In this post, you’ll find:

• An overview of the current challenges in the Voluntary Carbon Market (VCM)
• How the ICVCM’s Core Carbon Principles (CCPs) are bringing clarity to carbon credit quality
• The pros and cons of the first CCP-labeled projects
• Why labeling more complex carbon projects will be increasingly difficult
• How to use CCP labels as a guide, but why deep project-level due diligence is still essential

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Are CCP Labels All That a Buyer Needs?

If you put all of the carbon credits available on the voluntary market in a hat and picked one at random, what would the chance be that the credit you picked is high-integrity? Calyx Global has rated more than 50% of credits available on the VCM today and found that less than 10% of issued credits would receive a B or higher on their A to E scale. This is the current state of affairs in the voluntary carbon markets today: quality is out there, but it is hard to find.

Given these circumstances, the carbon markets can be hard for even the most sophisticated buyers to navigate. Purchasing high-quality carbon credits is essential to ensure the integrity of both your investment and your climate claims, but it isn’t as easy as it should be to participate in the voluntary carbon market (VCM). 

To introduce clarity and simplify the process for buyers to identify which credits they should buy, the Integrity Council for the Voluntary Carbon Market (ICVCM) has recently declared the first batch of carbon-crediting methodologies that adhere to its Core Carbon Principles (CCPs). Those principles aim to outline the fundamental requirements that carbon credits must adhere to in order to provide a real and verifiable climate impact. Projects implemented following a methodology that meets its CCPs are eligible for a CCP label. 

On June 6, 2024, the ICVCM gave the first CCP labels to methodologies related to landfill gas (LFG) and ozone-depleting substances (ODS) used by the American Carbon Registry, Climate Action Reserve, Gold Standard, and Verra registries (see the complete list here). The ICVCM is still reviewing dozens of other methodologies to determine which should be eligible for a CCP label.

What do we think about how the ICVCM did with their first labels?

• A good place to start: LFG and ODS projects were the right place for the ICVCM to grant their first CCP labels. As Calyx Global has shown, LFG and ODS projects tend to have higher carbon integrity than other project types such as Improved Forest Management or Avoided Deforestation projects due to the ease and accuracy with which their emissions reductions can be calculated. This is one of the reasons CNaught has consistently recommended buyers purchase these kinds of credits.
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• But some projects with CCP labels are problematic: Because the ICVCM engaged only at the methodology level, their labels may be applied to credits that are low-quality due to project-level issues. And a significant number of labeled projects have such issues. For instance, a recent review of fourteen projects implemented under one of the CCP-approved methodologies found that nearly half of them were likely to be non-additional. In this way, the labels are over-inclusive of low integrity projects
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• Some high-integrity LFG projects were excluded from the label: The ICVCM only granted labels (for now) to some of the more recent LFG project methodologies, meaning projects that issued high-integrity credits using older methodologies–typically older projects–are excluded. In this way, the labels are under-inclusive of high-integrity projects.
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• It only gets harder from here: The flipside of LFG and ODS projects being a good place to start is that it only gets harder from here. There is only more complexity and variability among other project types like improved forest management and reforestation. It will be that much more challenging to issue labels that are directionally accurate at the methodology level.

So where does this leave us? We appreciate that CCP labels reflect the strong sentiment that the VCM as a whole needs to be both simplified and improved, but we do not think they should currently be used as the lone-metric for deciding which projects to invest in and which to avoid–even among the projects they have reviewed. The ICVCM currently only considers methodology-level quality, but the quality of projects within methodologies can still vary widely. This can be due to differences in what data they report, what verifiers asses and how, as well as the project’s unique financial, legal, and regional context. So what would happen if you went back to our hat, filled it only with CCP-labeled credits, and picked at random again? Your likelihood of picking a high-integrity credit would have increased markedly, but it still would be far from certain. (What’s more, you also would have dumped a lot of high-integrity credits out of your hat!) 

We see the greatest impact of CCP labels as a means of guiding the market towards broader reform, rather than drawing a line that shows what methods are good versus bad. This first batch of CCP labels demonstrates that we need more consistency across projects within methodologies to be confident in their quality. We expect future iterations will continue to show why more consistency is needed across methodologies and project types as well. Because ICVCM is open to revising their decisions following methodological updates, we hope that CCP labels will also serve as a means of motivating projects and methodologies to adapt to comply with current best practices.

For now, we recommend that buyers look at CCP labels as an additional piece of information when they are considering projects. But they are no substitute for deep, project-level due diligence.