Carbon Credit Markets Still Coming: New Framework Aims to Improve Quality

A group seeking to improve carbon-credit standards will announce labeling rules in March that are expected to meet corporate customer concerns and help improve the new market, but companies will still face a series of criteria used by the various registrars that offer surpluses.

The Integrity Council for the Voluntary Carbon Market said they will publish a set of Core Carbon Principles to test the certification processes used by carbon-credit registries such as Verra and Gold Standard. Around the third quarter of this year, results that meet the criteria will receive a CCP-related badge—a benchmark of four Approvals are similar to certificates issued to organic food producers.

The principles are intended to ensure that the credit companies do what they promise, a concern that stopped the market after several studies that showed that the credit could not be delivered.

The IVCCM is one of several groups working to develop carbon-credit markets. It is a topic that is being discussed at the climate meeting of the United Nations this year, and the US State Department-backed Energy Transition Accelerator is also working to finance advanced projects that attract more market conditions.

Voluntary carbon credits are approved by the registry for projects that promise to avoid—or in some rare cases remove—all from the atmosphere. Many activities are involved, including planting trees, sustainable agriculture near forests, installing clean stoves in poor communities and supporting farms. renewable-energy trends in developing countries. There are also regulated carbon credit markets created by the government.

Market opportunity

The value of voluntary carbon credits is currently more than $2 billion, but many observers predict more growth in the market as businesses buy credits to finance their emissions. as they destroy their actions. The consulting firm McKinsey & Co. in 2021, for example, it was estimated that the market could reach $50 billion in 2030.

Despite the growing expectations, the so-called debt retirement, which is often measured by companies that say they face their windows, fell to 3% in 2022 from 2021, compared to the average annual growth of 48% from 2019 to 2021 on Verra, the largest carbon sink in the world. -retala debt, according to a report by the World Economic Forum published on Tuesday.

Some companies are avoiding carbon credits because of the complex web of quality regulations, varying carbon-credit quality information, lack of transparency and the risk of reputational damage, according to the report of the World Economic Forum.

ICVCCM’s Core Carbon Principles should calm concerns about efficiency and increase confidence in the market, said CEO William McDonnell.

“Some of the regulatory and promotional developments are directed at us and our work, which we think will also help to give consumers the confidence that if they buy CCP tokens, they should good standing,” he said.

He expects the final issues to be released in March won’t be too different from the draft proposals released in July: 10 general principles including demonstrating that projects cannot receive cost benefits without approvals, protection against double counting of credits and obtaining third party guarantees their cries. However, there may be some information on how to evaluate the programs and the standards they must meet, he said.

Patchwork of standards

Other standards are also coming. At the United Nations climate conference in Dubai this year, negotiators are expected iron information on how carbon finance can be used to help achieve the 2015 Paris climate agreement, and how the financial system interacts with the UN..

The Energy Transition Accelerator also plans to use carbon credits to finance renewable-energy projects in developing countries. Supported by the US State Department and promoted by the US Special Presidential Envoy for Climate John Kerry, the Rockefeller Foundation and Bezos Earth Fund, the group says it intends to align its work with standards such as ICVCCM’s Core Carbon Principles .

Competitors will continue to offer value based on consumer preferences, said Hannah Hauman, head of marketing for the carbon in the world trading Trafigura Group Pte.

The IVCCM rules are “another index of principles in the classroom,” he said. “We will live in a world of many different platforms and we will see if there is a connection one at a time.”

Trafigura has thousands of clients in 150 countries and will continue to trade non-CCP debt, he said. Trafigura’s customers are asking for concessions that will meet the standards of the Paris Agreement, he said. So far they have not asked about the purchase of debt in order to meet the new CCP standards, he added, although he expected that to change after it came into effect. final condition.

“We are talking about a set of products that will all be needed for climate change and that will all need carbon pricing to be able to be leveraged as a solution,” he said. “Even though there are a lot of pressures on climate change, we will have a lot of products to fight against it.”

Letter to Dieter Holger p dieter.holger@wsj.com

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