The Integrity Council for the Voluntary Carbon Market is due to release in Q1 the first approvals for the use of the Core Carbon Principles labels. The ICVCM will approve the use of these quality stamps -- with which the ICVCM aims to set rigorous quality thresholds for credits supply in the voluntary carbon markets -- both for certification bodies (also called standards, or "programs" in the language of the ICVCM) and for the project methodologies provided by the certification bodies themselves. S&P Global Commodities Insights talked to Amy Merrill, interim chief operating officer at the ICVCM, to dive deep on the processes already underway and to gauge how long it may take for unretired carbon credits currently in the market to obtain a CCP label.
At what stage is the ICVCM process for approving certifiers or "programs"? Are we likely to see the CCP labels assigned all in one go or in batches?
The assessment process for programs starts when the program itself applies for approval. When the application is in and all the right documents are submitted, then the full assessment of the program starts.
If they are a CORSIA [Carbon Offsetting and Reduction Scheme for International Aviation] approved program, then this is one level, if not, a deeper analysis is carried out. The goal for Q1 is to have a recommendation for the ICVCM board for [approval of] some of the programs that applied at the end of last year and early this year. The board will then take a decision. Programs that issue 98% of credits in the market have applied for assessment. Some, but not all of the standards will be through the assessment process or receive approval in Q1 2024.
Does ICVCM consider approval under CORSIA Pilot Phase or under CORSIA Phase 1 when deciding which level of analysis should be carried out for programs?
ICVCM is aware that CORSIA assessments in relation to eligibility for the Compliance Period (first phase) are ongoing. Interim or conditional approval decisions taken by the International Civil Aviation Organization Council in relation to the carbon crediting programs will be taken into account to the extent relevant for our Assessment Framework.
In parallel with the programs' approval, the ICVCM carries out a category assessment. Can you help us understand more about this level of assessment?
A category is a cluster of methodologies that have similarities. For example, renewable energy is a category, cookstoves is another category. It was possible to cluster methodologies into categories because many existing methodologies are similar, for example many are based on CDM [the UN's Clean Development Mechanism] methodologies; a number of programs took CDM methodologies and modified them for their own program. In November we had the first level of sorting out categories. A stakeholder group divided the categories in three groups:
1. Internal assessment: these are categories that were considered as easier to assess, because historically they have presented less issues so it is efficient to manage them internally using staff and experts.
2. Deeper assessment: these are the categories of projects that are known for presenting challenges in certain cases (for example they had measurement issues, additionality issues etc.).
3. Very unlikely to pass: for example fossil fuels extraction projects.
The internally assessed categories will be assessed internally by the ICVCM, while the deeper assessment projects are going into a stakeholder process with external experts. The Integrity Council will publish a list of the categories falling in the three groups in the first quarter of 2024.
How many categories are we likely to see CCP-approved in Q1?
In Q1, we expect to go to the governing board with recommendations on some of these categories. Some of the recommended ones might be [the ones] internally assessed and some might [come from the group of the categories] reviewed by external stakeholders.
It's important to understand that if one decision is moving faster than something else, it doesn't mean that it's better -- the decisions will be taken when they are ready to be taken, similarly to what happens when renewing banks' permits for example. If we approve category A for example, this doesn't mean that category B will fail. The sequencing is not prejudicial. We are going to have a webpage where we say which stage each category assessment process is at.
Will the ICVCM then move to a methodology level of approval?
If a cluster of methodologies passes, a decision would be taken around the whole group of methodologies. During this process we will look at the methodologies included in the category one by one. We will approve, for example Version 3 onwards of a specific methodology. The ICVCM will stop at the methodologies level. It will then be the approved program [i.e. the certifier, or standard] that will apply the CCP label to all the non-retired credits that have been issued using the approved versions of their methodologies. It will take a while for the standards to complete this process.
Does the ICVCM have a view on how long it might take for a program to label all of their credits, once it has received the approval on a methodology?
It's up to the program to issue CCP labels to credits from approved categories, so we do not have oversight of how long this process may take. We hope they will do it efficiently so that buyers are able to see which carbon credits to buy. We will use our oversight rules to ensure that tagging is done correctly.
Will the IVCMI have an enforcement role after this?
Once the program [i.e. certifier or standard] has finished assigning the CCP labels at project level, the ICVCM will move to oversight and enforcement: this includes spot checking individual projects that have received the CCP label to see if the standard gave the label to projects that really align with the approved methodologies.
If we know that a CCP labeled credit was in breach, we will use the section 6 of the Assessment Procedure to use enforcement tools to work with the program. We need to be confident that all the CCP-labeled credits are compliant with the assessed and approved methodologies.
Can ICVCM request the standard to withdraw or suspend the label should a labeled credits/project be in breach?
ICVCM will oversee the market to ensure integrity by auditing programs, making spot checks and responding to complaints. We can review a program or category, if there are concerns about its adherence to the CCPs. If it finds material failings, it will be able to suspend or terminate the eligibility of the program or its approval for the affected category.
