Policy news round up - July 24 2023

1. UN maritime talks agree net-zero target, thresholds for cleaner fuels

• Summary: The global shipping sector at UN-convened talks agreed to become 'net-zero' by "around" mid-century and adopted non-binding interim 2030 and 2040 "checkpoints" as a yardstick of progress, a deal that was hailed by many countries as a historic upscale in ambition but derided by critics as falling far short of science-based targets. Full text here.
• So what? Shipping is a key industry for net zero, responsible for a higher proportion of global emissions than aviation. These targets are not 1.5 degree-aligned but could be below 2 degrees, which is positive. However, we do not expect this agreement to be as important as CORSIA for VCMs: the opportunity to use carbon credits looks likely to be very much secondary and the focus is on greener fuels.

2. ANALYSIS: UK sends “very strong signal” on removals in Emissions Trading Scheme (ETS) reform paper

• Summary: The UK has set down a very significant marker for the inclusion of engineered removals in its compliance carbon market and one that starkly differs from the EU position, though integration is unlikely to be rushed. Full text here.  
• So what? Since 2020, international credits have not been permitted for use in the EU ETS (and therefore were not allowed in the UK ETS which spun out post-Brexit). Including engineered removals in the ETSs has been discussed in both the UK and EU, but this is the strongest signal yet that it is likely to happen in the future, if not imminently. 
  

• This could be a huge source of demand for voluntary removals credits, but it all depends on prices - EU allowances are hovering around €80-90 and UK around £50-60, which is cheaper than a lot of engineered removals credits currently available. “High-quality international credits should be included in the ETS, because they can channel carbon finance to the global south, position the UK as the global center for carbon trading, and allow the ETS to achieve greater climate impact at less cost,” said Allister Furey, Sylvera CEO and Co-Founder.

3. Stop using 'carbon neutral' claims, advises VCMI as it launches Claims Code for companies

• Summary: Companies should consign “carbon neutrality” claims to the dustbin, the Voluntary Carbon Markets Initiative (VCMI) advised on Wednesday as it launched guidelines for buying carbon credits that it hopes will inject heavy doses of confidence and capital into the voluntary carbon market and end accusations of greenwashing.Full report here. 
• So what? Read all about our take on the VCMI guidance in our blog.
  

4. UN carbon crediting body targets end of August for draft removals guidance

• Summary: The UN body with a mandate to shape carbon crediting under Article 6 of the Paris Agreement has signaled that draft recommendations on removals are to be prepared by the end of August as it scrambles to ready guidance before the UN's main COP28 climate summit at the end of the year. Full text here.
• So what? Removals did not feature in the CDM (the precursor to 6.4) - meaning the rules have to be agreed from scratch. Reversal risk remains a sticking point. The draft guidance will then be open for public consultation before the final rules are agreed. The impact of A6 on VCMs is still unclear, but it has the potential to set market norms, as well as be a source of supply for corporate buyers.

5. Insetting may not be any better than offsetting, says carbon credit integrity expert

• Summary: Companies turning to insetting as a knee-jerk reaction to criticism about offsetting practices may not be pursuing an approach that is any more credible, a leading expert on carbon credit quality told a conference on Friday. Full text here. 
• So what? Insetting might not be the hot topic it was last year, but this is a good talking point if you are asked about it. 'Offsetting' is no longer the model of choice for using carbon credits, but the issue is with the claims being made. Using credits that have gone through a third-party validation is much less open to greenwashing than companies developing their own methods.

6. Nigeria to crack down on 'unauthorized' carbon trading: reports

• Summary: Nigeria has become the latest African nation to state it will take much greater control of its project-based carbon trading, with the country's government reported as saying this week that sellers of credits must comply with local regulations. Full text here.
• So what? The ongoing story of host countries seeking greater control and fairer benefit sharing. It is affecting market confidence so important to stay on top of what is happening. In other host country news, disruption continues in Zimbabwe as Gold Standard pauses issuances from projects in the country just as Verra restarts. Malawi has also announced it will review all projects in the country and intends to take a share of revenue going forward.

7. Amazon deforestation down by a third in 2023, says Brazilian government

• Summary: Deforestation in Brazil's Amazon fell by 33.6% in the first six months of President Luiz Inácio Lula da Silva's term compared with the same period in 2022, the government says. Full text here.
• So what? This week's positive news in climate! Also interesting because it reflects the importance of policy and political context, and also the complexity of forward-looking baselines.

8. Renewable credit prices up after VCMI release, N-GEO rise 'technical'

• Summary Spot and near-curve nature-based and Corsia-eligible carbon offset prices strengthened during the second half of June due to increased buyer certainty and the technical rollover of a key contract. Full text here. 
• So what? Last week's VCMI launch seems to have boosted confidence and demand in VCMs: CBL GEO contract (CORSIA eligible) rose from $0.90 on Wednesday to $1.25 on Friday. Another contract - N-GEO- has been boosted by rolling over to newer vintages. We haven't seen many good news stories about prices in VCMs recently, but there are signs that integrity initiatives and market infrastructure is working to build confidence.

9. The social value of offsets

• Summary: It is unclear how much carbon should be stored in temporary and risky offsets to compensate for one ton of CO2 emissions. Here we cast the social value of an offset (SVO), measured in terms of economic damages avoided, as a well-defined fraction of the social cost of carbon reflecting offset duration, and risks of non-additionality and failure. Full text here. 
• So what? A really interesting paper that looks to quantify the value of non-permanent carbon credits, or ones with risks of lower quality. 
  

10.Verra Launches Consultation on Proposed Changes to the VCS Program

• Summary: Verra has launched a public consultation on proposed changes to its Verified Carbon Standard program in a bid to align with ‘meta registry’ the Integrity Council for the Voluntary Carbon Market’s (ICVCM) Core Carbon Principles and make the VCS program eligible for the first official phase of the CORSIA offset scheme in August this year. Full text here. 
• So what? This demonstrates the impact of the other major VCM initiative, the ICVCM. ICVCM is focused on credit quality, by raising the quality bar at the standard and activity type level. This seems to show that that approach is working and that standards are taking the label seriously and responding to the make sure they are compliant. 
  

11. Limited evidence of ‘greenhushing’ in voluntary carbon market following scandals

• Summary: Recent negative media coverage has mainly affected sentiment and prices in the voluntary carbon market rather than the number of credits retired, and does not seem to have led to a tangible increase in an anonymous activity whereby corporates attempt to keep quiet about their market involvement. Full text here. 
• So what?  A write-up of a Trove Research report looking into recent market activity and the impact of media coverage. Some interesting metrics that overall suggest, similar to Sylvera’s report published with Pachama, that things aren't all gloomy for VCMs. In particular, there hasn't been a rush for companies to hide their engagement in VCMs, which is good news in terms of developing VCMs in a transparent and trustworthy way. 
  

12. ISSB issues inaugural global sustainability disclosure standards

• Summary: An organization that sets standards for corporate reporting on climate targets published sustainability disclosure standards that aim to harmonize how companies across the world measure their progress and the information they give on the types of carbon credits used. Full text here. 
• So what?  The good news is that the global standard for disclosures requires companies to report details about their use of credits. The less good news is that it seems this is only required as it relates to climate targets rather than just using credits in general.

13. Investment in VCM fell after host country policy changes

• Summary: Developing countries taking greater control of climate-related projects in their territories contributed to a drop in investment in the voluntary carbon market as developers and buyers became increasingly wary of mooted changes to regulations in host countries. Full text here.
• So what? Most weeks recently, we've seen stories about host countries introducing new rules for carbon projects. It hasn't been clear so far what the impact has been. This is just the opinion of panelists rather than any kind of study, but it suggests that the uncertainty resulting from these new rules has had some impact on market activity. It shows the importance of keeping on top of developments and bringing certainty to buyers and intermediaries.