Three REDD+ methodologies receive high-integrity credit badge

Three carbon crediting methodologies related to REDD+ projects, which are yet to issue carbon credits, received a high-quality label from the Integrity Council for the Voluntary Carbon Market.

The governance body admitted that none of the current existing credits from REDD+ projects were strong enough to meet the Core Carbon Principles tag, it said Nov. 15.

Two of Verra's REDD+ methodologies (VM0048 version 1.0, Jurisdictional and Nested REDD+ framework version 4.1) and the ART's REDD+ Environmental Excellence Standard (TREES) version 2.0 passed the litmus test, according to the statement. These projects aim to begin issuing newly CCP-tagged credits in early 2025.

"These decisions are important, bringing the confidence needed to underpin investment and marking the start of a much-needed new chapter for nature in the carbon markets," ICVCM CEO Amy Merrill said.

The scrutiny of voluntary carbon markets has intensified, particularly concerning the effectiveness of certain REDD+ and nature-based projects. REDD+ initiatives focus on protecting forests from deforestation and contributing to climate change mitigation. These projects represent nearly a quarter of all carbon credits issued, making them a historically significant category.

Improving sentiment

ICVCM highlighted the upside potential of the volume of CCP-labelled issuances these methodologies could push onto the market.

The ART Trees projects could issue up to 123 million credits, while Verra's VM0048, with 21 projects in development, has the potential to issue about 300 million credits during its first crediting period.

The body, however, noted that Verra had excluded its older REDD+ methodologies from the assessment.

Verra CEO Mandy Rambharos welcomed the news, saying this approval not only "highlights the rigor" of its REDD+ framework but also reinforces "its role as a credible channel for forest conservation finance."

ICVCM's recent move could foster optimism regarding the overall integrity of REDD+ methodologies, potentially paving the way for more to qualify for the CCP tag.

To receive a CCP label, carbon crediting programs need to provide comprehensive and accessible disclosure on how each project calculates and quantifies its emissions impact, and how it assesses additionality and social and environmental impacts.

"These approved methodologies have demonstrated that they have significantly improved the integrity of REDD+ methodologies," Gabriel Labbate, co-chair of the ICVCM's expert panel, said. "Throughout the assessment process, we found that they have rigorous approaches in place to ensure additionality, permanence, robust quantification and social safeguards, among other criteria."

The perceived integrity concerns pertaining to some REDD+ projects had caused a withdrawal in buyer interest for these credits.

The Platts Nature-based Avoidance price, which reflects the most competitive internationally fungible carbon credits issued by nature-based projects such as REDD+ projects, is starting to rise after it reached record lows earlier this year.

The Platts Nature-based avoidance price averaged $4.45/mtCO2e in October, a slight recovery from a record-low of $2.77/mtCO2e in February, according to S&P Global Commodity Insights data. Platts Nature-based avoidance prices averaged $6.23/mtCO2e and $13.14/mtCO2e in 2023 and 2022, respectively.

Premium for CCP credits

So far only 27 million carbon credits or 3.6% of the market have been tagged with the CCP labels. These credits derive from projects that fall under two broad categories: Ozone Depleting Substances and Landfill Gas Capture and Utilization.

For CCP-labelled credits so far, higher pricing expectations have materialized in carbon markets in the form of higher offers compared with non-CCP tagged credits of the same segment.

Average offer levels for CCP-approved Methane Collection carbon credits showed a distinct premium over non-CCP counterparts. Offer levels for CCP-approved methane collection credits were observed at $6.28/mtCO2e in June, rising as high as $6.75/mtCO2e in July, but dropped off to an average of $4.85/mtCO2e in October, according to data from Commodity Insights.

Concurrently, the Platts Methane Collection Current year price averaged a respective $3.47/mtCO2e, $3.46/mtCO2e, and $3.40/mtCO2e in those periods.

From some quarters, CCP-tagged credits managed to gain more interest from market participants, but this did not necessarily materialize into wider demand as certain buyers found an element of 'misalignment' in CCP criteria, a carbon analyst told Commodity Insights.

A decision from the ICVCM on the assessment of cookstove projects is still expected in the coming months.