EDITORIAL: Positive signs for the VCM in the first two months of 2024
Quantum Commodity Intelligence – Without wanting to put a jinx on things, I think it is fair to say that the start of 2024 has been promising for the voluntary carbon market (VCM), after the 'annus horribilis' in 2023.
A much-talked about paper on the cookstoves sector had little or no negative impact on prices, while Quantum data indicates that in the first two months of the year almost 40 million carbon credits have been retired across six of the most active registries – Verra's Verified Carbon Standard (VCS), Gold Standard, ACR, Climate Action Reserve, BioCarbon, and Plan Vivo. This is 40% up on the year, and is the market's best ever start to a calendar year.
Retirements, a proxy for demand, reached 18.7 million tonnes of carbon dioxide equivalent (tCO2e), down from 20.9 million tCO2e month-on-month, with two fewer days in February than January.
On a yearly basis, retirements were also down by 14% but February 2024 still counts as the second-largest demand month in the history of the VCM. REDD+ continued to dominate, with retirements of 9 million tCO2e during the month, up both on a monthly and annual basis.
February also saw additional supply of 31.9 million tCO2e become certified under the VCS alone. This was buoyed by the official listing of some very large projects, including a 10.8 million tCO2e a year cookstoves project in Bangladesh operated by C-Quest Capital (VCS4312), currently the world's largest cookstoves development. During the month, C-Quest also registered several other large cookstove projects in India, Ghana and South Africa.
In addition last month, US-based management consultancy Bain & Company became the first organisation to make a successful claim under the Voluntary Carbon Market Integrity Initiative (VCMI) standard's Claims Code of Practice (CCP) making a 'carbon integrity platinum claim' which is the highest possible under the VCMI.
In order to make the platinum claim, Bain must have bought and retired 'high-quality' carbon credits equal to or greater than 100% of its remaining greenhouse gas emissions. VCMI is one of the two main 'meta-standards' in the VCM, together with the Integrity Council for Voluntary Carbon Markets (IC-VCM), and aims to become the main benchmark for demand in the market.
SBTi BVCM guidance
Meanwhile, the Science Based Targets Initiative (SBTi) released its much-anticipated guidance on 'beyond value chain mitigation' (BVCM) last month. The guidance came in the form of two reports on February 29, one offering suggestions to support companies in the design and implementation of BVCM strategies and a second exploring the incentives for BVCM over which the broader climate ecosystem has influence.
SBTi, the go-to standard for voluntary corporate climate action globally, reiterated that it currently has no plans to validate any BVCM claims citing "other market players" such as the VCMI which is working to define BVCM-related claims. BVCM guidance is included as a "best practice recommendation" in the SBTi's Corporate Net-Zero Standard rather than a criterion which must be met for a company's net zero target to be validated by the SBTi. There are, however, questions over how BVCM strategies will be implemented by companies and monitored in practice.
But market participants noted SBTi's acceptance that carbon credits can be used to meet BVCM targets, and apparent endorsement of a "money-for-tonne" strategy for creating a BVCM pledge. As one market source put it: "one positive is it ends the narrative that SBTi don't recommend investing in BVCM/credits today".
In addition, NGO Carbon Market Watch is generally positive about what SBTi put out. "The guidance does what it needs to do: it provides recommendations for what high-integrity action beyond a company's value-chain should look like. The adoption of this guidance and implementation of sustainable BVCM approaches is now up to companies," said its lead expert on global carbon markets Gilles Dufrasne.
Two decent months do not erase the problems experienced last year, but they are steps in the right direction for the VCM. It will be important to build on these positive signs over the coming months, which is possible, with the likes of IC-VCM to deliver its first assessments, for instance, and more data released for Verra's consolidated REDD methodology, among other things. Let's hope the good news continues.