IC-VCM: A New Sheriff In Voluntary Carbon Markets Town

IC-VCM: A New Sheriff In Voluntary Carbon Markets Town

Last month, the Integrity Council for the Voluntary Carbon Market (IC-VCM) published its Core Carbon Principles (CCP) to bring greater quality assurance to the voluntary carbon market (VCM).

The VCM is seemingly always on the verge of hyperbolic growth. Agreement to Article 6 at COP26 in 2021 imbued it with a sense of optimism, with the market hitting a record value of $2 billion in traded credits – a quadrupling in value since 2020. Growing pressure on corporates to set and achieve decarbonization targets has forced firms to consider how they should use, source and trade offsets. But the greenwashing threat looms large – and low-quality credits masquerade as high-quality ones.

How can buyers identify high-quality credits? Historically, verifying a project and associated credits with one of the leading standards – notably Verra or the Gold Standard – was enough. In January 2023, a nine-month investigation headed by the Guardian, Die Zeit and SourceMaterial found that 90% of Verra’s most common rainforest offset credits were ‘phantom’, representing no actual carbon reductions. With no regulation to provide quality assurance protocols, voluntary ratings agencies, such as Sylvera and BeZero, are stepping in to fill the gap. These agencies provide bespoke rating methodologies to help buyers understand actual carbon offset performance. This is a step in the right direction – but, as research from the Wall Street Journal reveals, these ratings vary across agencies.

Alongside ratings agencies, voluntary initiatives are pushing to boost transparency in the VCM. Foremost among these is the IC-VCM, which launched the CCPs and a Program-level Assessment Framework in March 2023. Essentially taking a surrogate role of carbon offset regulator, the council will grant CCP-approved status to projects that meet quality controls around issues such as governance and additionality.

Criticisms of the IC-VCM – levelled by historical players in the space, including Verra – focus on two key points: first, that the IC-VCM is attempting to supersede current market participants; and second, that it is attempting to do so too quickly.

2023 is a major inflection point for the VCM. Credit ratings agencies and trading platforms are working hard to improve carbon credit data accessibility. But the market is missing the ability to identify and assure itself of the quality of a credit, and to price that accordingly; without this capability, leaders will hesitate to use offsets in net zero strategies. Time will tell if the IC-VCM will be an effective governing body for the market, but as it stands, it represents a welcome step towards the next generation of the VCM.