Carbon ‘market structure’ next phase: ICVCM

The Integrity Council for the Voluntary Carbon Market (ICVCM) is broadening its focus and plans to offer guidance around improving "market structure," the chair of the private sector initiative said this week.

The group is "going to turn to market structure issues," bringing key players from the still relatively small voluntary carbon market together to examine what would be needed to supporter a larger, more liquid market, ICVCM chair Annette Nazareth said at the Xpansiv Climate Week Summit, a Climate Week NYC side event.

The council currently assesses carbon offset project types and carbon crediting programs, which has allowed for the sale this year of credits labeled as meeting the group's "core carbon principles" for project quality. The group has sought to standardize the largely unregulated market, potentially boosting trust among prospective corporate buyers that are worried about the reputational and legal risks of funding offset projects that might reduce emissions less than they claim.

ICVCM said Nazareth was referring to previously announced "continuous improvement work programs," which involve studying issues that could feature in the next edition of the group's core carbon principles rulebook that is due for implementation in 2-3 years. Some of these study groups are underway, including ones on how to align projects with national climate commitments and strengthen requirements around the permanence of emissions reductions, while others are set to start later this year.

Some topics Nazareth mentioned could make the market — which is largely an over-the-counter one today — less opaque for prospective buyers. She said there was interest in looking at encouraging price transparency and trade reporting, better integration of data, and addressing the fragmentation of carbon registries to allow for more "interoperability" and potentially encouraging a "meta-registry."

Other topics on the ICVCM's agenda involve equity concerns, such as setting best practices around disclosing and sharing revenues with local communities and also making it easier for small developers to access funds for starting up projects.

"Do we need to create databases on the performance of project developers? Would it help to have some sort of platform where lenders and project developers can find each other? There's a lot of interesting things that we could look at," Nazareth said.

Proponents of more guidance, which has come over the last year from various private groups and from regulators like the US Commodity Futures Trading Commission, hope that clearer standards will assuage doubts about the market and scale up investments in climate change mitigation projects.

But there is still deep disagreement about the ultimate role of carbon offsets, which some environmental groups fear is deterring companies from reducing emissions within their own operations. The Science Based Targets Initiative, a private sector group that assesses corporate climate goals, said earlier this year that companies can meet its standards even if they use carbon credits to offset emissions from their supply chain, but the group later backtracked and said it was still debating the issue.

By Cole Martin