Carbon body VCMI releases code to help buyers navigate offsets

The Voluntary Carbon Markets Integrity Initiative, or VCMI, launched its Claims Code of Practice on June 28, which outlines guidelines for companies to credibly make voluntary use of carbon credits.

This comes as the voluntary carbon market finds itself mired in a credibility crisis, as increased scrutiny over the efficacy of some carbon offsets and projects has led to both a steady fall in liquidity and confidence, and a downward spiral in the prices of carbon credits.

The Claims Code of Practice, which aims to bring integrity to the demand side of voluntary carbon markets, consists of three tiers of claims that companies can make – Platinum, Gold and Silver.

VCMI Platinum is the most aspirational tier, requiring the purchase and retirement of high-quality carbon credits equal to or greater than 100% of remaining emissions, compared with VCMI Gold and VCMI Silver, which require 60% to less than 100%, and less than 20% to 60%, respectively, of a company's remaining emissions.

VCMI said this rulebook provides "clarity, transparency and consistency" on what these claims mean, giving much-needed confidence to companies engaged in the carbon markets.

"Against a backdrop of recent criticism, we are now at a juncture where only consistent, well-considered global guidance can underpin a high-quality market and stimulate the rapid scaling of corporate use we need," Rachel Kyte, co-chair of VCMI's Steering Committee, said. "The Claims Code will give greater confidence and develop trust in those who use it. If you build integrity, trust will follow, and trust is the foundation of a high value, high impact market."

Four steps

A company must take four steps to undertake to make a claim, the first of which involves complying with VCMI's Foundational Criteria. This involves setting and publicly disclosing a validated science-based emissions reduction target and disclosing an annual greenhouse gas emissions inventory. The company must then select which VCMI Claim to make (Platinum, Gold or Silver).

"To make the claim, the company must select carbon credits which meet stringent quality thresholds in line with the Integrity Council for Voluntary Carbon Markets' Core Carbon Principles (CCPs)," VCMI said in it its Claims Code of Practice document. "Finally, the company must disclose information to support its claim and conduct independent validation and assurance in line with the VCMI MRV and Assurance Framework (to be published in November 2023)."

VCMI plans to expand the Claims Code throughout 2023, by adding a comprehensive monitoring, reporting and assurance framework, along with including additional claims tiers and updated claims names.

"Rules for claims madeat the product, service, or brand level, further guidance for buyers of carbon credits; and provisions for specific sectors, geographies and smaller entities, will also be added," the VCMI document said.

On June 28, the VCMI said it was working with the Integrity Council for the Voluntary Carbon Market (ICVCM) to develop an integrated market integrity framework to improve the quality of carbon offsets.

The ICVCM, which is involved in setting rules on the supply side of the VCM, released its program-level Core Carbon Principles in late March, laying out the attributes of a high integrity carbon credit.

It will release category-level assessment rules in the coming weeks, with the first batch of CCP-labeled carbon credits expected to be delivered to the market later this year.

Price slump persists

Market participants are hoping these integrity initiatives will restore trust and confidences in VCMs.

Prices, especially for nature-based credits, have recently sunk to record lows and many buyers have become cautious amid a plethora of articles by news media and academia questioning whether several offsets represent genuine carbon reductions.

Platts CNC, an assessment that reflects the most competitive nature-based carbon credit prices, was assessed at $1.20/mtCO2e June 27, only marginally up from an all-time low of $1.05/mtC02e which was seen from May 31 to June 8. Platts CNC averaged $9.55/mtCO2e in 2022, according to data from S&P Global Commodity Insights.

Analysts at S&P Global said the convergence of these initiatives is likely to drive increased demand for credits that are deemed high quality but there could be some difference between sectors.

"Under the VCMI Provisional Claims Code of Practice, hard-to-abate industries will likely need to purchase more high-quality credits to reach their net-zero goals compared to tech companies, which can more easily achieve emissions reductions through internal decarbonization," S&P Global analysts said in a recent note.