching its review of such methodologies?
We’re looking into Verra, the largest programme around REDD+, along with ART’s TREES standard that looks into jurisdiction-scale projects.
REDD+ has obviously been in the limelight because of issues such as additionality and leakage. These are tricky issues. For instance, do you have a requirement for 20 years of permanence in carbon storage, or 40 years? Do you have a sufficient buffer pool of credits for instances where there is a forest fire? Some of these issues have been difficult, even within the ICVCM.
I think we have landed on something we feel is robust. There is also a continuous improvement programme specifically for REDD+ [the current rule is to monitor for at least 40 years’ of carbon storage, with future iterations of the rulebook possibly extending to 100 years].
The main criticism on REDD+ has been around additionality and creating baseline deforestation rates. I think we now have a lot of good technology for looking into those issues. New jurisdictional approaches also help with making accurate baselines compared to creating them for individual forest projects.
But REDD+ is definitely the most challenging part of ICVCM’s work. For technology-based projects, the additionality issue can be addressed by looking out for whether projects in developed markets already have enough financing. That is easier than carbon calculations in REDD+, where there are lots of uncertainties and elements not completely in developers’ control – such as how deforestation rates are affected by forest fires or climate change.
Also, the environmental and social safeguards for REDD+ sometimes need to be way more robust than technology-based projects. You don’t want large monoculture plantations which destroy biodiversity, and there are a lot of communities living in forest environments. You need to be very clear about the FPIC [free, prior and informed consent] and benefit sharing processes.
How are you working with the United Nations to harmonise rules with the “Article 6.4” international carbon marketplace for countries?
There is a working group looking into that, it is one of our high priority tasks. We don’t have an answer yet, but that is ongoing.
We do want to harmonise the standards, and for the Paris Agreement’s Nationally Determined Contributions [climate targets set by countries] process to match what the ICVCM is doing. We cannot have two different processes, there is enough complexity in the market already.
In today’s carbon market, a single errant carbon project can destroy trust across the ecosystem. Can the ICVCM’s reputation withstand a situation where a project selling CCP-labelled credits is accused of wrongdoing?
It is definitely a risk, especially given the level of scrutiny on the market. Some of the carbon project problems could be avoidable, others may not be.
CCP-labelled credits come from meeting the requirements of methodologies and programmes that the ICVCM has approved. So if something goes wrong with a project, we need to find out why. Was it the validation and verification bodies who didn’t do a good job checking the project against the methodology? Was there something wrong with the methodology? Or was there a governance issue for the programme?
I wouldn’t say problems would never arise; more likely than not something will still go wrong. We have to learn from it and take it forward. We’re hoping the standards are strong enough, and then stakeholders can focus on plugging gaps in implementing them.
We have also set up an appeals process to the ICVCM for claims that certain programs or projects do not meet our standards.
What are your thoughts on the SBTi (Science-based Targets initiative) approving carbon offsetting for a company’s Scope 3 indirect value chain emissions?
From ICVCM’s perspective, we want to channel finance into carbon avoidance and removal by ensuring the supply side of the market is really strong.
But the market doesn’t work unless there is demand. To create such demand, you need to have alignment between all the stakeholders – ICVCM, SBTi, sustainability reporting group CDP and others. If the SBTi doesn’t recognise offsets as part of corporate decarbonisation strategies, companies are unlikely to invest in carbon credits.
From a pragmatic perspective, it is helpful to recognise the role of offsets in the hard-to-abate areas. The first principle is still that companies have to focus on internal decarbonisation, and cannot be allowed to buy their way out. But we do see a role for offsets, given also that we need the investments into nature and carbon projects to stop climate change in time.
This interview has been edited for clarity and brevity.
