The independent task force planning to police the carbon credit market unveiled its inaugural rules on Thursday, with its chair stressing that “everyone has to step up” to improve the quality of offsets.
The Integrity Council for the Voluntary Carbon Market, whose board members include representatives of the private sector and non-profit groups, said it planned to raise the bar on the quality of credits, which buyers, largely companies, use to compensate for their emissions.
The market for carbon offsets — which are supposed to represent a tonne of carbon avoided or removed from the atmosphere — has been plagued by concerns about a lack of integrity and regulation.
“Not everybody consistently meets all [criteria for best practice] . . . Everybody is going to have to step up,” said Annette Nazareth, chair of the ICVCM and a former commissioner of the US Securities and Exchange Commission. There was “not enough consistency in the quality” of credits, she added.
The first batch of offsets carrying the ICVCM stamp of approval is expected to be available before the end of the year.
The ICVCM, which grew out of an initiative spearheaded by former Bank of England governor Mark Carney, marks the first major attempt to regulate the growing industry, though Nazareth said the group was more of a “self-regulator”.
She said she was talking to regulators, including the US Commodity Futures Trading Commission and the International Organization of Securities Commissions, which are interested in the growing market.
The ICVCM will have the power to approve groups such as Verra, a non-profit organisation that is the largest issuer of credits from environmental projects that are used by companies to offset their emissions. The body will also be able to remove its approval in cases of serious non-compliance.
Under the plan, approved groups will be required to label individual credits that meet all the rules, with the ICVCM undertaking periodic spot checks.
Those issuing credits must also publicly disclose important information, including the names of the projects linked to the credits that companies have purchased.
The initial rules from the ICVCM came as the chief executive of Verra said the group was working to improve the assessments of carbon credit projects by its third-party auditors.
“We’re streamlining [the process], we’re improving systems, we’re training the auditors, bringing in technology” and making sure that “the rules and the requirements are fit for purpose”, said David Antonioli.
Verra had a “backlog” of work, in part as a result of having to ask auditors to redo reports, he added. At the moment, 46 Verra projects are unable to issue credits while the group reviews various concerns, including disputes over land ownership.
Nazareth said it was “incumbent” on groups such as Verra to ensure that their auditors were “doing a good job”.
The ICVCM, which is funded by philanthropic foundations, including the Bezos Earth Fund, would in the longer term “have to think about different funding models”, such as introducing a transaction fee, she added.