A new initiative launched recently will focus on trying to improve the “integrity” of ‘voluntary carbon markets’, to help ensure they play a “credible role” in keeping global warming to 1.5c.

With the Intergovernmental Panel on Climate Change (IPCC) raising a climate alarm yesterday (Tuesday, August 10) as it published ‘Climate Change 2021: the Physical Science Basis’, it is no doubt that voluntary carbon markets will grow exponentially this decade.

However, this new initiative – the Voluntary Carbon Markets Integrity Initiative (VCMI) – aims to help ensure that credibility concerns are addressed so that these markets “fulfil their potential to support the goals of the Paris Agreement“.

The VCMI will initially focus on how businesses can make climate claims – like ‘net zero’ and ‘carbon neutral’ – that are “robust and underpinned by science-based action on reducing greenhouse gas emissions”.

Becoming carbon neutral means reducing GHGs “as much as possible, but also compensating for any remaining emissions”, according to the EU.

“A net-zero emissions balance is achieved when the amount of greenhouse gas released into the atmosphere is neutralised.

“This can be done by carbon sequestration, i.e. by removing carbon from the atmosphere, or through offsetting measures, which typically involve supporting climate-oriented projects.”

What are voluntary carbon markets?

Voluntary carbon markets enable companies to purchase carbon credits from activities that reduce or remove greenhouse gas emissions.

A policy brief published by the EUI School of Transnational Governance this year notes that voluntary carbon markets originate “on the basis of voluntary commitments” – in contrast to ‘compliance carbon markets’ that are based on obligations created by regulation, a familiar example being the EU’s Emissions Trading System (ETS).

The ETS is in place for reducing emissions from energy-intensive industries. It is a market for carbon permits establishing the amount of emissions these industries can release into the atmosphere. Permit levels are gradually reduced to cut the emissions of the participating industries.

Meanwhile, when it comes to the voluntary carbon market, to fulfil climate action claims, some businesses may use carbon credits to help address their greenhouse gas emissions.

But these actions “should complement rather than substitute for ambitious direct reductions in their own emissions”.

The VCMI has launched a first consultation to gather views on how carbon credits can be voluntarily used and claimed by businesses as part of credible net-zero strategies.

This work will form the building blocks of recommended actions to “bring integrity to private sector climate action” – with proposed guidelines expected in late 2021.

The initiative has been launched with co-funding by the UK government and Children’s Investment Fund Foundation, and is supported by the COP26 presidency and UN Development Programme.

Architecture of climate cooperation

Speaking about the initiative, Rachel Kyte, co-chair of the VCMI said: “The science is clear – we must keep global warming below 1.5°.

“Voluntary carbon markets may play an important role in channelling finance to the protection and restoration of nature, when transparent and based on a common and agreed framework of integrity.

“VCMI is an important multi-stakeholder effort to build a working consensus around how we assure the integrity of voluntary markets so that they lead to emissions reductions and support countries’ climate ambitions.

“The issue of integrity is an essential piece of the foundation of the new architecture of climate cooperation.”

Alok Sharma, COP26 president-designate said that such a market can “incentivise emissions reductions, encourage technology innovation and promote reforestation”.

Meanwhile, John Kerry, US special presidential envoy for climate said that to get net-zero emissions globally by 2050, companies should “drastically reduce their own emissions”.