Industry Spotlight: What the latest developments from Verra and VCMI mean for the voluntary carbon market
After a year of changes in the voluntary carbon market, industry bodies are working to improve the safeguards to uplift quality and integrity. This week, both Verra and the Voluntary Carbon Markets Integrity Initiative (VCMI) have released new guidance for improving projects and how claims are made about participation in them, respectively. Read on to unravel the key components and understand what they mean for market stakeholders.
Verra’s New Forest Protection Methodology
Verra unveiled its new methodology for protecting forests designed to elevate the standards for calculating emissions reductions under the Verified Carbon Standard (VCS) Program. This methodology introduces a new baseline-setting approach, aligning with the accounting requirements of nationally determined contributions (NDCs) under the Paris Agreement. This alignment could set the stage for a new era of global investments in nature protection – much needed funding considering that today investment in nature-based solutions only amounts to less than half the amount of funding needed by 2025.
The methodology integrates advanced remote-sensing technologies and rigorous risk assessments to more accurately predict deforestation in project areas. This ensures that the number of verified emission reductions aligns consistently with jurisdictional-scale accounting, fostering transparency and reducing potential conflicts of interest.
Sylvera’s Take: Navigating Towards Higher Standards
The new methodology is a promising step forward for the carbon markets. By minimizing conflicts of interest and ensuring data integrity through third-party suppliers, Verra's approach is a step towards addressing the persistent challenge of overcrediting in carbon markets. By relying on third-party suppliers for data collection, Verra mitigates the risk of accounting manipulation and provides a more trustworthy foundation for carbon crediting initiatives.
As part of the changes, Verra states that it will “enable project proponents to voluntarily transition their project(s) to the new methodology and adjust historic project calculations accordingly.” Correcting historic miscalculations has the potential to eliminate past instances of over-crediting, which would be a great step in increasing market confidence. However, the actual impact remains to be seen until the specific details of how this will be implemented are revealed.
Verra will also reduce the re-baselining period from 10 to six years, a step in the right direction. This reduction means that the counterfactual scenarios for projects will stay more up-to-date, ensuring more relevant crediting levels and potentially reducing the over-crediting risk.
Verra’s updated approach should help ensure consistency and add a layer of quality control, offering robust support for government actions. Implementing higher standards in methodologies and monitoring, reporting, and verification (MRV) will help drive certainty. As a result, it could help investors gain confidence and enable the global North to drive more funding to communities in the global South and protect nature's critical ecosystems.
VCMI’s Update Guidance on Climate Code of Practice
This week, the Voluntary Carbon Markets Integrity Initiative (VCMI) also released additional guidance for its Claims Code of Practice (Claims Code) to enable companies to make credible claims about their use of high-quality carbon credits in their net zero strategies, after they’ve reduced as many emissions as possible.
The updated guidance includes a Monitoring, Reporting and Assurance (MRA) Framework, a distinct brand and associated mark for making ‘Carbon Integrity' Claims, and a beta version of an additional Scope 3 claim. Crucially, the MRA Framework enables companies to substantiate a Carbon Integrity Claim, providing the information that must be disclosed and appropriately evaluated, evidenced, and verified.
Scope 3 emissions are emissions that aren’t directly produced by the company but those the company it has indirect responsibility over through its value chain. VCMI's introduction of the Scope 3 Flexibility Claim in beta permits a company to make limited use of carbon credits to close the emissions gap between its Scope 3 emissions reductions targets and its actual Scope 3 emissions, while increasing its internal decarbonization efforts and investment. It is intended to incentivize companies to take urgent climate action as they get on the path to net zero.
Sylvera’s Take: Fostering Accountability for Climate Action Claims
The ability for buyers to make claims about their impact is important for incentivizing investment into effective climate action that would otherwise go unfunded. By requiring evidence for the claims made, the VCMI’s updated guidance to the Claims Code of Practice provides much-needed clarity for buyers and could help unlock millions of dollars flowing to critical climate solutions.
Particularly, the MRA framework emphasizes transparent reporting and third-party assurance. As a result, these measures should bring much-needed accountability and trust to participating in the voluntary carbon market.
Driving Quality and Integrity with Technology
The technology to improve many areas of the voluntary carbon market already exists – now, stakeholders are working to deploy it from all angles. Notably, both Verra's new methodology and VCMI's updated guidance make use of some of the leading technologies available in the space, such as digital measurement, verification, and reporting, to drive integrity.
In addition, third parties like Sylvera can provide buyers with additional assurance, whether that’s in conducting due diligence for where to invest in the carbon markets or in demonstrating the impact of a project when making a claim.
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