Building confidence: ICVCM Core Carbon Principles Assessment Framework released

The ICVCM has detailed its assessment framework, which will serve as the initial bar for determining carbon credit quality. Meaningful implications for carbon markets are likely around the corner. We share our evaluation of this quarter’s publication. When we first reported on the publication of the Core Carbon Principles (CCPs) earlier this year, we welcomed the Integrity Council for the Voluntary Carbon Market’s (ICVCM) decision to build on guidelines established by the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), and their new registry governance guidelines. Now that the assessment framework has been released, we believe that the ICVCM has delivered a largely workable set of guidelines that balance ambition and practicality while acknowledging the need for continuous improvement. Key themes that stood out include the use of layered approaches to additionality, the establishment of new permanence and uncertainty benchmarks, and the use of flexible guidelines in baseline determination requirements.

“The initial version of the assessment framework sets a workable but improvable quality benchmark that threads a line between raising the bar for quality and ensuring reasonable pragmatism.”

By the end of the year, the first issuances of CCP-labeled credits are expected with assessment covering three broad themes: governance, emissions impact, and sustainable development. Here, we detail the key themes that stand out from the assessment framework.

Key criteria for determining carbon credit quality

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AdditionalityAdditionality under the CCPs will need to be supported through a layered approach that includes, at a minimum, these practices:

• Demonstrating that the project activity isn’t already legally required
• Demonstrating that carbon revenues were considered before the project began
• Detailing a market penetration rate for the technology or practice, and
• Detailing an investment analysis that demonstrates the need for carbon, or
• Conducting an analysis of project barriers

Standardized approaches to project approval, such as those used by the Climate Action Reserve (CAR), are permitted if they apply the same criteria laid out for project-specific assessments. The ICVCM gives registries flexibility to demonstrate additionality. For example, carbon programs may offer multiple compliance options to project proponents to show prior consideration of carbon revenues before the project start date. The first option is to require project proponents to submit public evidence generated prior to project commencement (within one year of the start date) and to limit registration (validation or verification) to a “reasonable” period of time. This approach aligns with Verra’s requirements for Agriculture, Forestry, and Other Land Use (AFOLU) projects, which commonly allow for a five-year period before validation with evidence of the start date provided. The second option involves establishing a set window of time between the project start date and validation with no requirement to provide evidence of prior consideration. This approach is aligned with CAR, which requires project proponents to submit a project within six months of commencement. The ICVCM plans to further limit the window of time permitted to produce and provide evidence of prior consideration in the next iteration of the assessment framework scheduled for 2025. In the meantime, registries will likely continue to improve on this critical component in a manner that makes sense for their particular operational context (i.e., global vs. North America).

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Permanence monitoringThe ICVCM has set permanence at a minimum of 40 years. Permanence is the time period over which carbon avoidance or removals are required to remain stored. This threshold is already used by the American Carbon Registry, which typically involves a 20-year crediting period followed by an additional 20-year permanence monitoring period. CAR uses a 100-year permanence monitoring requirement. Verra's approach didn't require project proponents to monitor permanence after a crediting period until August 29 when version 4.5 of the Verified Carbon Standard was published. Now projects need to have a minimum longevity (crediting period and permanence period) of 40 years.

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UncertaintyUncertainty in greenhouse gas (GHG) accounting methods can originate from multiple sources depending on project type and geography, among others. For this reason, carbon standards and accounting methodologies have historically taken different approaches to quantifying uncertainty and the associated deductions to ensure conservatism in carbon credit issuance. The new CCPs level the playing field across methodologies, requiring that overall uncertainty—originating from a commonly defined set of sources—is taken into account.BaselinesPerhaps an area where most flexibility is granted for registries is baseline setting. Our read from the assessment framework is that ICVCM baseline guidance isn’t comprehensive, as it only provides examples of ways to ensure conservativeness. Examples include (1) considering different scenarios, including best available technology or statistically relevant historical information; (2) considering uncertainties in choosing between different scenarios; and (3) considering legal and regulatory requirements in a baseline setting. These options aren’t necessarily exclusive of each other. In addition, the quantification methodology should “ensure that the overall degree of conservativeness in the quantification of baseline emissions or removals is based on the level of the overall uncertainty, taking into account the choice of assumptions, models, parameters, data sources, measurements methods and other factors.” The analysis required to understand how carbon offset methodologies will meet this condition can be significant as highly technical GHG quantification knowledge is required. It’s therefore difficult to anticipate how methodologies will need to adjust their approaches to meet this requirement at this time. Ensuring rigor in baseline setting will be a task dependent on the quality of the ICVCM's methodology review process.

Progress balancing higher standards with pragmatism

The initial version of the ICVCM Assessment Framework sets a workable but improvable quality benchmark that threads a line between raising the bar for quality and ensuring reasonable pragmatism. In many areas, the framework serves as a summary of current common practice. This starting point will allow for the continued operation of the voluntary carbon market (VCM) while registries continue to raise the bar toward the next CCP update scheduled for 2025. Further, registries are allowed to use alternative approaches for additionality and robust quantification as long as they meet the ICVCM thresholds and make their justifications publicly available. Terms such as “reasonable,” “decisively,” and “appropriate” are used throughout the definition of quality criteria and are open to interpretation. While not ideal in terms of concrete guidance, these flexible definitions allow for the uninterrupted operation of the VCM while registries continue to improve and innovate.

VCM standardization is picking up pace

The ICVCM has laid the foundation for effective assessments through the establishment of category-specific review committees comprising independent subject matter experts, a transparent process, and an open door for public input throughout. Attention to detail in the review panel’s interpretation and application of the CCPs and assessment framework will be key to determining which methodologies credibly make the cut and which don’t. With CCP implementation kicking off now, momentum toward VCM standardization, transparency, and integrity is picking up pace in this critical inflection year for carbon standards and practices. Projects that deliver CCP-approved credits may stand to benefit from credit price premiums over non CCP-approved credits.Read More From Manulife HereInvesting involves risks, including the potential loss of principal. 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