A significant portion of existing carbon credits has failed to meet the criteria set by a new standard aspiring to become the global benchmark for the voluntary carbon market, as disclosed by the board on Tuesday.
Within the voluntary market, companies engage in purchasing credits from initiatives like wind farms or reforestation projects worldwide to fulfill their internal carbon reduction objectives. Notably, all credits falling short of the benchmark in the latest assessment were associated with renewable energy ventures.
The demand for offsets experienced a standstill last year amidst increasing doubts about the efficacy of credits in reducing emissions.
To tackle integrity concerns, the Integrity Council for the Voluntary Carbon Market (ICVCM), an independent regulatory body, has introduced the Core Carbon Principle (CCP) standards and commenced evaluations to determine project validity.
According to the ICVCM, eight renewable power methodologies, accounting for approximately 236 million unutilized carbon credits (comprising 32% of the market), failed to meet the standard’s requirements regarding additionality.
Additionality serves as a metric to ascertain whether a project required revenue from carbon credit sales to proceed. Projects that would have been executed irrespective of credit sales undermine the argument that they have facilitated emissions reduction and thus warrant recognition.
Amy Merrill, CEO of the ICVCM, emphasized that renewable projects can still participate in the voluntary carbon market, encouraging the submission of new methodologies for review. She highlighted existing global barriers to project deployment, suggesting potential opportunities for additional projects.
A report by the non-profit Ecosystems Marketplace revealed a 69% decrease in the price of renewable energy offsets last year, averaging $3.88 per metric ton.
Analysts caution that failure to meet the CCP standard may lead to further declines in renewable offset prices this year. Merrill reiterated the focus on establishing an integrity threshold in the market, emphasizing that not all projects are expected to meet the standard.
