INTERVIEW: Harmonizing standards key to boosting demand in carbon market: VCMI

The key to pushing up demand across carbon markets is to harmonize standards in terms of how carbon credits can be used and what defines high-quality carbon credits, Mark Kenber, executive director of the Voluntary Carbon Markets Integrity Initiative (VCMI), said in a recent interview.

Kenber highlighted several areas where fragmentation has appeared.

First, VCMI, which sets standards for buyers on how to use carbon credits properly, and Science Based Targets initiative (SBTi), which guides corporates to set reasonable climate targets, have not fully aligned their rules, especially on whether carbon credits can be used by companies to tackle their Scope 3, or indirect, emissions across supply chains.

Second, some countries have chosen to develop their own carbon crediting methodologies, but they are yet to align these methodologies with international standards. The lack of coherent standards might hinder international carbon trading and incur reputational risks, Kenber said.

Finally, some policymakers and industry participants showed strong preferences towards technology-based removal credits, like direct air capture credits, neglecting the importance of nature-based removal credits, like afforestation credits. Meanwhile, some stakeholders also sidelined reduction credits, namely credits from projects that avoid, instead of directly removing, emissions, like projects that prevent deforestation or substitute emission-intensive cookstoves with clean ones.

Whether the global carbon market's demand and prices will grow significantly depends on whether these currently fragmented rules and practices can be harmonized, Kenber said.

VCMI and SBTi

SBTi issued a draft Corporate Net-Zero Standard for public consultation in March under which removal credits would only be allowed to be used for Scope 1, or direct, emissions. Concerns have been raised by industrial stakeholders who planned to use carbon credits to tackle Scope 3 emissions, which are usually much larger and harder to manage.

Later in April, VCMI issued its Scope 3 Action Code of Practice, defining a set of rules to properly use carbon credits for Scope 3. Kenber highlighted that VCMI's rules would only allow companies to use carbon offsets to cover no more than 25% of their emission reduction targets, and this option for offsetting will be phased out by 2040.

He said VCMI's rules were designed based on extensive consultations with companies and the fact that companies are still far away from meeting their Scope 3 targets.

"Companies that have SBTI or net-zero targets across Scope 1, 2 and 3 in 2025 were behind where they should be by 1.4 gigatons of emissions, equal to the whole of Japan's emissions. By 2030, at the current rate, that will be seven gigatons, which is two times the size of Europe's emissions," Kenber said.

"It [VCMI's latest Scope 3 rules] is not specifically directed at SBTi, but we're hoping that people will look at it when they respond to the SBTi consultation. And, when SBTi looks at it, they'll say 'OK, if we put certain guardrails in place, then we can allow some carbon credits'," he said, adding that despite the differences VCMI and SBTI "agree on about 80 or 90% of things."

Bridging separate markets

For carbon crediting methodologies under individual jurisdictional carbon markets, Kenber expected that there would be a trend of harmonization, especially aligning with Core Carbon Principles (CCPs), a widely used rule set defining high-quality carbon credits.

"They [methodologies] don't have to be the same, but they have to be compatible," Kenber said.

Currently, CCP labels have only been issued to international carbon crediting methodologies. However, Kenber pointed out that VCMI required corporate buyers to do a due diligence check for their investments in these jurisdictional credits, like Thailand's T-VERs or China's CCERs, to justify that these credits are compliant with CCP requirements, even though the actual CCP labels have not been granted.

Kenber noted that some Southeast Asian countries have started aligning their carbon crediting methodologies with one another, allowing them to "avoid having a situation where they are competing with each other, and that pushes the price down."

'We need everything'

Kenber mentioned that the 7-gigaton gap towards meeting emission reduction targets only factors in 8,000-10,000 companies that have net-zero commitments, but there are around 55,000 listed companies globally, which implies an even larger gap in climate actions.

Given such situations, he highlighted that all types of carbon credits should be considered as essential and valuable instruments to drive decarbonization.

"We need to do everything we can. We can price them differently. We can risk manage them differently. We can report them differently. But, we still need them," he said.

When asked whether renewable energy certificates and carbon credits are currently competing against each other, Kenber said, "We need to decarbonize power, heating, transport... And we need to stop land degradation. Whatever we can do for those, I'm in favor of."

The value of carbon credits(opens in a new tab) can vary from CORSIA-eligible offsets at $22/mtCO2e, to household device offsets at $3.1/mtCO2e, nature-based avoidance offsets at $6.35/mtCO2e and tech carbon capture offsets at $150/mtCO2e, Platts data showed May 14.