The ICVCM published the much anticipated Core Carbon Principles at the end of last week. We break down the 10 principles and what they mean for the voluntary carbon market in this article.
The Core Carbon Principles (CCPs) were years in the making for the Integrity Council for the Voluntary Carbon Market (ICVCM), so their publication last week was highly anticipated. Meant to standardize the quality of carbon credits sold on the voluntary market, the CCPs were developed through global cooperation from every stakeholder in the carbon world.
Certain differences in opinion emerged after the publication of a draft in September, with some players finding the CCPs too stringent and expressing concerns over their applicability. At the time, voluntary carbon registry Verra said its faith in the initiative was “shaken” and the CCPs were “on the wrong track”. But at ClimateTrade, the opinion was that new technologies, such as blockchain, would support the implementation of the CCPs. ClimateTrade’s Co-Founder José Lindo replied to Verra’s open letter as follows: “There are now emerging technologies such as DLT/Blockchain, IoT, smart contracts which can automate processes in ways which were unthinkable only five years ago. Yet we must acknowledge that CCPs are an innovative tool to raise integrity standards and interdependence across the industry.” Critics like Verra have yet to comment on the final version of the CCPs.
Now that the final rules are out, carbon crediting programs will go through an eligibility assessment, with the first CCp credit approval expected before the end of 2023, according to the ICVCM. Those approved could then display a CCP ‘label’ that would help buyers identify high-quality carbon credits.
So what exactly are the Core Carbon Principles, and how do they respond to the carbon market’s need for transparency?
Governance
Almost half of the rules relate to how carbon crediting programs are governed: without good governance, none of the other quality principles could be guaranteed.
1. Effective governance
According to the principles: “The carbon-crediting program shall have effective program governance to ensure transparency, accountability, continuous improvement and the overall quality of carbon credits.”
While this sentence doesn’t go into detail as to what “effective governance” really is, the ICVCM adds in its Summary for Decision Makers that it will include “meeting governance requirements set out in CORSIA”, as well as “a transparent and robust corporate governance framework (…), including reporting and disclosure, and risk management policies and controls such as anti-bribery and anti-corruption”.
This CCP makes it clear that transparency and accountability are key elements in ensuring the quality of carbon credits.
2. Tracking
About tracking, the document says: “The carbon-crediting program shall operate or make use of a registry to uniquely identify, record and track mitigation activities and carbon credits issued to ensure credits can be identified securely and unambiguously.”
This is a key element to improve the integrity of the voluntary carbon market: without traceability of the carbon credits, they could be sold to more than one buyer, reducing the overall carbon mitigation generated by the market. It is one of the reasons we created the ClimateTrade marketplace, where carbon credits are identified with a unique blockchain key.
The ICVCM adds: “Specifically, the carbon-crediting program’s registry should identify by whom and on whose behalf a carbon credit was retired, identify the purpose of retirement, have procedures to address erroneous issuance of carbon credits and procedures and requirements to ensure no more than one carbon credit is issued per tonne of CO2 equivalent.”
3. Transparency
“The carbon-crediting program shall provide comprehensive and transparent information on all credited mitigation activities. The information shall be publicly available in electronic format and shall be accessible to non-specialized audiences, to enable scrutiny of mitigation activities,” note the CCPs.
Here, the ICVCM addresses the burdensome and paper-heavy processes currently required to issue carbon credits, and confirms that digitization is crucial for transparency in carbon markets. ClimateTrade’s user–friendly marketplace displays accessible and verifiable information about the carbon mitigation projects generating credits – improving transparency and traceability.
4. Robust independent third-party validation and verification
Finally, the ICVCM explains: “The carbon-crediting program shall have program-level requirements for robust independent third-party validation and verification of mitigation activities.”
The issue of third-party verification became particularly apparent in January this year, when The Guardian found that a large proportion of reforestation credits sold under the Verra standard did not meet their carbon mitigation claims.
The ICVCM explains that to meet this criteria, crediting programs must set out the rules for how validation and verification bodies (VVBs) become and remain accredited, review their performance, and develop standards and procedures to guide them in their work. “These rules include provisions on VVB organizational structure and management, organizational resources, validation and verification processes, and information requirements, penalties for rule breaches and rules ensuring the impartiality of the VVB and the avoidance of conflicts of interest,” the Council adds.
Emissions impact
The second category included in the CCPs is that of ‘emissions impact’, a subset of principles meant to guarantee that carbon credits actually result in emissions removal.
5. Additionality
Additionality is one of the main criteria to assess the quality of carbon credits. This specific CCP says: “The greenhouse gas (GHG) emission reductions or removals from the mitigation activity shall be additional, i.e., they would not have occurred in the absence of the incentive created by carbon credit revenues. “
For instance, a forest that is not at risk of deforestation, or a renewable project that is already approved and financed should not be able to issue carbon credits under this rule: the carbon savings they represent would exist with or without funding from the carbon market.
6. Permanence
Next is permanence, a word used to describe how long carbon stays out of the atmosphere thanks to a mitigation project. Here, the ICVCM notes: “The GHG emission reductions or removals from the mitigation activity shall be permanent or, where there is a risk of reversal, there shall be measures in place to address those risks and compensate reversals.”
This is particularly important in the case of reforestation credits: as climate change increases the frequency of wildfires, it is important to make sure that the forests that have recently issued carbon credits are not destroyed.
7. Robust quantification of emissions reductions and removals
“The GHG emission reductions or removals from the mitigation activity shall be robustly quantified, based on conservative approaches, completeness and sound scientific methods,” says the document. This CCP addresses the concern that some of the benefits of carbon mitigation projects might be overstated, as was the case with the projects exposed by The Guardian.
In its Summary for Decision Makers, the ICVCM states that carbon crediting programs should develop a thorough and conservative quantification methodology with the help of public stakeholders and independent experts. They will also be required to verify emissions reductions or removals after they have been achieved.
8. No double counting
For the final CCP related to emissions impact, the ICVCM says: “The GHG emission reductions or removals from the mitigation activity shall not be double counted, i.e., they shall only be counted once towards achieving mitigation targets or goals. Double counting covers double issuance, double claiming, and double use.”
Double counting is one of the main concerns in the carbon market, and one that will certainly be tackled through the increase in tracking and traceability mentioned above.
Sustainable Development
Finally, the CCPs require that carbon mitigation projects be aligned with the UN’s Sustainable Development Goals (SDGs). This is something ClimateTrade is particularly excited about: we have always believed decarbonization should be aligned with the SDGs, which is why all the projects on the ClimateTrade marketplace list their SDG contributions – and can even be filtered by SDG.
9. Sustainable development benefits and safeguards
The ninth CCP states that: “The carbon-crediting program shall have clear guidance, tools and compliance procedures to ensure mitigation activities conform with or go beyond widely established industry best practices on social and environmental safeguards while delivering positive sustainable development impacts.”
This principle will require mitigation projects to explain how their SDG impacts are consistent with the host country’s goals, as well as provide safeguards for the respect of human rights.
10. Contribution to net zero transition
“The mitigation activity shall avoid locking-in levels of GHG emissions, technologies or carbon-intensive practices that are incompatible with the objective of achieving net zero GHG emissions by mid-century,” the document concludes.
Do you want to know more about what the CCPs mean for ClimateTrade? Get in touch with our experts.
