A Path Forward to High-Integrity Voluntary Carbon Market Offsets

Core Carbon Principles Part II: Assessment Framework

The newly released Assessment Framework provides guidance on how standards will be assessed along with the underlying project methodologies within each standard. This process is designed to expedite the approval of some standards that have already passed through a degree of external scrutiny, as is the case with CORSIA, while providing an additional layer of review and assessment for those standards that have not. Further, Part II provides details on the assessment process itself and the process for ongoing assurance and enforcement.

The goal of the CCPs, the Assessment Framework and, ultimately, CCP-Approved offsets, is to "…build trust in the voluntary carbon market and unlock investment by making it easy for buyers to recognize and put a price on a high-integrity carbon credit."

Background

The Voluntary Carbon Market ("VCM") has gone through a period of rapid growth, emerging from a niche market to one seen as playing a critical role in the path to Paris Agreement targets. As the market has become mainstream, it has received heightened scrutiny from stakeholders and regulators alike and it is widely acknowledged that the market requires more stringent oversight and quality control.

Timeline

• September 2021 – The Integrity Council for the Voluntary Carbon Market ("ICVCM") was established and their work, which included extensive stakeholder consultations, has culminated in the release of two documents
• March 28, 2023 – Part I established a set of 10 guiding Core Carbon Principles ("CCPs") for high-integrity carbon offsets
• July 27, 2023 – Part II establishes the Assessment Framework to evaluate carbon offset standards and methodologies against the CCPs

What's Next:

• End of year 2023 – The ICVCM expects CCP-Approved Offsets to be available in market by year end. The tagging of CCP-Approved offsets and any applicable CCP Attributes will be completed by the standards.
• 2024 and beyond – The ICVCM will establish a number of working groups including the Categories Working Group and Multi Stakeholder Working Group that will provide analysis on which category types meet the criteria and requirements in the Assessment Framework.
• 2026 – The CCPs will continue to evolve based on best practices with the intention to pursue continuous improvement. The first update of the CCP Assessment Framework is expected in 2026.

Key Criteria Within the Assessment Framework

• Compatible With a Transition to Net Zero – Certain project activities, including enhanced oil recovery using carbon capture, fossil fuel-based road transport, and coal power generation are excluded from eligibility. Project types that include electricity generation from natural gas are permitted.
• Permanent – Projects will be required to monitor and report on emissions for at least 40 years for project types where risk of reversal exists (i.e., Nature-based solutions). The ICVCM has already indicated this will likely rise to 100 years in the next iteration of the framework.
• Additional – Standards must ensure project documentation demonstrates that in a counterfactual scenario where carbon revenues are not available, the project activity would not have occurred and therefore it is sufficiently additional. The ICVCM is also expected to take into account restrictions standards have already placed on some project activities to ensure they remain additional, including renewable energy and energy efficiency projects.
• Robustly Quantified – Overestimation has been a key point of criticism for the market. To help mitigate this, standards must ensure their measurements of emissions impact are conservative.

Assessment of Carbon Crediting Programs

• Standards apply through the ICVCM Assessment Platform. CORSIA-eligible standards will be fast-tracked, while others will require further assessment.
• The Governing Board will notify standards of changes, if any, required to become CCP-Eligible.
• The Governing Board will publicly release their final decision in which they may approve, approve with conditions, or reject the application.

Assessment of Categories

• In order for CCP-Eligible standards to tag offsets as CCP-Approved, category assessment is required. The Categories Working Group ("CWG") will assess each category.
• Assessment of categories will be completed based on public classification of categories, academic literature, ratings agencies, and other publicly available information.
• The CWG will provisionally group each category into one of the following groups:
  1. Fast track consideration;
  2. Deeper assessment;
  3. Very unlikely to meet the requirements.
• Deeper assessment, if required, will be conducted by Multi-Stakeholder Working Groups ("MSWGs") convened by the ICVCM. Following assessment by the MSWGs, the Governing Board of ICVCM will make a decision determining which categories are eligible for CCP-approval and what remedial action is required, if any.

Building high-integrity voluntary carbon market offsets

While it is too early to predict whether the ICVCM will succeed in bringing integrity to the voluntary carbon market, we do expect that CCP-Approved offsets will receive a premium in the market. We also expect that the assurance and enforcement aspects of the ICVCM should create a strong incentive for the underlying standards to maintain heightened due diligence, with suspension or disqualification having the potential to be an extinction event for some standards. That said, the initial implementation of the CCPs is likely to be fraught with challenges as the assessment processes are codified and greater clarity emerges around the function of many ICVCM working groups.

The release of the CCPs represents a positive and critical step in the maturation of the VCMs. Market adoption, as well as the ability to refine and update the CCPs as new practices, technologies, and regulations emerge will play an important role in insuring that the CCPs are fit-for-purpose, both now and into the future.

Source: Integrity Council for the Voluntary Carbon Market – Core Carbon Principles