The role of Core Carbon Principles and Carbon Credit Ratings

Executive summary

• The ICVCM’s CCPs and carbon credit ratings both address carbon credit quality
• However, they fulfill different and complementary roles that will raise standards across the VCM
• CCP labels do not replace the need for ratings

• Only ratings provide assurance of the quality of individual projects
• Only ratings look at how projects have performed, rather than the project design and processes 

Note: this blog was updated in March and August 2023 to reflect the latest releases from the ICVCM.

Integrity is the word of the moment in the voluntary carbon markets (VCMs). Recently, the Integrity Council for the VCM (IC-VCM) released the first drafts of its Core Carbon Principles (CCPs) and Assessment Framework, outlining its plan to assess carbon credit types and methodologies. How does this fit into the wider VCM landscape, and the role of carbon credit ratings agencies?

‍What is the IC-VCM?

The IC-VCM was spun out of the TSVCM (taskforce on scaling the voluntary carbon markets). The principle is simple: ‘build integrity and scale will follow’. The IC-VCM aims to develop and enforce minimum threshold standards for credit quality to ensure that investments in VCMs are channeled to effective climate solutions, and give buyers and the wider confidence in the integrity of the market.

*Update as of July 2023: The IC-VCM launched its updated Core Carbon Principles and details of how standards will be assessed. This included a slight change in CCPs.

Soon, carbon crediting programs, such as Verra's Verified Carbon Standard (VCS), can apply for approval to be labeled as meeting the CCPs if they fulfill the criteria outlined in the newly released Assessment Framework. Project-category level assessment criteria are expected later this year. The effectiveness of delivering these principles depends on high-quality data, and Sylvera is proud to be supporting the IC-VCM in achieving this.

The VCM landscape

Several initiatives focused on market integrity exist across the VCM, some with confusingly similar names and acronyms. Recently, two in particular have released draft guidance: the IC-VCM and the VCMI (VCM integrity initiative). While the IC-VCM is focused on credit quality and integrity, the VCMI looks at how those credits are used, and claims from credit buyers.

In addition, there are a number of other initiatives focusing on market integrity on both the supply side (e.g. ICROA, CCQI) and the demand side (e.g. The Nordic Code and The Oxford Offsetting Principles). In general, these reflect broadly similar principles but vary in the exact scope or approach to guidance and accreditation. The table below gives a brief overview of some of the main initiatives in this area. 

What do we know about the IC-VCM’s CCPs?

1. Assessment level

The IC-VCM is not planning to assess credits at a project level, but will assess both the program and the credit category (considering factors such as the type of mitigation activity and methodology applied). IC-VCM assessment will consider not just the frameworks, but also how they are implemented and enforced. Credits will not be CCP eligible unless they meet the criteria at both levels. 

‍2. The high-level principles

There are 10 core principles to ensure that credits create real, additional and verifiable climate impact with high environmental and social integrity. These include project design criteria such as additionality and permanence, good program governance and transparency, and wider market considerations such as no double counting and supporting the transition to net-zero emissions. 

The IC-VCM has grouped the CCPs into three categories, while providing clear definitions under each:

• Governance – effective governance at the credit programme-level, tracking of credits through a registry system,transparency, third-party validation and verification.
• Emissions impact – additionality, permanence, robust quantification, and no double counting.
• Sustainable development – social and environmental safeguards, and avoid locking-in technologies or practices that areincompatible with reaching net zero GHG emissions by mid-century

3. Additional tagging

The CCP assessment will also surface key information relevant to buyers’ preferences, which the IC-VCM refers to as ‘CCP attributes’. These tags are:

• whether host country authorization and a corresponding adjustment are applied
• whether the project makes a voluntary contribution to the Adaptation Fund of the UNFCCC
• whether the project quantifies a positive contribution to the UN Sustainable Development Goals

‍CCPs and ratings platforms

Once CCP assessments have been implemented across the market, won’t carbon credit ratings become redundant? This is a common misconception as on the surface both are assessments of quality, but actually CCPs and carbon credit ratings serve different purposes. ‍

IC-VCM has a valuable role to play in improving integrity and scaling VCMs. However, market players who are committed to achieving real climate impact and want to avoid reputational risk and wasted spend should consider the value of project-level due diligence. Unlike the binary CCP approval, carbon credit ratings give a nuanced insight into multiple aspects of quality at the level of individual projects. 

CCPs and Sylvera ratings are complementary rather than overlapping:

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Relying solely on CCPs presents risks to credit buyers:

• Uncertainty as to whether CCP will provide a high-quality floor

The conflicting needs for the CCPs to balance high environmental integrity of credits and sufficient market liquidity mean that they are unlikely to be an absolute guarantee of quality. 

• Lack of project-level performance insight

Sylvera’s analysis demonstrates that the quality of projects of the same project type can be highly variable - a project can be bad, even if the methodology is good - but this is lost with standard and methodology-level assessments. 

A complementary approach

The IC-VCM is a hugely valuable initiative, well aligned with our values and mission at Sylvera. In the recent Sustainability Leaders Panel at Sylvera’s Carbon Markets Summit, IC-VCM Chair Annette Nazareth recognized the value of a number of organizations working together to increase transparency and accountability in VCMs:

“One positive outcome would be a race to the top, where companies are competing not only for robust disclosure, but robust practices.” — Annette Nazareth, IC-VCM Chair

In working towards this shared aim, we are able to achieve different things and serve different audiences. Sylvera will continue to engage with IC-VCM to ensure VCMs have the biggest and most positive impact on the climate, nature, and local communities.