Everything Regulators Need to Know about the Core Carbon Principles
Written by ICVCM
Published
With carbon removals recently in the news as the EU came to a provisional agreement on the voluntary Certification Framework for Carbon Removals, find out more about carbon removals and how they fit into the Integrity Council’s work.
The Integrity Council for the Voluntary Carbon Market is an independent, non-profit governance body for the voluntary carbon market. We assess carbon-crediting programs and carbon credit methodologies for adherence to our Core Carbon Principles. The Core Carbon Principles (CCPs) establish a new global benchmark for high-integrity carbon credits based on extensive market consultation and the latest science. They are similar to standards set by financial regulators; setting rules relating both to a product – carbon credits – and to the carbon-crediting programs that issue them.
Governments and regulators setting up voluntary carbon markets are now looking to the CCPs as an international standard that can be incorporated into their own frameworks for carbon markets. In creating the CCPs, our goal from the start has been to develop a framework that can be adopted by governments and regulators with minimum market disruption. In this article, Annette Nazareth, Chair of the Integrity Council and former US SEC Commissioner, discusses why the Integrity Council has taken a regulatory approach to achieve its goal of maximising the potential of the voluntary carbon market to mobilise private finance for climate solutions and channel investment to the Global South.
How does the work of the Integrity Council align with regulatory practices?
In creating a rigorous governance structure and ensuring extensive and diverse stakeholder engagement throughout the process of forming the CCPs, the Integrity Council has sought to operate in the manner of a fully recognised and regulated organisation.
The Integrity Council has embraced regulatory practices, including adopting a full notice and comment process for our Core Carbon Principles (CCPs), Assessment Framework and Assessment Procedure. We have also been fully transparent concerning the entities that have applied for the CCP label and the processes we are undertaking to grant the CCP label to particular categories of carbon credits – which is our way of grouping carbon credit methodologies into similar types. It is particularly noteworthy that carbon crediting programs representing over 98 percent of the current market (based on retirements in 2023) have applied for the CCP label, evidencing the tremendous buy-in and support for the Integrity Council’s work.
How do the CCPs compare to standard international regulation instruments?
In a broad sense the CCPs are akin to both intermediary regulation and listing standards.
Like intermediary regulation, they provide detailed governance rules that carbon crediting programs must meet to ensure that the credits they issue satisfy key integrity requirements. These governance rules that apply to carbon crediting programs, contain detailed requirements for the programs’ internal governance, along with integrity and transparency requirements relating to the developers of the projects that underly the voluntary carbon credits.
And in the same way as listing standards define the minimum requirements for shares or securities for public sale, the CCPs define which categories of carbon credits deliver genuine climate impact and thus qualify for the CCP label. For a carbon credit to trade with the CCP label, it must be both issued by a carbon crediting program that has been granted the CCP label and must be a voluntary carbon credit from a CCP-approved carbon category.
What is the Integrity Council’s assessment process? How is it similar to a regulated process?
The Integrity Council is currently assessing carbon crediting programs as well as carbon crediting methodologies – that is the rules for designing and implementing projects – to determine their compliance with the CCP requirements. For our assessment of carbon credit methodologies, we are employing both Integrity Council independent experts and staff, and Multi-Stakeholder Working Groups (MSWGs) for categories of credits that could benefit from broader expertise and perspectives. The recommendations of the independent experts, Integrity Council staff and the MSWGs will be considered by the Standards Oversight Committee (SOC) and ultimately determined by the Governing Board of the Integrity Council.
Further, in line with traditional self-regulatory organizations, the Integrity Council will periodically examine the carbon crediting programs for adherence to the CCPs and will take action in the event of non-compliance. The Integrity Council will also take stock of any information brought to its attention concerning adherence to the CCPs as they relate to carbon crediting programs or carbon categories.
Will the Integrity Council update the CCPs in the future?
The Integrity Council will continuously curate and update the CCPs and Assessment Framework based on best practices and best science. We anticipate this updating process will occur every two to three years. The process of improving the framework is already underway, with Continuous Improvement Work Programs (CIWPs) launched this year to consider matters such as: Paris Alignment; Sustainable Development Benefits and Social Safeguards; Permanence; Digital Measurement, Reporting and Validation; and Market Transparency, Standardization and Scalability. Other CIWPs will be formed over time.
How have the CCPs been received by the market?
Governments establishing voluntary carbon markets have been looking to the CCPs as an international standard that can be incorporated into their frameworks. The UK government has announced that it intends to consult on endorsement of the CCPs and consider how to reflect them in policy, regulation, and guidance.
The Commodity Futures Trading Commission (CFTC) has welcomed the Integrity Council’s work to create a common understanding of high-quality carbon credits and the CFTC’s draft guidance released at COP28 is in accord with the CCPs. The African Carbon Markets Initiative has said it requires project developers to adhere to the CCPs and the Monetary Authority of Singapore is exploring how to align its transition credits with the CCPs.
We believe this reliance on the Integrity Council’s work is well placed. It is a recognition of the robust, transparent, and regulated-like process we have undertaken. It is also a recognition of the palpable benefits of employing a public-private partnership to address one of the most existential challenges of our time: climate change. The private sector has devoted considerable resources and expertise that is not available in the public sector – at least not in the timeframe required – to establish international standards for voluntary carbon credits and the VCM. But working alongside and in cooperation with governments, we believe the Integrity Council makes urgently needed progress.
Principles of integrity, such as transparency of process, strong governance and wide stakeholder engagement are central to the Integrity Council’s work. Our aim is to replicate what a financial regulator would do for the voluntary carbon market.
We welcome the input of regulators and look forward to continuing to engage with industry, regulators and policymakers across the globe, including the SEC, CFTC and IOSCO. By creating the CCPs in this manner, if governments decide to take action to regulate voluntary carbon market activity, then they can seamlessly transfer our framework can be seamlessly into compliance frameworks with minimal market disruption.
The work of the Integrity Council is already making an impact, with significant support from the market. There is no shortcut to integrity. However, we are confident that by achieving a widespread consensus around a global benchmark for high-integrity carbon credit, we are maximising the potential of the voluntary carbon market.