ANALYSIS: IC-VCM has started its assessment work, but who is in line to pass muster?

Quantum Commodity Intelligence – The Integrity Council for the Voluntary Carbon Market (IC-VCM), one of the global meta-standards aimed at improving the integrity of the VCM, earlier this month started the process for assessing carbon credit categories and standards' alignment with its Core Carbon Principles (CCPs).

IC-VCM noted that, as well as Switzerland-based Gold Standard (GS), which announced in October it had submitted programme details for assessment, other unnamed standards had now also applied for scrutiny.

In the wake of the IC-VCM's announcement California-based Climate Action Reserve (CAR) said on November 1 it had submitted its programme for assessment.

The CCPs aim to engender an all-encompassing quality threshold for VCM credits and reassure investors following a period of prolonged price weakness and negative media coverage.

The CCP label "is designed to unlock much-needed private sector investment in climate solutions which would otherwise not be viable, and accelerate flows of finance to countries in the Global South to support the growth of vibrant green economies", IC-VCM said.

It gave no firm timeline for the review process or indication when the first results will be announced, only saying applications are being accepted on a rolling basis, and processed in the order they are received.

Quantum contacted several other leading carbon standards to ask if they have applied to IC-VCM, however, none of those that responded said they had submitted as yet, although several intend to join Gold Standard in applying.

US-based ACR, formerly known as American Carbon Registry, said it is preparing an application for assessment against the CCPs later in the autumn, while Qatar-based Gulf Carbon Council (GCC) expects to submit something "most likely in the first quarter of 2024".

France-based afforestation, reforestation and restoration (ARR) standard Ecosystem Restoration Standard, which was officially launched in September, has also confirmed that it plans to file applications for accreditation under IC-VCM.

US-based Verra had not responded at press time, along with several others including India-based Universal Carbon Standard. But, Tatsushi Ogita, from Mizuho Research & Technologies, which acts as the secretariat for Japan's J-Credit offset scheme, said there are currently no plans to apply to IC-VCM.

He said the focus of the secretariat is on an application for J-Credits to be eligible for the first official phase of the UN-administered Corsia offset scheme – which will run from 2024-2026 and aims to regulate carbon emissions associated with international flights.

Back in July, when IC-VCM published the assessment criteria for CCPs, Verra welcomed the announcement and said the "criteria establish clear quality thresholds to inspire greater confidence in the carbon markets and their contributions to the Paris Climate Agreement and the Sustainable Development Goals".

It added that it would review the assessment framework and "will be considering the best timing and scope for submitting its methodologies for IC-VCM assessment".

There are two strands to IC-VCM's review process. One assesses categories of carbon credits or project types, while the other covers carbon standard programmes themselves. In October, when GS first said it had made a submission to IC-VCM, it said the assessment, which was underway, covers information on "governance and overarching criteria, including sustainable development provisions, assurance approaches, double counting and additionality".

However, GS said at this stage it is waiting for more clarity on the assessment process for carbon credits before submitting methodologies for approval to the Integrity Council. Gold Standard will "decide on which methodologies it will submit to IC-VCM once their credit-level approach is further defined", it said in the October 12 announcement.

"IC-VCM has noted that some activity types may require greater guidance and/or criteria for the CCP label to be applied to resultant credits. This could be due to inherent complexity or specificity," a GS spokesperson told Quantum. "At present the categories group is exploring which activity types this might be relevant for and, we understand, early next year the process of designing specific criteria will be underway," the spokesperson said.

The 'categories group' mentioned above is an IC-VCM working group, comprising internal and external experts who are conducting an initial assessment of carbon credits produced by different categories. Members include representatives from Verra, Gold Standard, CAR and ACR, but, as yet, no other carbon standards, as well as from carbon ratings agency BeZero and project developer Climate Bridge.

Buyers are currently represented by Amazon, with S&P the data provider, but as yet no-one is confirmed as a UN Article 6 expert or for Indigenous peoples and local communities (IPLCs).

IC-VCM said this working group is "triaging categories of carbon credits by the required action", adding that categories will either be: fast-tracked for assessment by the IC-VCM against the CCPs; referred to a Multi-Stakeholder Working Group (MSWG) for deeper assessment; or deemed unlikely to meet requirements, and so "deprioritised".

The MSWGs are currently being established to conduct the deeper assessment of categories that have not been fast tracked or deprioritised, IC-VCM said. These groups will consist of experts with specialised knowledge "to assess categories that raise more complex issues".

The MSWGs will determine whether categories meet the criteria and requirements for CCP approval; meet the criteria and requirements for approval, subject to remedial action to be undertaken by the relevant carbon-crediting programme; or do not meet the criteria and requirements for approval.

GS told Quantum it believes all its methodologies will have "potential alignment" with the CCPs. "Newer methods are most likely to be closely aligned, older methods, adhering to norms and good practices of their times, may require some bridging or update requirements," it said.

For methodologies that don't 'pass muster', what happens next will depend "on the nature of the misalignment" with the CCPs. "For some it might entail a simple update, others more complex. If alignment is not possible then either the project would need to update to an eligible methodology or it would not be able to receive the CCP label," GS said.

ACR said its submission will include "all our currently approved and active" methodologies. "Given ACR's eligibility in both Corsia's voluntary phase 2021-2023 and first phase 2024-2026, we assume alignment with the CCPs, despite having outstanding questions about IC-VCM's category assessments, process and decision criteria," it said.

GCC told Quantum it is confident that the standard's methodologies will be in line with the CCPs. "We do not see much difficulty in alignment of methodologies with IC-VCM. However, some changes may be required. A detailed gap analysis work is being done," it said. Any methodologies that are found not to be aligned "may be revised to ensure alignment, if necessary", GCC added.

However, research published last month by Trove cast doubt on approval expectations, saying that strict adherence to the CCPs would see the bulk of existing projects failing to meet the principles' eligibility criteria.

It created a project-level "CCP-likelihood" metric for over 4,000 registered projects, and estimated that fewer than 20% of currently registered projects have a high or very high likelihood of being CCP-eligible.

In an extreme case, "if the CCPs were applied to all currently registered projects, and only those that were CCP eligible were allowed to issue credits, we estimate that issuances would reduce by between 50% and 80%".

On the programme approval process, the IC-VCM's Policy and Implementation team will assess applications and present a set of recommendations to the governing board for review and a final decision.

There are three possible outcomes from the assessment process with the programme either: approved as CCP-Eligible; approved with remedial actions to be completed within two months; rejected (rationale will be shared with the programme, which can reapply in six months).

All final decisions on categories of credits, and completed programme applications, will be published in the IC-VCM website.