An international benchmark that determines what counts as a high quality carbon offset project has taken a step closer to reality, with a high-profile industry governance body naming the first few standards organisations that have cleared its assessment on Friday.
Three of the “Big Four” certifiers – Gold Standard, ACR (formerly American Carbon Registry) and Climate Action Reserve are said to have met the “high-integrity” criteria set by the Integrity Council for the Voluntary Carbon Market (ICVCM), which was established by global financiers in 2021 to discipline and grow the fledgling sector.
The three approved organisations, which together verify over a quarter of carbon credits put on the global voluntary market, will soon be able to add a new label created by the ICVCM to carbon credits they list. The hope is for the label to drive demand towards quality projects and build confidence back into a market shaken hard by allegations of fraud and mismanagement in recent years.
ICVCM chair Annette Nazareth said the move represents “a new chapter” for the market. “This will help mobilise private capital at scale for projects to reduce and remove billions of tonnes of emissions that would not otherwise be viable, and will channel investment to the Global South,” she said.
This first round of approvals, from appraisals that started late last year, does not include Verra, which dominates with an almost 70 per cent market share. ICVCM says it needs more time to process a large volume of information from the certifier, and board consideration of its application is expected by May, along with a handful of other candidates. Verra was the target of intense media scrutiny last year for allegedly enabling developers to overissue carbon credits to corporate buyers.
ICVCM assesses the carbon credit certifiers, not individual carbon projects. It checks for acceptable measures taken in areas such as governance, transparency, calculations and community safeguards, before allowing certifiers to pin a “Core Carbon Principles”, or CCPs, label to the carbon credits they approve.
Certifiers have had to change some procedures for ICVCM compliance, the council said, pointing to Gold Standard updating its registry to show who bought and used carbon credits, and for what purpose.
“Building the integrity of the carbon market so it can deliver real impact where it is needed most is vital, and the CCPs represent an important step on this journey,” said Gold Standard chief executive Margaret Kim.
“We will continue to engage constructively with ICVCM to defend best practices in a world that is demanding not only carbon market integrity, but also inclusivity and urgency,” said ACR executive director Mary Grady.
Climate Action Reserve president Craig Ebert said the organisation “continues to be fully supportive of collaborative actions from our global community to ensure integrity and high quality in the voluntary carbon market”.
The three approved certifiers cannot affix CCP labels yet as the ICVCM has not yet decided what types of carbon projects – forest, renewables and so on – are eligible for the tag. The council is examining individual carbon crediting methodologies, and the first rulings are expected by next month.
A decision on forest management projects, once popular but now shunned due to integrity allegations, is expected by September. By then, ICVCM also wants to largely complete reviewing methodologies covering more than half of the carbon credits issued in the market.
The certifiers themselves have asked ICVCM to exclude some methodologies – meaning carbon credits generated using them cannot use the CCP label. Notably, Verra left out a handful of forest management rulebooks – some of which are under internal review. Gold Standard opted out over a dozen methodologies related to issues such as biofuels and municipal waste. ACR excluded one on carbon capture.
The ICVCM represents arguably the most prominent industry-led effort to improve the integrity of the carbon market. A sister group is in parallel looking into how corporate buyers should properly use carbon credits, while the United Nations is also working on similar initiatives for country-level carbon trading.
The council has had to balance calls for strong oversight and flexibility from various corners of the carbon market. Certifiers had asked the ICVCM to be less prescriptive when it was developing its assessment criteria.
Meanwhile, several governments and investors – including the US$150 trillion GFANZ climate coalition – have agreed to back purchases of CCP-labelled credits, increasing hope that the initiative will bring respite to the stalled market. As it stands, carbon credit prices, especially in the forest management quarter, are still at record lows, though higher offsetting activity in the last quarter of 2023 hints at recovery.
Work in progress
ICVCM’s approvals come a week after Belgium-based Carbon Market Watch (CMW) raised concerns about documentation issues in the registries of the “Big Four” carbon credit certifiers.
In a review of 140 listed carbon projects, the nonprofit said over 400 documents – related to project design, validation, monitoring and verification – were missing, while others were mislabelled, duplicated or lacking in clarity – with some showing erroneous project locations. These registries showed “notable limitations in transparency practices”, and CMW called for stronger quality control.
In particular, CMW said almost 30 per cent of projects it reviewed in Gold Standard’s registry had missing validation reports. A Gold Standard spokesperson acknowledged continuity issues with documents since a system transition in 2021, and said the organisation is working to resolve the matter. Requests for project reports can be made with its certification body SustainCERT, the spokesperson added.
CMW added that ACR and Climate Action Reserve do not mandate the publication of project monitoring reports – a point ACR told Eco-Business was inaccurate as mandatory disclosure of such information has been in place since last July.
As approved certifiers, ACR, Climate Action Reserve and Gold Standard will be subject to assurance and oversight from ICVCM, which has said it will make spot checks, respond to complaints, and is willing to retract recognition of programmes should it find wrongdoing.
