Feature: Emerging Global Carbon Council standard more liberal in renewable energy project registration

A new standard is emerging in the voluntary carbon market, namely the Global Carbon Council, and market participants have deemed it more liberal than others like VerifiedCarbon Standard, and Gold Standard, which are hesitant to register renewable energy projects not from least developed countries, or LDCs.

By default, the GCC has become the go-to standard for renewable energy projects by middle income countries like India, China, Mexico, Turkey and Vietnam. Large global carbon credit project developers and traders like South Pole have started taking their renewable energy projects to the GCC too.

Respite for developers

Based in Qatar, the GCC was founded in 2016, but has only been operational since 2019. Its acceptance of renewable energy projects has come as a relief to many developers.

"Clients still want renewable energy projects, especially those purchasing on the spot market and who do not want long-term projects. There is a section of customers, who only want renewable energy credits," a developer based in India, who is registering projects with the GCC, said. A Turkish developer said: "VCS and GS have unfairly put all renewable energy projects into one basket."

The GCC's program has been approved under the global Carbon Offsetting and Reduction Scheme for International Aviation, or CORSIA, where airlines and aircraft operators will offset any growth in CO2 emissions above 2020 levels.

It has also been conditionally endorsed by the International Carbon Offset and Reduction Alliance, or ICROA, subject to the issuance of 100,000 credits and 10 project registrations. ICROA is a non-profit organization made up of leading carbon reduction and offset providers in the voluntary carbon market.

So far, two projects have been registered with the first issuance of 136,000 credits expected in September, while a total 24 projects have been submitted with another 70-100 expected by the end of the year.

"All renewables projects in countries like India and China had to find a new home," a market source said.

Additionality argument

Carbon credit project developers have been finding it hard to prove additionality of their renewables projects to standards that have made registration of projects from non-LDCs more stringent since 2020. Additionality is a criterion for project eligibility that requires proof that reduced emissions would not have taken place without the carbon market. Credits generated through previously registered renewable energy projects are being actively traded in the voluntary market, but developers are struggling with registration of new projects.

According to the GCC, each project must prove additionality individually; a blanket ban against registering projects from certain regions is unfair.

"[Clean Development Mechanism] is also approving credits for renewable energy even though it's provisional, as we are towards the end of the Kyoto protocol. Secondly, overall penetration of solar projects is about 3.5%, while penetration of wind projects is about 6.7%. Project owners face a lot of investment and institutional barriers in implementing projects across the world. They must be given an opportunity to demonstrate additionality through the investment, or barrier route," Kishor Rajhansa, COO of the GCC, said.

The GCC has cited common practice in its justification for approving renewables projects. If a project is not a common practice in the host country, the additionality test stands. By that definition, renewable energy projects are not common practice in countries like India and China, thus such projects in these countries can stand the test of additionality.

"For common practice, adoption of a particular technology has to be more than 20%. Verifiers on the ground must check the information and data submitted to them for demonstration of additionality. We don't want to make a blanket decision that all renewable energy projects are not additional," Rajhansa said.

A project developer, who spoke with S&P Global Platts, expressed concern over GCC's shorter crediting period as well as its no-renewal policy. The crediting period for GCC-certified projects is 10 years with no renewal as opposed to other standards that allow multiple renewals, prolonging the duration and credit-generating possibility of the project.

"We want to improve efficiency of carbon finance in the market rather than pumping money to the same project for 20-21 years," Rajhansa said.

Pricing

As no GCC credits have been issued, or traded, so far, it is unclear how the prices of GCC-certified projects will fare compared with credits certified by VCS and GS.

A South American developer, who has recently switched to GCC from VCS and GS for his renewable projects said: "We are expecting good prices once those projects are certified. We are expecting prices to be in line with VCS and GS for renewable energy credits."

Another source, however, was less optimistic.

"Don't be surprised if GCC projects trade at a discount compared to the rest. The simple reason is that buyers are more familiar with standards like Verra [VCS]. Also, as Verra has questioned additionality of the same projects, buyers will be in a quandary. Buyers being buyers will want to play safe."

The GCC has been sticking to its stand despite being questioned.

"Renewable energy penetration is less. If you don't give incentives to cleaner tech, how will penetration go up?" Amit Thusu, director of the Global Carbon Council, said. "The transition from fossil fuels to cleaner grids needs finance and capital expenditure. Where will it come from?"

"We want to move towards a cleaner world, but, if we are to create artificial barriers, the transition is unlikely to happen," Thusu added.