New initiative aims to standardise voluntary carbon market quality to support accelerated, smooth transition to net zero.
A lack of transparency and monitoring of voluntary carbon markets (VCM) means that companies may be more tempted to offset their carbon emissions rather than deal in absolute reductions. A public consultation, launched today by the Voluntary Carbon Market Integrity (VCMI) initiative, proposed guidelines on companies’ claims around the voluntary purchase of carbon credits to assure investors on their commitment to net-zero or carbon neutral pledges.
“It is essential that companies are not using carbon credits to make claims that would mislead their stakeholders […] into thinking that the organisation is taking more ambitious mitigation action than they are in reality,” said the VCMI. The initiative aims to align voluntary carbon markets by ensuring they play a credible role in limiting global warming to 1.5°C.
Carbon credits are used by companies to offset or compensate for emissions at an organisational or product level. However, VCMs have previously faced criticism for promoting greenwashing and mis-selling.
VCMI’s proposed categorisation scheme for “high-quality claims relating to the voluntary use of carbon credits” recommends that company claims should: avoid creating a false impression or hiding trade-offs; refer to voluntary actions or achievements that go beyond complying with existing legislation or standard business practice; avoid overstating the beneficial environmental impacts of the activities; and be substantiated with objective, transparent and up-to-date data.
Paddy McCully, Energy Transition Analyst at NGO Reclaim Finance, previously labelled the carbon offsets market as a “wild west” of variant methodologies that aren’t closely monitored and lack transparency.
Alongside promoting corporate transparency, VCMI will partner with complementary initiatives, such as the Taskforce on Scaling Voluntary Carbon Markets, launched in November 2020, which is developing data and tools to better measure the quality of existing VCMs.
The initiative will also engage with countries to develop policy options and strategies, building global technical capacity to promote access to high integrity VCMs.
“A robust voluntary carbon market can incentivise emissions reductions, encourage technology innovation, and promote reforestation while also helping to raise finance to tackle climate change,” said Alok Sharma, COP26 President-Designate.
The VCMI noted that the US VCM market size was worth US$320 million in 2019, but this is predicted to increase to between US$5-30 billion by the end of this decade. This emphasises the need to align VCMs and ensure they are contributing to, rather than delaying, the global transition to net zero, the initiative said.
The initiative is co-founded by the UK Government Department for Business, Energy and Industrial Strategy (BEIS) and the independent philanthropic organisation Children’s Investment Fund Foundation (CIFF). The launch is supported by the COP26 Presidency, the US Special Presidential Envoy for Climate John Kerry and the United Nations Development Programme (UNDP), as well as civil society, business groups and governments.
“The science is clear – we must keep global warming below 1.5C. This means that, very quickly, we must move away from VCMs that are vulnerable to misuse and misinterpretation. VCMI represents a turning point in private sector climate action. We will work together to establish rigorous and transparent VCMs – which incentivise meaningful climate action by businesses. Action that is underpinned by deep and rapid cuts to greenhouse gas emissions, and credible climate change science,” said Rachel Kyte, VCMI Co-Chair.
The consultation will publish finalised proposed guidelines later this year.