UPDATE 1-Global initiative outlines criteria for carbon offsets
(Adds reaction from Carbon Market Watch and JPMorgan)
By Susanna Twidale
LONDON, March 30 (Reuters) - A global initiative designed to grow the voluntary carbon market outlined standards on Thursday that it hopes will bring transparency to the $2 billion market, which has struggled for credibility.
The Integrity Council for the Voluntary Carbon Market (ICVCM), an independent governance body for the market, released the guidance to help what is currently an unregulated, voluntary market with many different standards and approaches.
Demand for carbon offsets, generated through projects such as tree planting or using cleaner cooking fuel, is expected to grow as companies seek to use the credits to help meet net-zero emissions goals.
"Criteria we are issuing today are an important step towards a transparent, regulated-like market where buyers can easily identify and price carbon credits that meet consistently high-integrity standards,” ICVCM chair Annette Nazareth said in a statement. ICVCM is made up of project developers, academics, NGOs, policy makers, investors and Indigenous people and local communities and credit buyers.
Critics of the market cite concerns including poor transparency, a limited supply of credits and questions over the quality of projects.
To be eligible to meet the ICVCM's Core Carbon Principles (CCP), announced on Thursday, project developers must disclose how each project calculates and quantifies its emissions impact, and how they assess social and environmental impacts.
They must also show how projects meet additional requirements, which prove the project is additional to any activities that would have taken place even without carbon credit finance. They also need to assess the risk of negative social impacts such as those relating to indigenous people, biodiversity or human rights.
An initial assessment phase for carbon crediting programs to gain eligibility will begin in mid-2023 with the first CCP credit approval expected later this year, the Integrity Council said.
Reaction to the new standards was mixed.
Non-profit Carbon Market Watch said it was an improvement on current practices but more work was needed. It called for the concept of offsetting to be abandoned.
“While the new rules help enhance the quality of carbon credits, they do not close all the loopholes of the voluntary carbon market,” said Gilles Dufrasne, its lead expert on global markets.
“More rules are needed and the credibility of the Integrity Council still hangs in the balance as several important criteria still need to be released.”
U.S. bank JPMorgan Chase, like many large corporations a significant buyer of carbon credits, welcomed the new criteria, telling Reuters it would improve the market's integrity and transparency.
"These principles are the building blocks for a trustworthy voluntary carbon market and a prerequisite for buyers and investors to deliver the capital needed to accelerate its development," said Brian DiMarino, the bank's Head of Operational Sustainability. (Reporting By Susanna Twidale; Additional reporting by Tommy Reggiori Wilkes; Editing by Sharon Singleton and Josie Kao)