VCMI releases 'ready to use' guidance for buyers of carbon credits

The Voluntary Carbon Markets Integrity Initiative released an updated set of guardrails Nov. 27 to help buyers make high-integrity claims on their use of carbon credits, as the market remained mired in a credibility crisis.

The new guidance includes a Monitoring, Reporting and Assurance (MRA) Framework and a Carbon Integrity Claims brand, encouraging corporates to increase their participation in the voluntary carbon markets.

This is on top of the Claims Code of Practice that the VCMI launched in June, which consists of three tiers of claims that companies can make -- Silver, Gold and Platinum.

Mark Kenber, executive director at VCMI, said this updated "ready to use" guidance paves the way for companies to now be able to make claims.

"So now companies know exactly what information they have to produce, whether it has to be publicly disclosed, limited assurance or reasonable assurance," he said in an interview to S&P Global Commodity Insights.

This announcement comes as the VCM finds itself under severe criticism in recent years, with several media outlets and academics questioning the efficacy of carbon projects and credits.

Market participants are banking on such integrity initiatives to restore some trust and confidence in carbon offset though many expect the recovery to be gradual.

"We have delivered what buyers need to make claims today, along with practical solutions to spur further corporate action. Companies can now step up their credible use of carbon credits, and should feel confident to do so," added Kenber.

Key metrics

The MRA Framework enables companies to substantiate a Carbon Integrity Claim.

The framework includes metrics, requirements and standards that bring integrity and rigor to the VCMI Claims Code, ensuring that underlying information is appropriately evaluated, evidenced and verified for each claim, the VCMI guidance document said.

Meanwhile, the Carbon Integrity Claims, which have also been divided into Silver, Gold or Platinum tiers, are designed to indicate if companies are going above and beyond science-aligned emissions cuts through the additional use of high-quality offsets.

[This] will give the most innovative companies already performing well on climate mitigation an incentive to go further and inspire other companies to follow," VCMI added. "For those companies and other stakeholders that do not yet qualify for a Carbon Integrity Claim, the robust claims system will help them understand what actions need to be taken for them to embark on their decarbonization journey."

VCMI also launched a beta version of a Scope 3 Flexibility claim to aid companies in taking responsibility for their scope 3 emissions.

This flexibility claim is expected to be finalized by the third quarter of 2024, which involves refining the criteria and guardrails of the new claim.

"We now have a claims code that is ready to use," said Kenber. "And this beta version is something that doesn't exist in the market so far, which is how companies can use credits or not to bridge the gap to their Scope 3 emissions."

Kenber said there were some technical challenges which involve working more with bodies such as the Science Based Targets Initiative to help develop more tools to measure a company's progress toward its targets and define if a company is suitably 'on-track' to meet them.

Lower thresholds

The updated Claims Code of Practice, which aims to bring integrity to the demand side of voluntary carbon markets, still consists of the three tiers of claims that companies can make, but the threshold for these tiers was lowered slightly.

Kenber said the rulebook provides more clarity, transparency and consistency, with no huge changes made from the original Claim Code.

VCMI Platinum, the most aspirational tier, requires 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 equal to or greater than 50% to less than 100%, and greater than 10% to less than 50%, respectively, of a company's remaining emissions.

Despite a series of quality initiatives in the market, prices of many carbon credits remain low, with many buyers becoming cautious amid a plethora of articles by news media and academia questioning whether several offsets represent genuine carbon reductions.

The Platts Nature-Based Avoidance price, which reflects the most competitive internationally fungible carbon credits issued by nature-based projects such as REDD+ projects, continues to languish at record lows.

The Platts Nature Avoidance 2023 was assessed at $4.15/mtCO2e on Nov. 27, up $0.05/mtCO2e from Nov. 24, when it was at its lowest price since the assessment began in August 2021. Platts is part of S&P Global. Prices in January were as high as $11.60/mtCO2e.