Renewable energy projects 'fail to meet high-integrity label': ICVCM

Carbon credits from renewable energy projects have failed to receive a high-integrity Core Carbon Principles label due to additionality concerns, the Integrity Council for the Voluntary Carbon Market said Aug. 6.

The ICVCM said methodologies for renewable energy projects were insufficiently robust and urged carbon crediting programs to update their approach.

The decision impacts 236 million unretired credits, and could put further pressure on a market still reeling from intense scrutiny.

The ICVCM governing board decided that eight renewable project methodologies, which make up 32% of the voluntary carbon market, failed to meet the CCP requirements on additionality, terming them "insufficiently rigorous."

These are all credits from renewable energy projects apart from a small number covered by one methodology for reducing the release of sulfur hexafluoride, a greenhouse gas used in the magnesium industry.

ICVCM Chair Annette Nazareth said decisions like this were necessary to build a high-integrity voluntary carbon market.

"We need to modernize the design of these carbon projects, which carbon-crediting programs can and should do," Nazareth said.

Renewable energy projects financed by carbon credits had a role to play in decarbonizing grids "because it remains challenging for many least developed countries to secure the investment," she said.

The voluntary carbon market has endured two turbulent years, as the efficacy of some carbon projects and credits have been questioned by media and academia, pushing down prices and lowering market confidence.

Carbon credits generated from renewable energy projects have also faced criticism around the issue of 'additionality'. Additionality means that a project requires the extra revenue generated by credits to be operational.

Platts assessed the renewable energy credit price at $1.40/mtCO2e on Aug. 5, compared with $2.90/mtCO2e a year earlier. Renewable energy offsets are avoidance credits that contribute to the development of renewable energy projects. This includes, but is not limited to hydropower, wind, solar and biomass projects.

Next steps

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.

The ICVCM is expected to make more announcements in the coming months focusing on a broader set of methodologies including project categories such as REDD+, Improved Forest Management, Afforestation, Reforestation and Revegetation.

"The volume of CCP-labelled credits will grow steadily over 2024 as our assessments progress and we approve further methodologies," it said.

The governance body is tasked with setting threshold standards for high-quality carbon credits. It has developed CCP labels and an assessment framework to help define high-integrity carbon offsets.

Carbon credits can only be tagged with the CCP label if the carbon-crediting program is approved as "CCP-Eligible" and the projects that generate the credits use methodologies that are also "CCP-Approved," according to the ICVCM.

So far five carbon crediting programs with a 98% share of the market have the CCP labels: Verra, the Architecture for REDD+ Transactions body, American Carbon Registry, Climate Action Reserve and Gold Standard.