Voluntary Carbon Market | Manulife Investment Management

The Integrity Council for the Voluntary Carbon Market (ICVCM) is a governance body that seeks to establish and enforce global standards for carbon credit quality. For projects to issue Core Carbon Principles (CCP)-labeled credits, they’ll need to use a CCP-approved methodology that complies with specific category criteria. In March, the ICVCM released the final version of the CCPs, the criteria for application at the program level, and its assessment framework. A second publication will specify how the CCPs should be applied at the category level, which is a grouping of mitigation activities that share the same activity type, program, methodology version, and other common features such as location.

“The Core Carbon Principles (CCPs) are a global benchmark for high-integrity carbon credits that set rigorous thresholds on disclosure and sustainable development ... the CCPs provide a credible and rigorous means of identifying high-integrity carbon credits that create real, verifiable climate impact, based on the latest science and best practice.”

icvcm.org

We believe that potential categories used by the ICVCM may include improved forest management, reduced emissions from deforestation and degradation (REDD+), and afforestation, reforestation, and revegetation. Project methodologies that fall within an ICVCM-approved category would be issued CCP-labeled credits. The first approvals of programs that apply to become CCP eligible are scheduled to be made in Q3 2023.

By the end of the year, the first issuances of CCP-labeled credits are expected, which ensure effective implementation covering three broad themes: governance, emissions impact, and sustainable development.

Governance that increases accountability

Governance applies at the program level and includes the principles of transparency, accountability, tracking of credit use, and third-party validation and verification. Within governance, registries will be expected to increase their accountability for how they make decisions.

CCPs and program and category level criteria—governance

CCP	Definition	Program level criteria	Category-level criteria
Effective governance	Registries shall have governance for transparency, accountability, continuous improvement, and credit quality	Independent board, annual report, and processes for CSR, anti-money laundering, anti-bribery, and anti-corruption	Not applicable
Effective governance		Robust global stakeholder consultation and processes for grievances	Not applicable
Tracking	Registries shall identify, record, and track mitigation activities and carbon credits	Registry shall identify retiring entity, purpose of retirement, and procedures to address erroneous issuances	Not applicable
Transparency	Programs shall provide comprehensive and transparent information on all credited mitigation activities	Credit calculation documents. Project design documents shall be made public and processes in place to share non-public information	Not applicable
Third-party validation and verification	Programs shall have requirements for independent third-party validation and verification	VVBs shall be accredited, and registries shall have process to manage VVB performance	Not applicable

The outlined program-level criteria includes requirements beyond those set forth by Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) where applicable. VVBs are Validation and Verification Bodies. CSR is Corporate Social Responsibility.

Reducing uncertainty over emissions impact

The second theme, emissions impact, applies at the program and category levels but is more relevant for the latter. The majority of criteria for this theme has yet to be released. The criteria published so far includes measures to approve new methodologies, program-level quantification requirements, and measures to prevent double counting. It’s worth highlighting that standards now have to define processes to assess the overall uncertainty of emission reductions or removals associated with an activity type.

CCPs and program and category level criteria—emissions impact

CCP	Definition	Program level criteria	Category-level criteria
Additionality	Emission reductions or removals wouldn’t have occurred in the absence of carbon credit incentives	Not applicable	To be published in Q2 2023
Permanence	Emission reductions shall be permanent or mitigation measures shall be in place	Not applicable	To be published in Q2 2023
Robust quantification	Emission reductions or removals shall be robustly quantified based on conservative approaches, completeness, and sound scientific methods	Registries shall have processes to update methodologies, defined list of minimal methodology content, methodologies shall undergo a review by independent experts, and registries shall have processes to withdraw methodologies	To be published in Q2 2023
		Seven measures to standardize quantification of emission reductions and removals, including GWP values to use, processes to assess uncertainty and systematic approach to ensure conservativeness	To be published in Q2 2023
		Ex-ante credits will not be CCP approved	Unclear if this applies at the category level; if it does, new criteria will be published in Q2 2023
No double counting	GHG emission reductions or removals shall not be double counted (issuance, claims, and use)	Registries shall have provisions to prevent double registration, double issuance, double use, and double claiming	Unclear if this applies at the category level; if it does, new criteria will be published in Q2 2023

The outlined program-level criteria includes requirements beyond those set forth by Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) where applicable.

Sustainable development requires new safeguards

The third theme, sustainable development, will bring the most changes to registry operations. Eleven safeguards will now need to be uniformly monitored, extending beyond the traditional scope of a carbon offset program. For example, standards will have to include criteria in their methodologies for explicitly safeguarding labor rights and working conditions. Previously, registries limited their scope to the regulatory environment within which projects were implemented, and standards may now need to go above and beyond country regulations depending on project location. Contribution to net zero is one of the two core carbon principles within the theme of sustainable development that will be defined when the next CCPs are released in Q2 2023.

CCPs and program and category level criteria—sustainable development

CCP	Definition	Program level criteria	Category-level criteria
Social and environmental safeguards and sustainable development impacts	Programs shall provide guidance, tools, and procedures to ensure mitigation activities conform or go beyond best practices on social and environmental safeguards while delivering positive sustainable development impacts	Ensure proper assessment and management of environmental and social risks	Unclear if this applies at the category level; if it does, new criteria will be published in Q2, 2023
		Ensure compliance with labor rights and working conditions
		Ensure resource efficiency and pollution prevention
		Enable fair land acquisition and prevent involuntary resettlement
		Enable biodiversity conservation and sustainable management of natural resources
		Protect indigenous peoples, local communities, and cultural heritage
		Respect human rights, stakeholder engagement
		Enable gender equality
		Ensure a robust benefit-sharing framework
		Ensure consistency with the Cancun safeguards of the United Nations Framework Convention on Climate Change
		Ensure positive Sustainable Development Goals impact
Contribution to net zero	Mitigation activities shall avoid locking in levels of greenhouse gas (GHG) emissions, technologies, or carbon-intensive practices that are incompatible with the objective of achieving net zero GHG emissions	No guidance was published; it's unclear if new criteria will be published in Q2 2023

The outlined program-level criteria includes requirements beyond those set forth by Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) where applicable.

The CCPs add specificity and ambition to quantification approaches

Historically, standards made their own judgment in interpreting criteria like additionality, sustainable development, stakeholder consultation, ownership of GHG reductions, uncertainty, confidentiality, and verification. To become CCP eligible, standards will now need to align with the ICVCM’s interpretations.

Three new key requirements relate to accountability, sustainable development, and net zero alignment.

Registries will now be required to seek an independent review for all changes to their standards, which may further increase engagement with stakeholder consultation processes.
Similarly, GHG credit quantification approaches are likely to converge toward higher confidence calculations, but this may come at the cost of practicality and financial feasibility.

Clearer thresholds for accreditation and credit quality—project developers stand to benefit

We welcome the ICVCM’s decision to build on guidelines established by CORSIA, which was the first global industrywide effort to reduce emissions and govern carbon market participation. CORSIA has set the first threshold for registry accreditation, and the ICVCM is now building on CORSIA with additional quality requirements to avoid further burdening registries and confusing market participants.

Project developers working with programs approved by the ICVCM will be able to provide assurance of credit quality with no double counting to their buyers, further simplifying and speeding market transactions. Sellers that choose not to use ICVCM-approved methodologies may need to undertake additional efforts to demonstrate ICVCM-comparable quality claims.

Building confidence in a transitional year

The CCP criteria is an important step in building confidence in the voluntary carbon market in a transitional year for carbon market confidence, which is achievable with the work plan laid out by the ICVCM. Manulife Investment Management continuously updates its carbon principles to ensure continued alignment with international best practices defined by the ICVCM and other carbon market standards groups.

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