What is the ICVCM?
The Integrity Council for the Voluntary Carbon Market (ICVCM) is a governance body for the voluntary carbon market (VCM). Its mandate is threefold: create a global benchmark for high-quality carbon credits; govern their implementation and adherence; and define a roadmap for VCM growth. Together, these levers promise to smooth the passage to the Paris Agreement by boosting market confidence and thus climate finance.What are the CCPs?
Last week, the ICVCM initiated Stage 1 of its campaign. The 10 newly published Core Carbon Principles (CCPs) establish a long-awaited threshold for quality carbon credits, supported by an assessment framework that provides guidance on CCP criteria, requirements, and eligibility.Market integrity is coming into view.
In the ICVCM’s own words: Build integrity, and scale will follow.
The CCPs are designed to foster trust and transparency in a market suffering from a dire lack of it. By introducing a “global benchmark for high-integrity carbon credits,” of every program, type, and region, the ICVCM paves the way for a “regulated-like” and standardized market framework — and not a moment too soon.
Carbon credits have an inevitable place in corporate transition plans. More than a third of large, global, listed companies have implemented net-zero commitments, according to recent research. Of those, 40% plan to use carbon credits to achieve net zero. Fewer than 2% have ruled out offsetting, which leaves nearly 60% that have yet to decide or disclose.
Could they be held back by fear of reputational and project-level investment risks?
In the absence of central regulation, a complex array of programs and standards has flourished. Verification frameworks, including Verra’s Verified Carbon Standard and the Gold Standard, serve an important purpose in holding environmental projects accountable, but their rules don’t apply to the total carbon-credit ecosystem. Moreover, there is no obligation to purchase verified credits.
Fragmentation has exacerbated buyer confusion, stunting market growth, and climate finance. By relieving corporate buyers of the burden of proof for credit additionality, permanence, and double counting, the stringent guardrails provided by the CCPs are likely to foster the confidence required to open the floodgates to liquidity.
The road ahead is long and winding.
“Transformational changes are more likely to succeed where there is trust, where everyone works together to prioritize risk reduction.” — IPCC Chair Hoesung Lee
The final CCP release, scheduled for Q2, will establish specific CCP standards for different credit categories, including afforestation, renewable energy, and waste management. Programs will be assessed and the first batch of credits stamped with CCP approval by end 2023.
In advanced markets, regulation and insurance play a twin role in mitigating asset-level risk. Carbon credits, however, are no ordinary asset, nor a real commodity. This is an inherently complex market, in which no two credits are the same.
The CCPs are the end result of a long consultation involving hundreds of industry players, scientists, and policymakers. The ICVCM recognises there’s a long way to go — and plenty of feedback loops — before ‘success’ can be claimed without reservation. But this is an enormous first step.
Oka, The Carbon Insurance Company, looks forward to working with the ICVCM and other bodies to accelerate the VCM’s route to integrity.
