VCMI Claims Code of Practice explainer

Today the VCMI launched their Claims Code of Practice. This is new guidance on how companies can use credits in alignment with net zero targets.

If you haven’t got time to read all 44 pages, here’s what you need to know.

What is the Claims Code of Practice?

The Claims Code of Practice (CoP) aims to accelerate corporate use of voluntary carbon markets as part of net zero pathways by building a sense of trust and confidence in how companies engage with voluntary carbon markets (VCMs). 

There are two areas of concern about integrity in VCMs: credit quality, and how credits can be used. The VCMI deals with the second: what can companies claim about how they use credits? 

After recent negative coverage and court cases, the term “carbon neutral” is falling in popularity. So this guidance suggests a replacement model for claims, intended to be of higher integrity and aligned with the goals of the Paris Agreement. 

What does it say?

There’s a lot of detail, but the big picture is:

• Companies first must have validated near and long-term emissions reduction targets aligned with the Paris goals and be on track to meet them. 
• The most common approach here is to set an SBTi net zero target

• While in the process of reaching net zero, companies can use carbon credits to compensate for their emissions each year. Depending on how many credits they use, they can achieve different levels of claims:

• Platinum - credits equivalent to at least 100% of scope 1, 2 and 3 emissions are retired
• Gold - credits equivalent to 60-100% of emissions are retired
• Silver - credits equivalent to 20-60% of emissions are retired

• Companies must report transparently and regularly on a number of metrics related to the claims, including emissions across all scopes, targets, progress against targets, and how many and what credits are being used.

What’s new?

Last year the VCMI published a provisional CoP. This final CoP is pretty aligned with that. The same four stages to a claim still apply, with very similar prerequisites. 

However, there has been one fundamental change to the claims levels. There are still three metallic tiers. However, bronze is out and platinum is in. Bronze allowed up to 50% of progress towards scope 3 emissions reduction targets to be met through offsetting. This has been removed. Now all claims tiers require claimants to be on track to meet their interim net zero-aligned emissions targets.

Why does it matter?

Without an incentive, companies won’t buy credits. 

If carbon neutrality is pushed out with no replacement, we would expect a significant drop in demand for carbon credits, therefore stifling finance flowing to carbon projects. This guidance aims to outline a credible model for how credits can be used that both appeals to corporate buyers, investors and governments, and ensures VCMs deliver real climate impacts. 

If widely accepted, it should allow companies to engage in VCMs with confidence. It should also bring greater clarity to consumers, investors, and regulators by having clear definitions for each claim (unlike claims like carbon neutral, which are now associated with greenwashing).

Are there any concerns?

The CoP mainly aims to provide guidance on credit use rather than credit quality. Ultimately, however, any claim based on poor quality credits is greenwashing. Claims guidance must therefore consider quality carefully, and we think this guidance could be more stringent in that regard.

The guidance states that once IC VCM Core Carbon Principles-approved credits are available, those must be used. Until then, CORSIA-eligible credits should be used.  

Neither of these quality standards go deep enough to require project-level assessments, and so do not fully capture the range in quality found within standards, activity types and methodologies. Therefore some good projects are ruled out, and some bad projects are approved.

We would encourage the VCMI to also consider other approaches to assessing quality that better consider this spectrum of quality, including carbon credit ratings. 

What’s next?

Despite the depth of the  guidance doc, supporting docs and annexes, there is still more detail to be ironed out over the next few months. 

• We are expecting more levels of claims below silver, aimed at SMEs and companies in developing countries that do not have the resources to go through the full rigmarole outlined above.
• These next stages will be guided by a Stakeholder Forum, which Sylvera has been selected to be part of and looks forward to contributing to ensure the success and impact of the CoP.

In terms of impact, claims are only valuable if they are widely recognized and valued. We welcome the VCMI’s work on this important topic, and look forward to continuing to collaborate. It will take some time to see if the VCMI claims are widely adopted by carbon credit users. We hope today’s release is a step towards restoring confidence in VCMs and is the basis for ever-improving integrity.