New joint commitment launched to boost carbon market integrity

One key aspect of the commitment is that it promotes the importance of companies setting independently verified science-based emissions reduction targets

Mark Carney’s ICVCM will work with Rachel Kyte’s VCMI as part of a new joint commitment to create confidence and clarity for financial firms and businesses seeking to invest in high-integrity credits to assist with decarbonisation strategies.

The two organisations will unite under a shared vision to create a high-integrity market for the private sector to support and finance.

The new commitment outlines the ways that corporates can purchase high-integrity credits and where these fit in with broader decarbonisation plans. The commitment emphasises that companies must first prioritise decarbonisation across the value chain by investing in clean energy, efficiency upgrades and new modes of transport. The commitment then states that companies should clarify the “complementary role” that high-integrity credits can play to support the final push to reduce hard-to-abate emissions. It proposes that companies develop clear guidelines that specify how credits will be purchased and utilised.

One key aspect of the commitment is that it promotes the importance of companies setting independently verified science-based emissions reduction targets as part of their decarbonisation strategy.

VCMI’s co-chair Rachel Kyte said: “It is essential that companies have clarity and consistency in how they can credibly use high-quality carbon credits and how this fits into their broader decarbonization strategies. What is needed is clear guidance, policy direction and a focus on quality.

“This collaboration will deliver a robust voluntary climate action framework that companies can follow, with the forthcoming launch of VCMI’s Claims Code of Practice a critical part of this, alongside the important work to raise the bar on corporate climate action from other organisations.”

Kyte previously spoke to edie on the imbalance between “well-intentioned companies” that want to work with “integrity” who are still reluctant to participate in the market due to concerns over greenwashing or the quality of the credits on offer.

These issues have given a lot of media attention to “junk” credits. Indeed, edie has its own feature on the issue here.

The VCMI’s Claims Code of Practice is due out on 28 June and the ICVCM Core Carbon Principles (CCP) Category-level Announcement is also expected in the coming weeks.

Both organisations have stated that the standards and guidance will “consistently reinforce” that investments into carbon markets must support “best-practice” corporate climate strategies that are aligned to the Greenhouse Gas Protocol, the Science Based Targets initiative, CDP’s reporting platform and We Mean Business Coalition’s 4As of Climate Leadership.

Issues with the carbon markets tend to fall back to accusations around greenwashing for corporates, especially if the credits they’re purchasing aren’t of high integrity. With one in every five cases of corporate risk incidents linked to environmental, social and governance (ESG) issues stemming from greenwashing and misleading communications, businesses will need to get their strategies and communications right.

Indeed, the UN’s High Level Expert Group on Net Zero Emissions Commitments of Non-State Entities outlined a new set of key recommendations to help organisations develop and deliver net-zero targets credibly, avoiding common greenwashing pitfalls at COP27.

The report offers steps to avoid greenwashing and recommends that non-state actors should no longer claim to be net-zero if they continuously build or invest in new fossil fuel supply, support deforestation and other environmentally destructive activities that should be branded as “disqualifying”.

Additionally, firms should avoid purchasing cheap carbon credits instead of reducing emissions. The report does state that “high-quality” carbon credits can be used, but only to balance out remaining emissions once short and medium-term science-based targets have been met.

Commenting on the joint commitment, the ICVCM’s governing board chair, Annette Nazareth, said: “We have a shared vision of end-to-end high integrity throughout the voluntary carbon market, from the supply of credits, to the markets they trade in, and ultimately how they are used. We are joining forces to create a high-integrity VCM that delivers real impact at speed and scale.

“By building an effective, trusted market, we can unlock investment and exponentially increase the positive impact it creates.”