What is behind this "ICVCM" acronym?
In addition to COP27, the hottest topic in the Voluntary Carbon Market (VCM) at the moment is the draft released by the Integrity Council for the Voluntary Carbon Market (ICVCM) in late July.
The draft presents a set of Core Carbon Principles (CCP) for identifying high-quality carbon credits and proposes an Assessment Framework with requirements for carbon-crediting programs and project developers. It pursues nothing less than the regulation of the VCM and is now open for public consultation.
The ICVCM, the independent governing body behind the draft, wants to ensure that the VCM accelerates the transition to 1.5°C . Its ultimate goal is to increase confidence in the VCM and clear any barriers to investment.
It aims at setting and enforcing new globally accepted threshold standards for high-quality carbon credits, delivered by ICVCM-certified programs and retired by corporations to support their net-zero claims . With that, buyers can better identify best-practice projects, and project developers have clearer guidance on how to create high-quality projects.
What is the Voluntary Carbon Market (VCM)?
In the VCM, carbon credits are bought for voluntary use, in contrast to the Compliance Carbon Market (CCM), where carbon credits are bought to comply with legally binding emission reduction obligations. This voluntary market evolved with the advent of the ESG criteria and supports state-led climate policy with projects and know-how .
Due to its voluntary aspects, this market is more methodologically flexible and innovative than the CCM  and has no centralised recognition procedure nor a uniform and binding standard . New stakeholders can enter the space quite easily, which accelerates the implementation and financing of climate solutions. At the same time, its lax regulation creates the risk of low-quality credits coming into circulation .
Today, there are fundamental differences between the existing climate solutions and associated accounting methodologies, when it comes to the quality and integrity of the carbon credits they deliver .
Corporate buyers often express concerns entering the unregulated VCM space due to the risk of greenwashing. They therefore request transparency regarding the origination of credits, and the quantification of emission reductions to avoid bad projects and consequent reputational damage .
The ICVCM approach
In this context, the ICVCM’s 140-page draft comes into play. It elaborates on issues such as program governance, double-counting and information disclosure. Additionally, it addresses the well-known questions of additionally, permanence and sustainable development impacts.
With that, the ICVCM’s draft joins the current developments to standardise the international climate protection efforts (such as the International Sustainability Standards Board) and to drive credible, net-zero-aligned participation (such as the Voluntary Carbon Markets Integrity Initiative).
In line with their motto “build integrity and scale will follow”, the ICVCM tries to implement consistency, comparability, and transparency into the VCM, to increase the legitimate confidence in the market and to trigger consequent scaling.
There is no doubt about the fact that the VCM needs to ensure that carbon credits have a real and verifiable climate impact. Only then it can align with the Paris Agreement, and overall establish itself alongside regulatory regimes.
Criticism from VCM stakeholders
As of today, there is not a single ICVCM-eligible carbon credit out there. The current version of the extremely detailed ICVCM framework is perceived as cumbersome by many stakeholders. Well-known carbon credit registries, such as Verra, argue that some of the criteria are unrealistic and unworkable.
Frequently mentioned points of criticism are that the framework lacks consideration for differences between project types, and that the ICVCM is not building on existing, widely documented standards, but instead throwing them out and starting over with a completely new framework.
Smaller projects, which cannot afford the certification of respected standards, will have difficulties in the future meeting the conditions proposed by the ICVCM. Additionally, existing projects, methodologies, and carbon credits will most likely struggle to become ICVCM-eligible. In this context, the issue occurs that existing products are devalued as soon as new ICVCM-eligible products come up. For registries, the fundamental problem with the ICVCM is that it undermines the registry’ credibility and threatens to replace them at some point.
The ICVCM, however, argues that with their approach, they do not want to criticise the existing standards but instead encourage them to improve. Since the draft is only in the consultation phase, many of the stated problems will dissolve during revision. As normally in such a process, the principles are very stringent at the beginning to test the water, and are adjusted according to the feedback.
The ICVCM will take the implementable and practicable criteria to the next phase when they finalise the framework.
Our take on ICVCM and approach to quality
At Callirius, we strongly believe that the VCM needs to become more thoroughly regulated and that this regulation is coming very soon.
That is why we use our knowledge from financial markets to build a transparent, high-integrity platform, based on traditional market principles. If regulatory changes are coming our way, we are perfectly prepared.
The ICVCM framework serves as an orientation for our quality approach. The Callirius quality approach allows to trace credits from issuance to retirement and guarantees emission reductions or removals happening at the project level.
Since the draft of the ICVCM cannot be used to assess all aspects of a project, our approach helps to dig deeper into each project, its local conditions, its peculiarities, and its special requirements.
Our trained AI algorithm filters all available projects and with that, we only have to manually assess those projects that meet our pre-established criteria. Then, remote-sensing data is used to verify and re-examine the project information regarding pivotal points like additionality, permanence, and robust quantification. The distributed-ledger technology allows us to track and trace all carbon credits to ensure transparency and high integrity.
Through this Callirius quality approach, we create access to the highest-quality climate solutions for our customers.
Quality and integrity are widely used buzzwords in the carbon credit world. In this context, the ICVCM framework can be seen as a threshold for the standardization of the term “high quality”.
Whilst some people argue that the ICVCM framework adds a new level of complexity to the already multifaceted and complex market, others respond that a common understanding of high quality simplifies things a lot. It can only be hoped that the framework does not act as a deterrent to some stakeholders but enables the much-needed scaling of the VCM.
As for companies and project developers, they should not be intimidated by the new quality requirements, but rather talk openly about their climate action. It is of no use to anyone if companies no longer dare to report on their actions in the face of tightening regulatory quality requirements in fear of damaging their image.
- ICVCM – Build integrity and scale will follow (2022) URL: https://icvcm.org/. (Access at 07.11.2022).
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