July 2023 Voluntary Carbon Offsets Update
VCMI Claims Code of Practice
Developed through extensive research and stakeholder engagement, the Claims Code aligns with existing standard setters to enhance clarity for businesses, stakeholders, and the public. It is tailored for companies seeking credible carbon credit use, individuals making climate-friendly purchases, investors evaluating climate ambitions, and governments striving to incentivize truthful carbon credit utilization through endorsed policies and reporting standards.
The Code operates on a four-step process: complying with foundational criteria aligned with the Paris Agreement, selecting a VCMI Claim tier, meeting carbon credit use and quality thresholds, and obtaining third-party assurance. The foundational criteria require companies to disclose emissions inventories, establish science-based reduction targets, demonstrate progress towards targets, and align policy advocacy with climate goals.
VCMI has defined three claim tiers: Silver, Gold, and Platinum, each with increasing requirements for carbon credit retirement. The credits used must meet quality standards and contribute to global net zero emissions goals. Transparent reporting and assurance are crucial for substantiating claims.
The Claims Code will evolve with additional modules and guidance, such as a monitoring, reporting, and assurance framework, more claim tiers, rules for claims at different levels, and sector-specific provisions. Although VCMI Claims focus on voluntary action, the goal remains comprehensive policies and regulations to avert severe climate change. The Claims Code aspires to contribute valuably to this evolving policy landscape.
News
Rwanda to set carbon price floor above $30/ton. Rwanda's Minister of Environment has stated that the country will establish a minimum carbon credit price of over $30 per ton and intends to expand both technology-focused projects and those involving forests. The country's carbon market framework is expected to be finalized by the end of the month, allowing Rwanda to set prices for its carbon credits in global markets. Rwanda, among other African nations, is taking steps to enhance control over its carbon assets for increased revenue.
New platform launches to bring transparency to voluntary carbon market. Centigrade, formed through collaboration between crypto solutions provider Ripple and think-tank RMI, has introduced an open data platform aimed at enhancing transparency in the voluntary carbon market. Centigrade's platform will allow earlier-stage credit suppliers to disclose their pipeline projects and claims, facilitating access to pre-issuance services like project finance and verification
Deloitte predicts retail carbon offset demand will grow to $115 billion by 2030. This surge in demand for carbon offsets is expected to result from consumers' increasing interest in products labeled as sustainable. Deloitte suggests that financial institutions, such as banks, could play a pivotal role in supporting the back-end infrastructure that connects consumers' payment processes to the carbon credit market. This projection is significantly higher than the under $2 billion value of voluntary carbon market transactions in 2021.
Issuances are down sharply, while retirements are slightly lower
22.75 million offsets were issued in July, a 12 million ton decrease from June issuances. This is the largest drop in issuances since January of this year. Retirements were lower by 500k tons to 10.71 million.
Energy projects continue to be the leading project type of issuances and retirements.
52% of issuances and 56% of retirements were from energy projects, with forestry projects coming in second place at 36% of issuances and 23% of retirements. Waste and Landfill remained at 1% of issuances and 3% of retirements. Retirements from Alternative energy projects doubled from last month to 14% of total retirements.
The surplus of unused offsets increased by 12 million tons.
The bank of offsets increased by 12 million tons in July, the second smallest increase in the bank so far this year. The average increase in the surplus this year is 18.67 million tons. This was caused by the reduction in supply and not a function of demand changes.