United States: More Standard Setting For Standard-Setters: This Time For Voluntary Carbon Markets

On July 27, 2022, the Integrity Council for the Voluntary Carbon Market (Integrity Council),¹ an independent governance body² for the voluntary carbon market (VCM), released its draft Core Carbon Principles (CCPs) and the related Assessment Framework (including related Terms and Definitions) and Assessment Procedure for a 60-day public consultation through September 27, 2022. The Integrity Council also made available a related 5-minute video, offered and conducted public briefings, and issued a related press release providing additional background and context for the CCPs. The Integrity Council also released a helpful Summary for Decision Makers.

The Integrity Council had previously indicated that the CCPs would be released last May and would become effective in Q3 2022. Currently, the Integrity Council is targeting Q4 2022 for publication of the official CCPs, Assessment Framework and Assessment Procedure, following this public consultation.

The CCPs and Assessment Framework are intended by the Integrity Council to "provide a credible, rigorous, and readily accessible means of identifying high-quality carbon credits that create real, additional and verifiable climate impact with high environmental and social integrity."

The Integrity Council believes that without a "definitive global threshold standard for high-integrity carbon credits, the voluntary carbon market (VCM) cannot meet its full potential to deliver urgent climate impact in support of the Paris Agreement" and that by "creating a standardised benchmark, the draft CCPs and Assessment Framework [will] reduce confusion and fragmentation, allowing buyers to more easily identify high-quality carbon credits that meet their preferences at transparent prices," and "should also provide a clear signal to suppliers about buyers' expectations to reduce uncertainty and help direct investment decisions."

The CCPs, once final, would presumably cover the various VCM standard-setters, which include, for example, Climate Action Reserve, Gold Standard, Puro Standard, and Verra (or the "Verified Carbon Standard," which was formerly known as the "Voluntary Carbon Standard" and is also known as "VCS"). However, exactly how the Integrity Council intends to "enforce" its CCPs is currently unclear, especially if a VCM standard-setter declines to submit its standards to the Integrity Council's Assessment Framework and Assessment Procedure—a decision that likely turns on the perceived value of the "CCP-compliant" assessment that a successful application would permit.

In addition, it is possible that VCM exchanges and other trading venues may require such a "CCP-compliant" assessment as a condition to listing or trading that would compel or encourage such applications. Of course, these issues are somewhat speculative and are certainly affected by the Integrity Council's ongoing work on the CCPs and, in particular, the likely controversial proposed "high-quality" designation under the CCP.

Footnotes

1. The mission of the Integrity Council is to "set and enforce definitive global threshold standards, drawing on the best science and expertise available, so high-quality carbon credits efficiently mobilize finance towards urgent mitigation and climate resilient development."

2. The Integrity Council is the effective "successor" to the Taskforce on Scaling Voluntary Carbon Markets whose activities we summarized in our related August 12, 2021, Legal Update "Voluntary Carbon Markets Integrity Initiative Consultation Report Released" and January 29, 2021, Legal Update "Scaling Voluntary Carbon Markets: Taskforce Releases Core Carbon Principles and Roadmap."

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