Ecuadorian Amazon/ EDF 2022
2024 marks a pivotal moment for carbon markets as the voluntary carbon market (VCM) transitions into its next phase: VCM 2.0, a high-integrity, high-impact market that has the potential to reshape how we tackle climate change. But what does this mean for corporate buyers who want to use carbon credits to tackle near-term emissions on their journey to net zero?
For companies, the path forward is clear: While decarbonizing your own operations and value chain remains the top priority, carbon credits can help you go further by compensating the emissions that are currently unavoidable. But only high-quality, high-integrity credits should be part of that equation.
The road to VCM 2.0
For years, the market’s reputation has been tarnished by concerns over low-quality credits and the over-crediting of projects. But the tide is turning. Initiatives like the Integrity Council for the Voluntary Carbon Market (ICVCM) are leading the charge by setting a high bar for credit quality. The ICVCM’s Core Carbon Principles (CCP) labels signal to companies and investors alike that CCP-eligible credits represent a credible path toward net-zero goals. This shift is creating a more credible, reliable market that companies can trust.
However, this transformation won’t happen overnight. Transitioning to VCM 2.0 requires tough decisions and a reset of the market. But this reset is a necessary step if we want to unlock the full potential of a high-integrity VCM—one that can meaningfully fund climate solutions, particularly in developing nations where the need for funding is greatest.
What types of credits have ICVCM approved this year, and what is to come?
In 2024 so far, here are the credit categories that ICVCM has assessed already for CCP eligibility:
- Leak Detection/Repair in Gas Systems: Accepted (CCP-eligible)
- Ozone Depleting Substances (ODS): Accepted (CCP-eligible)
- Landfill Gas Capture and Utilization: Accepted (CCP-eligible)
- Grid-Connected Renewable Energy: Rejected
- Mini-Grids (Renewable Energy): Rejected
- Renewable Energy (Off-Grid): Rejected
Approximately 5% of credit categories currently on the market have been approved. Here are the decisions we can expect ICVCM to announce before the end of 2024:
- Improved Forest Management (IFM)
- Afforestation, Reforestation, and Revegetation (ARR)
- Reducing Emissions from Deforestation and Forest Degradation (REDD+)
- Jurisdictional REDD+ (JREDD+)
- Clean Cookstoves
So, what should companies do next?
Now that we have a global threshold for carbon credit quality, with CCP-eligible credits on the market, what’s next? Here’s a roadmap for companies to navigate this new landscape:
- Prioritize high-integrity credits
The first step is to engage with the highest quality credits on the market. CCP-eligible credits have been vetted against rigorous standards and are designed to ensure real, verifiable climate impact. But while the CCP label is an excellent benchmark, due diligence remains essential. The CCP label applies to categories of carbon credits, not individual projects, so companies should still conduct thorough evaluations of the projects they choose to invest in. - Be cautious with non-CCP credits
For credits that haven’t met ICVCM’s standards, proceed with caution. While the CCP label should be your primary guide, there may be circumstances where credits outside this framework or specific projects could still be of high integrity. But if you choose to buy non-CCP credits, it’s crucial to understand why ICVCM rejected them and ensure that the projects you support are free of those issues.
- Guidance on high-integrity use and claims relating to credits is solidifying, but keep your eyes on a shifting landscape.
While the underlying quality of carbon credits is critical for businesses to assess and prioritize, it’s just as important to make responsible claims around the use of those credits. Increasingly, stakeholders are taking a hard look at corporate environmental claims – including those made on the back of carbon credits – making transparent, science-backed, and rigorous claims more important than ever.Thankfully, the Voluntary Carbon Markets Integrity Initiative (VCMI) Claims Code of Practice has led the way in setting rules for how companies can credibly use carbon credits as part of their net-zero journeys.However, there remain open questions for businesses about the role that carbon credits can play in sustainability strategies. The Science Based Targets initiative (SBTi) has been considering the role of carbon credits and other environmental attribute certificates in addressing challenging Scope 3 emissions as it begins to revise its Net Zero Standard, and VCMI is conducting stakeholder outreach to inform the development of a beta Scope 3 Claim. Meanwhile, regulators in the EU are working towards a finalized version of the Green Claims Directive, which may introduce significant new rules around how companies publicly talk about their use of carbon credits. As we navigate this evolving terrain, it’s not just about claiming progress – it’s about ensuring every step forward truly counts.
- Leverage resources for due diligence
Thankfully, companies don’t have to navigate this complex landscape alone. In addition to ICVCM, there are several initiatives working to bolster integrity across the VCM. On the supply side, the Tropical Forest Credit Integrity (TFCI) Guide provides guidance for companies looking to purchase high-quality tropical forest carbon credits. Additionally, the Carbon Credit Quality Initiative (CCQI) offers transparent data on credit quality to help market participants understand which carbon credits are most likely to deliver real climate benefits.
There’s still a lot of work to do, but we now have a clearer picture of what quality credits look like.
As ICVCM continues to assess different types of credits, including the upcoming evaluation of REDD+ and Jurisdictional REDD+ credits, the market is gradually shifting toward higher standards. For corporate buyers, the focus should now be on supporting this transition by advocating for high standards and integrity in the carbon market. High-quality credits not only offer long-term environmental and social benefits, but they also reduce the risks associated with low-quality projects, ensuring a more resilient and credible carbon market for the future.
By supporting a high-integrity VCM, we’re not only addressing climate change—we’re also driving meaningful investments in ecosystems and communities around the world. And that’s a win for everyone.
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