‘Urgent’ need for integrity to scale up VCM

The voluntary carbon market (VCM) needs high-integrity oversight in order to build demand, grow the market and direct capital finance flows to emerging economies, delegates heard today at the World Bank's Innovate for Climate conference in Bilbao, Spain.

Carbon markets have a key role to play in the energy transition, but they "must be transformative", UN Framework Convention on Climate Change (UNFCCC) secretary general Simon Stiell said. He called for "high-level integrity and transparency", to build trust. Carbon markets could save up to $250bn/yr in the cost of climate action, Stiell added.

The need for integrity is "very urgent", managing director and head of sustainable finance at the Institute of International Finance Sonja Gibbs said. Gibbs is also a board member of the Integrity Council for the VCM, which is an independent governance body run by global carbon market experts and former regulators.

The group finalised initial standards in March and plans to release a detailed framework for assessing carbon credit categories — like clean cookstove or jurisdictional forest projects — in June. Applications will then open for carbon crediting programmes, meaning that the first "high-integrity" credits will be available later this year, Gibbs said today.

The group will also look at demand-side integrity, seeking to build an "end to end system", Gibbs said. "Our goal is to create a benchmark", she added. That can then be used as a reference point for the market and it can then develop in similar ways to traditional commodity markets, for instance in areas such as hedging, she said.

"Scrutiny will help drive the integrity that's needed and the transparency that's needed", UNFCCC director of mitigation James Grabert said. Mitigation refers to efforts to reduce greenhouse gas emissions causing global warming.

Buyers must be able to access high-quality carbon credits and understand them, Gibbs said. And the VCM can be used to mobilise private finance to developing economies, speakers agreed. The market needs standards to grow at scale, and then "demand can trigger the investments that are needed", Grabert said.

And carbon markets are likely to play a significant role in the development of carbon removals, including nature-based and technologies such as carbon capture and storage, Grabert said.

Mitigation and carbon removals will be necessary to reach net zero targets, UNFCCC representatives said today. "We need both, emissions avoidance and removals and we need them at unprecedented scale", Stiell said.

By Georgia Gratton