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"Integrity is the watchword. With less than a decade to keep
1.5˚C alive, there is simply no room for greenwashing," said Alok
Sharma, president-designate of COP26, in a statement released by
VCMI.
The intent of VCMI, said Sharma, is to bring greater reliability
to calculation of carbon credits so that the corporations can use
carbon trading to do their share of meeting the Paris Agreement
goal of limiting global temperature increase to 2 degrees C and,
preferably, 1.5 degrees. The new program will provide guidance to
carbon trading markets to ensure that the allowances they trade can
be verified and result in real reductions.
Comments are being accepted through September 2021, with the
organizers planning to announce the detailed program in time for
COP26 coming in Glasgow, Scotland, in November.
The US is a co-funder of VCMI, which also has participation of
governmental groups such as United Nations Development Programme
and World Economic Forum; governments such as Chad, Cambodia,
Kenya, Mexico, and Mexico; private companies such as Ford; and NGOs
such as the Science-Based Targets Initiative and World Wildlife
Fund.
Indicative of US support, US Special Presidential Envoy for
Climate John Kerry is a member of the VCMI steering committee. "We
welcome the VCMI's focus on clear norms for companies to use
high-quality carbon credits, including toward their net zero
targets in a way that is credible, transparent and aligned with the
goal to limit global warming to 1.5 degrees," Kerry said.
Multinational collaboration is a key element of the concept,
said IHS Markit Global Head of Strategic Governance Advisory
Christine Chow. (IHS Markit did not participate in the development
of VCMI.)
"Carbon markets out there today are disjointed. What's missing
is the global approach," Chow said.
IHS Markit is among the private companies building a carbon
allowance registry, she added, in this case a meta-registry that
compiles information from other allowance tracking programs.
Enhancing corporate commitments
In the consultation document that
outlines VCMI, the initiative's organizers said that their goal is
to be a central resource for companies that have committed to
reducing GHG emissions that will complement their efforts to
prevent climate change.
"Investors and companies do not currently have the tools to
easily compare quality features and/or cost of carbon credits,"
they said.
They are trying to solve how companies can be assured—and
assure the public—they are moving towards their goals. "At the
time of writing, more than 3,000 companies have signed up to the
UN's Race to Zero campaign, and more than 1,500 companies have
committed to set science-based greenhouse gas emission reduction
targets as part of the Science Based Targets initiative," they
said.
"But integrity is crucial. VCMs have faced criticism in the
past, e.g. around poor environmental integrity, greenwashing, or
mis-selling. Without integrity, VCMs will not fulfil their
potential to channel finance in line with the Paris Agreement
temperature goal," they wrote.
Terms such as "net zero" or "carbon neutral" can be manipulated
or unclear, and work must be done on improving the integrity of the
"supply side" of credit created and the "demand side" of how they
are used.
"We need to know that when somebody makes a claim that they are
carbon neutral or that they are on the pathway to carbon
neutrality, that stands up," Rachel Kyte, VCMI co-chair, said. "We
need to know that when an offset is used as part of a claim to be
carbon neutral, that is a genuine trade."
No more double-counting, less use of
offsets
At the top of VCMI's list is to end the double-counting or
"double-claiming" of credits that occasionally occurs.
"There are situations in which both the host country where the
credit was generated and the purchasing company make some use of
the emission reduction or removal represented by the carbon
credit," VCMI said in its consultation document. "For example, the
host country may report them as pertaining to government action,
while the company uses the same emission reduction or removal to
make claims about their climate performance."
The other key element of the plan is to diminish the purchase of
offsets by corporations to reach their climate pledges.
"The imperative for overall and absolute emissions reductions
globally, to keep 1.5˚C within reach, necessarily means the end to
'traditional' offsetting—where carbon credits are purchased
instead of reducing avoidable emissions within the value chain of a
company," VCMI explained. "Concerns exist that simply
counterbalancing emissions potentially carries a disincentive for
actual and steady emission reductions within corporate boundaries.
The major risk has always been that offsetting would turn into a
cheap license for companies to continue polluting and delaying
their own GHG reductions."
To end or reduce this practice, the registry will define terms
such as "offsetting," "compensation," and "neutralization," and
track corporate use of each form of emissions balancing or
abatement.
For IHS Markit's Chow, the value of VCMI will be realized if it
is able to bring those ideas to life. It's less about counting
allowances, because the systems to track it are fairly well
established, she said. "It's the governance that is the difference
with the VCMI plan. Having the buy-in of the US and the UK is what
stands out, and could bring many stakeholders together," she
said.
