The Integrity Council for the Voluntary Carbon Market (ICVCM) and the Voluntary Carbon Markets Integrity Initiative (VCMI) are synergistically joining forces. Their collaborative mission? To meticulously craft an innovative, unified market integrity framework.

This robust system is designed to build confidence among investors in the Voluntary Carbon Market (VCM), assuring them of the superior quality and high integrity of their carbon credits.

Their goal is to enable a high-integrity VCM that the private sector can invest in to complement their efforts in decarbonizing company operations and value chains.  

Setting an Integrated Market Integrity Framework

The collaboration between VCMI and ICVCM is one of the many initiatives that set an integrated market integrity framework. Four crucial things are at stake: quality, credibility, transparency, and accountability across value chains. 

Their joint commitment will define best practices and credibility in using and sourcing high-integrity carbon credits. VCMI’s Co-chair Rachel Kyte asserted the importance of this by saying:

“It is essential that companies have clarity and consistency in how they can credibly use high-quality carbon credits and how this fits into their broader decarbonization strategies.” 

The two key stakeholders in the VCM target to release new standards and guidance in 2023 and beyond. These include the upcoming launch of VCMI’s Claims Code of Practice, which Kyte said is a big part of their collaboration. It is due to launch on June 28. 

The ICVCM’s Core Carbon Principles (CCP) Category-level announcement is also due in the coming weeks. CCP was launched earlier this year and the first assessment decisions and labels for CCP-approved carbon credits will be released later this year.

The CCPs and Claims Code of Practice is global standards that create real, verifiable climate impacts in the VCM.

As the organizations operate these standards, they’ll continue to emphasize that investing in the VCM should supplement established best practices when it comes to creating climate strategies, accounting, and setting targets. 

These standards and approaches include, in particular, the Greenhouse Gas Protocol, Science Based Targets Initiative (SBTi), and CDP’s reporting platform.

By combining their resources and expertise, the VCMI and ICVCM set the stage for a credible VCM with integrity framework. This is critical to build trust and confidence among market players and stakeholders namely, companies, governments, investors, and local communities.

How Can the Framework Help Companies in their Net Zero?

Science shows that investing in carbon credits can help ramp up efforts to prevent global warming from going above 1.5°C. But as long as companies use them as a supplement to their science-based internal decarbonization and net zero strategies.

More importantly, carbon credits can also unlock critical funds for climate solutions that wouldn’t otherwise be feasible. 

ICVCM Board Chair, Annette Nazareth, commented on the partnership: 

“We are joining forces to create a high-integrity VCM that delivers real impact at speed and scale. By building an effective, trusted market, we can unlock investment and exponentially increase the positive impact it creates.”

Giant tech companies like Microsoft, Meta, and Apple have been pouring millions of dollars in the VCM as one means to abate their emissions. They fund projects that either reduce or remove carbon dioxide from the atmosphere. 

The integrated market integrity framework will help companies do their part in bringing the world to net zero emissions by highlighting these important aspects:

Asserting that companies must give priority to their internal decarbonization efforts such as investing in clean energy technologies and processes.  
Defining the complementary role of high-integrity credits in a corporate climate strategy through guidelines that will continuously be improved. 
Enhancing commitment to quantified and verified carbon emissions reduction targets that align with the Paris Agreement goals. 
Promoting adherence to enhanced reporting requirements, disclosure mechanisms, and guidelines on the use of high-quality carbon credits toward net zero.

The announcement came ahead of the “Summit for a New Global Financial Pact” in Paris on June 22 and 23. 

The post Revolutionizing Carbon Credits: ICVCM and VCMI Team Up to Create High-Integrity Voluntary Carbon Market appeared first on Carbon Credits.

As the world continues to experience out-of-this-world disasters, polluters are under more fire to help clean up the planet-warming carbon they dump into the air. As they do that, more people are asking what carbon credits are, how they work, and what role they’ve got in fighting the climate crisis. 

Many believe that they are instrumental in promoting both corporate sustainability and global sustainable development. 

Others think that carbon credits can help companies meet their climate goals by reducing emissions and advancing sustainable business practices.

Yet, some consider them as a greenwashing tool for some reason…

…But many more find them an essential market mechanism to help reverse the effects of climate change. 

Regardless of the different views on carbon credits, getting them explained in this article will help clarify things and answer your most pertinent questions about them. 

What are Carbon Credits?

The idea behind carbon credits is to put a price on carbon emissions. The goal? To incentivize emitters to pollute less, ideally. 

In essence, carbon credits serve as permits to emit a certain amount of carbon. These permits are tradable in carbon markets. These markets turn CO2 emissions into a commodity by giving them a price.

International carbon trading markets have been around since the 1997 Kyoto Protocols. But the new regional markets have prompted a surge of investment.

The world has seen billions of metric tons (Mt) of CO2 pumped into the air every year. In 2022, around 41 billion Mt of greenhouse gasses were emitted, up from 36 billion Mt in 2016. These gasses are the ones to blame for the earth’s rising temperatures. 

So, if we want to stop the planet from heating up more, we need some solutions up our sleeves. And yes, carbon credits are one of them. But how do they work in fighting climate change?

How Do Carbon Credits Work?

One carbon credit represents one tonne of CO2 or its equivalent (CO2e) gas that an organization can emit. 

It’s important at this point to say that carbon credits are often referred to as carbon offsets. While they’re very similar, they’re not the same. 

Carbon credits, also known as carbon allowances, work like permission slips for emissions. You can think of them as a unit of measurement for CO2e emissions that have a tradable element. 

The number of credits issued to a company corresponds to its emissions limit or “cap” set by a regulatory body. So, they’re also called a “cap and trade” system. 

If that company doesn’t go above its cap, then it will have excess carbon credits which they can sell in the compliance carbon market regulated by the government. But if the company goes beyond the limit, it can turn to the carbon market to buy the required carbon credits.

In short, the governing organization creates carbon credits and allocates them to individual companies within that jurisdiction. Over-emitters buy carbon credits from under-emitters.

On the other hand, carbon offsets (also called carbon offset credits) are from projects or initiatives that reduce or remove carbon emissions. 

Carbon reduction projects generally fall into two types: nature-based and technology-based. 

Nature-based solutions usually include reforestation and wetland restoration projects. They naturally sequester carbon in the environment. 

Technology-based projects often involve investments in new technologies that increase efficiencies or reduce emissions like renewable energy projects.

Once an offset is generated, the organization that develops or completes the project can retain the offsets or trade them on a voluntary carbon market (VCM). 

Other companies can then buy the offsets to compensate for their own carbon footprint.

To fully distinguish the two terms, keep these keywords in mind – compliance for carbon credits and voluntary for carbon offsets.

In a compliance market, companies regulated by the government must abide by their limits or cap. Within the voluntary market, the idea is just the same. It’s just that companies do the offsetting voluntarily, either as part of their ESG goals or because of shareholders’ pressure

Who Are The Biggest Buyers Of Carbon Credits?

Carbon-intensive sectors such as energy face a harder quest to net zero emissions than others. That’s no surprise because companies in this sector simply can’t just instantly reduce their reliance on fossil fuels.

This is why the biggest buyers of carbon credits were from the energy sector, as well as from the finance, technology and consumer goods sectors. The Ecosystem Marketplace (EM) keeps track of these companies and how much credits they’re buying.

In another analysis, researchers found that at least 36% of large companies buy carbon credits voluntarily to offset their footprint. The analyzed companies include the world’s biggest and top S&P 500 businesses. 

The findings revealed that Microsoft, Salesforce, Goldman Sachs, Disney, and Nike, among others are the top buyers. 

The projects that those companies bought credits mainly generated in the global south. These projects often involved: 

Forestry projects, 
Renewable energy, 
Household and community projects

In a broader analysis by EM, which included carbon project developers and investors, they found that the most popular projects producing carbon offsets are forest and renewable energy initiatives.

In separate Bloomberg analysis of data from Verra, the largest buyers of voluntary carbon credits are cryptos, airlines, and carmakers. The analysis covers only about 50% of the global carbon market in 2021 as data is voluntarily disclosed. 

On the sellers’ side, in case you don’t know it yet, Tesla is the largest seller of carbon credits under the California cap-and-trade system. The company had earned billions of dollars from it.

Last year, Tesla’s total carbon credit sales reached a record $1.78 billion. All thanks to the carmaker’s hundreds of thousands of sold EVs. 

Now you might be wondering why Tesla earned that much from selling carbon credits. So your next question would be how much does each credit worth?

How Much Is A Carbon Credit Worth?

Same with other commodities, there’s no single price for a carbon credit. 

The cost varies. A lot. Even so in the VCM. 

The cost of carbon offsets depends on various things, including project quality, issuance year, verifiability, additional benefits created and so on. For live VCM carbon pricing, please go here.

Let’s consider the project type. Common carbon offsetting projects are forestry and nature conservation, waste-to-energy, and renewable energy. Some of these projects can be worth below $1 per tonne of carbon offset, while others can cost over $40.

For a clearer explanation, take for example you opt to have a forest tree planting initiative. 

If a tree can store about 5 tonnes of carbon and each tonne of carbon removed is valued at $15, you’ll generate $75/tree. Assuming the cost of carbon increases, then your revenue goes up, too.  

Sounds pretty good in theory, right? But in real life, that could even be better, especially the figures. 

Several farmers have been receiving over $100,000 in yearly income by letting their lands sequester over 7,000 tonnes of CO2. Boston-based Indigo Ag has been paying their partner farmers that amount and more, depending on how much carbon their farms remove.

Looking at the entire market, the VCM was valued at $2 billion in 2022 alone. It may be quite huge for some market outsiders, but for insiders that’s rather not surprising. 

That’s because more and more companies and organizations are expected to reveal their net zero pledges. And as mentioned earlier, over a third of the large businesses are using carbon credits as offsets. 

For a better picture of how huge the market could get, take a look at the projection below.

That estimation is conventional and other market analysts predict even higher demand growth. 

So how could you leverage this exponential carbon market growth? You might be asking how you can invest in carbon credits, earn profits, or simply help in the climate change fight. 

We’ll explain the steps involved in the next sections. Let’s first help you out on how to buy carbon credits step-by-step.

How To Buy Carbon Credits

Buying carbon credits may not be as simple as selling them. But after you’ve known the criteria for a successful purchase, the following steps won’t be hard. 

#1. Buy directly from project developers

This is the most direct way to get the credits you need – at the source. That’s from the project developers themselves. Here are the top five options that have the highest ranks.

You can either directly invest in the project as it’s being developed (lowest cost but longest time to wait until delivery) or you can contract for delivery (lower than market price but still have to wait for some time).

#2. Buy from a broker

If you want to skip all the work needed when contracting with the developer, look for a broker. Yes, carbon credits have brokers, too.

They make it easier for you and other buyers to find the credits you need. Plus, the best ones can give you an analysis of the project where those credits are from. 

This is perhaps the most practical way to buy carbon credits, more so if you need a lot of them. The purchasing process doesn’t include long contracts but, of course, you guess it right – it comes with a price. So, you may have to pay more for the broker’s services. 

#3. Purchase from a retailer

If you’re still wondering how to buy carbon credits if you only need a smaller volume, then going for a retailer might help. In fact, this option may also be the fastest way to get the credits.

Most often, retailers have an account on a carbon registry, allowing them to retire the credits on your behalf. But ensure that after paying the retailer, you get the rights to the credits. 

#4. Purchase from an exchange

Finally, you can buy carbon offset credits from a carbon exchange. Doing so will also allow you to earn profits from trading them.

There are plenty of carbon exchanges but here are the top trading platforms worth exploring. They usually work with carbon registries to facilitate their trading transactions.

Sourcing the credits from an exchange can be quick and easy. But it may also be more difficult to access enough information about the credits’ quality. 

So, there you have it. You’ve got four ways on how to buy carbon credits. Here’s a much more comprehensive guide on how to do that. And here’s the checklist you should keep in mind as a buyer. 

Now, if you’re more into selling the credits or planning to sell them and get paid, here are the ways to do that.

How To Sell and Get Paid for Carbon Credits

The fastest way to sell these credits is through an online carbon exchange. There are many within the U.S. and globally that allow sellers to get paid for their offsets. 

Carbon exchanges are pretty much similar as to how various regular stock exchanges operate. Selling or trading through them follows this general rule: buy low, sell high.

One quick tip though – quality carbon credits sell higher. So, it’s best if the offset credits you sell follow the standards set by the top carbon registries. 

Next, if you’re a land owner or farmer, you need to secure the documents showing that you own the land, along with all the details describing your land. You must also have the papers documenting the land management practices you perform. This is crucial for the buyers and as proof that your land captures the amount of carbon you declare.

The same applies to any carbon reduction project that generates your credits. 

But before you sign any contract with the buyer or look for one, do your research first. Knowledge will help you be confident that the amount you’ve sold or get paid for is enough and not too low than you deserve. 

As mentioned earlier, you may also opt to enlist the help of a broker. But be prepared to share the payment with one. 

But if you want to take home all the money, then by all means, just find the right buyer yourself. 

How To Earn Carbon Credits? 

Before you can sell the credits, you have to earn them first. How do you do that?

If your business activity or project reduces, avoids, or removes CO2 from the atmosphere. 

For every metric ton of reduction or removal, you earn one carbon credit for it. 

So if you have a huge project or a couple of them, you can earn even more credits to sell. But what are the major factors you need to consider to earn high-quality credits? Remember, quality credits sell higher. 

Let’s give a specific example for a better understanding – a farmer or rancher.

Here are the things farmers should be aware of to earn more through carbon credits.

Right carbon program. 

The right carbon credit program prompts farmers to apply sustainable practices designed to improve soil health, reduce carbon emissions, and enhance soil carbon sequestration. The approach should take into consideration that each farm is unique and so needs a customized guideline.

Right carbon farming plan.

Having a custom carbon farming practice plan means basing it on your baseline assessment and goals. The experts will guide you on how to implement carbon farming practices to generate the credits. Common examples are reduced tillage, improved residue management, cover corps, to name a few.

Right implementation.

This stage requires proper data-keeping and monitoring. Remember your goal is to generate credits by implementing the changes in your farming methods. Availability of data will help you guide what to improve in your practices. 

Verification. 

Verifying your data and results can be done by the carbon program you partner with or an independent body. Verification means determining if the amount of carbon removals or reductions your farm delivers is correct. 

Only with all those things in place that you can be issued with carbon credits and earn them. 

Carbon Credits Explained: Key Takeaway

To wrap it all up, can you make money from carbon credits? Yes, you can. Either by selling them or trading them as an asset.

Either way, you are not only earning cash but you are also contributing to winning over the climate change fight.

After all, carbon credits were designed to encourage us to reduce our planet-damaging footprint before it’s too late.

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Climate talks in Bonn, Germany kicked off this month where diplomats around the globe meet to agree on a common agenda for the next big UN climate summit, COP28, taking place in Dubai in November. 

However, negotiators parted ways with some decarbonization issues left hanging. These particularly include climate finance and how quick emissions cuts must be done formally known as the Global Stocktake. 

Global Stocktake provides a picture of where the world is in addressing climate change, where it needs to go, and how to get there.

The Bonn delegates have the huge task to lay the groundwork for the Global Stocktake before its finalization at COP28. But early in the two-long-week talks, tensions were high as negotiators couldn’t agree on the agenda. 

This prompted the climate conference’s co-chair Nabeel Munir to call the diplomats “a class of primary school”.

Here are the key issues that caused agenda woes and disputes among delegates.

Where Are We Right Now in Cutting Emissions? 

The Global Stocktake is a key element of the Paris Agreement that will inform the next round of climate pledges by countries. It’s a critical turning point when it comes to national efforts in reducing carbon emissions to tackle climate change. 

In other words, it’s a defining moment to take a deeper look at the state of the Earth and chart a better course ahead. It will help nations bolster their ambition as necessary to avoid more global warming. 

The first talks on Global Stocktake also happened in Bonn in June last year. The second one took place at COP27 in Egypt, while this is the third one it’s discussed for COP28. 

To have the final output of the Global Stocktake (GST), here’s how it will go for the participating parties:

Mapping of the indicative elements of Global Stocktake (GST) outputs with Paris Agreement Article 7.14 mandates (Source: NAP Global Network)

There’s a common understanding that countries aren’t on track to achieve their climate goals. These targets even fall short to meet the 1.5°C warming threshold. And so, the Global Stocktake was designed to bring countries back on the right course in addressing the climate crisis.  

Only decided upon on the last day of the Bonn talks, negotiators were able to draft a framework for the Global Stocktake with these key areas:

But there were significant disagreements on some points discussed within Global Stocktake (third section) among delegates. And one of them is on climate finance.

Climate Finance: The Most Disputed Agenda 

Since the Paris Accord in 2015, the Dubai COP28 will see the UN publish the Global Stocktake for the first time. But disputes arise on how to incorporate finance and support. 

In the words of a delegate from a global nonprofit organization, “Progress was underwhelming on nearly every front, with one main culprit: money.”

While climate finance isn’t directly part of the agenda, it casts a shadow over the talks. 

During the conference, low-income nations expressed frustrations on the funds promised by rich countries that didn’t come. The $100 billion 2020 pledge by wealthy developed nations to finance developing countries’ climate actions remains unmet. 

Meanwhile, there’s a new post-2025 climate finance target to help developing nations cut their carbon emissions and improve climate resilience. They call it the “new collective quantified goal” (NCQG) that’s the agenda for COP29 in 2024. 

Yet, discussions for this new climate finance goal in Bonn were so technical.

The general sense is that rich nations, particularly the U.S. and the EU, are trying to avoid specific talks on climate finance. 

For instance, the US wants to make developing nations also rely on private financing and suggest including wealthy developing nations in the list of climate finance donors. These include China and the Gulf states, in particular. 

For Tom Evans of E3G, developed countries are using that as a shield to block talks on climate finance at Bonn. He remarked that they’re bothered that “the more we talk about financial flows, we’re literally talking about ending fossil fuel investment.”

Commenting on this issue, Harjeet Singh from Climate Action Network tweeted that wealthy nations showed indifference toward developing countries. She further asserted that:

“Let’s be clear: without honouring their financial pledges—directly tied to their historical role in driving the climate crisis—these affluent nations lack the moral authority to exert pressure on poorer countries.”

That climate money is not only due to developing nations; it’s also critical to ensure a transition to a renewable energy system for all. 

The COP for Global Stocktake

Looking forward to COP28, many believe it would be a big fight between the rich and the poor countries over climate finance. 

Others dub this year’s climate summit as “Global Stocktake COP”.

After Bonn climate talks, there will be a summary report on the 3rd meeting of the Global Stocktake’s technical dialogue by August. Then a synthesis report ensues by September that brings together all the assessments of the entire 3rd Global Stocktake dialogue. All these in preparation for COP28 final talk. 

In his closing speech, the UN Climate Change secretary Simon Stiell noted that pledges and implementation are far from enough. Thus, “the response to the Global Stocktake will determine the success of COP28 and, far more importantly, success in stabilizing our climate”, he adds. 

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If you’ve been keeping up with the net zero trend, then you’ve probably heard the terms Carbon Dioxide Removal (CDR) and Carbon Capture and Storage (CCS) thrown around before.

Both are important tools in the ongoing fight against climate change. What you might not know, however, is that they actually refer to two different processes.

Generally speaking, CDR refers to processes and technologies that remove carbon dioxide from the atmosphere. Some examples of this include afforestation and reforestation.

On the other hand, CCS differentiates itself from CDR with the term “capture”. This refers to the fact CCS methods generally capture CO2 from specific points of emission, also known as “point sources”. An example of CCS would be capturing the carbon dioxide emitted by a specific industrial factory.

With that said, CDR and CCS are two sides of the same coin – they simply differ in where they remove the CO2 from. For both processes, the end goal is the same: to remove carbon dioxide that would otherwise end up in the environment, and to get rid of it by storing or using it up.

Various Types of CDR and CCS

Both CDR and CCS are expected to scale up significantly from where they are now in the IEA’s Net Zero Emissions by 2050 Scenario. 

There are already a number of differing options for both. And we’ll go over some of the major ones in detail below.

For CDR, one of the most common types of projects is planting trees, which falls under either afforestation (planting trees where there weren’t trees before) or reforestation (planting trees where there used to be trees).

Trees and other types of vegetation store carbon through photosynthesis as they grow, making them fantastic natural carbon sinks.

Many of these forestation type projects qualify under the UNFCCC’s REDD+ framework. If you haven’t heard the acronym before, REDD+ stands for “Reducing Emissions from Deforestation and forest Degradation in developing countries”. The “+” includes activities that don’t directly involve planting trees such as forest management.

In a similar vein, some projects also aim to store carbon in the soil through special farming practices, or in certain types of ecosystems that work as excellent carbon sinks. Coastal wetlands and peat marshes are examples of such ecosystems that are particularly suited to sequestering carbon. As such, conserving and restoring these kinds of ecosystems also serves as a method of CDR.

Another offshoot of this type of CDR are blue carbon projects, named so for how they focus on ocean-based ecosystems. Coastal biomes such as tidal marshes and mangroves are thought to be more effective at removing carbon when compared to a forest of similar size on land.

Blue carbon ecosystems aren’t as well understood as traditional land-based ones though. But this is an exciting CDR field with lots of ongoing research.

Storing carbon in the above manners is collectively known as “biological sequestration”, where the carbon is stored in natural ecosystems.

Geological Carbon Sequestration

On the flip side of biological sequestration, we have “geological sequestration”, where the carbon is stored in deep rock formations. Much like how oil and gas deposits are usually found deep underground trapped between layers of impermeable rock, carbon can be stored the same way.

Types of CDR that allow for geological sequestration include technology-based solutions like Direct Air Capture (DAC) and Bioenergy with Carbon Capture and Storage (BECCS).

DAC involves directly removing CO2 from the air. BECCS involves capturing the carbon emissions from biological sources such as bioethanol or pulp and paper production. Both are critical to achieve the IPCC’s 1.5C scenario as shown above. 

Example of DAC process by Climeworks

While BECCS technically involves removing carbon from a point source and has CCS in its name, it blurs the line between CDR and CCS. The biomass used in BECCS processes absorbed CO2 from the atmosphere while it grew. In effect, BECCS technically removes carbon from the atmosphere as a net result.

For instance, the process of fermenting corn to turn it into bioethanol releases carbon dioxide as a by-product. However, that corn also absorbed CO2 from the atmosphere as it was growing.

As a result, any CO2 captured from the fermentation process was actually effectively removed from the atmosphere.

On the subject of CCS and net zero, the technologies involved are much more straightforward than with CDR.

As mentioned, CCS is mostly often performed on point sources as that’s where it’s most easy and cost-effective to do. Large industrial plants, fossil-fuel-based energy plants, and other such facilities with significant carbon emissions are all viable targets for CCS.

The different types of CCS technologies differ in exactly how they capture carbon from emissions streams. Examples include absorption through carbon dioxide scrubbers, chemical looping combustion, and oxyfuel combustion, to name a few.

The Role of CDR and CCS in the Push to Net Zero

Though the world continues on the path to net zero, the transition will take time – decades worth of it.

In the meantime, there will continue to be plenty of ongoing essential processes worldwide that are difficult to make net zero with current technology. Steelmaking and cement manufacturing are two such examples of industrial processes that are hard to completely eliminate carbon emissions from.

For these industries, CCS will serve as a perfect solution for abatement.

On top of this, CDR will help to reduce carbon either already in the atmosphere, or already emitted by sources that are difficult to capture emissions from.

CDR and CCS are both key parts of our efforts to mitigate climate change. But they can’t fully replace the net zero transition.

Geological analysis has estimated that the world had a tremendous amount of CO2 storage capacity through geological sequestration. Yet, not all of this capacity is in accessible locations, or even cost-effective enough to use.

And the fact that there exist industries where it’s difficult to completely eliminate carbon emissions, as previously discussed, means that it’s even more important to remove other sources of carbon dioxide wherever possible.

Still, both CDR and CCS will play major roles globally as we continue on our 2050 net zero pathway. Expect to see heightened focus on both in the years to come as the fight against climate change progresses.

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