We recognize the impact that the ICVCM can have on the voluntary carbon market – and that many of our customers are watching the evolution of this organization. For this reason, we started a series: ICVCM Insights. To date, we have posted the following:

Reflections on the ICVCM’s Latest ‘Reveal’

How Calyx Ratings are aligned with the ICVCM CCPs

Working side by side to drive quality: ICVCM and carbon credit ratings

We also offered to answer questions from our subscribers in this Frequently Asked Questions “living” blog. If you have a question, feel free to send it our way.

Questions asked:

1. What exactly will the ICVCM assess – programs, methodologies or projects?
2. Do you have a sense of timing for issuing the first labels?
3. Can you explain the 40-year permanence provision and its impact on nature-based projects?
4. How will the CCP label process work? If a developer has registered an afforestation / reforestation project, what process would the developer follow to add the CCP label to the project’s offsets?
5. Will AR-ACM0003 qualify for the CCP label? In particular, our team is interested in understanding if you believe reforestation with native species using AR-ACM0003 will qualify for the CCP label by ICVCM?  
6. Are there any “safe havens” to invest in (that will receive the CCP label)?

Answers from Calyx Global:

1. What exactly will the ICVCM assess – programs, methodologies or projects?

August 1, 2023 | The ICVCM will make assessments on two levels: 

(1) Carbon crediting programs:  A carbon-crediting program is defined as “A standard setting program that registers mitigation activities and issues carbon credits.”  For example, this would be VCS, ACR, CAR or Gold Standard. This level of assessment will look at issues such as governance, registry operations (tracking of credits), transparency and auditing procedures (e.g. independent validation & verification). Programs that pass this stage are deemed “CCP Eligible” and only then are they allowed to “tag” credits as “CCP Approved.”

(2) Categories of credits: The ICVCM will also assess “Categories,” or project types using specific methodologies, such as large-scale wind projects using ACM0002 under CDM, or Avoided Unplanned Deforestation projects using the new consolidated REDD methodology under VCS. While methodologies are straightforward, deciding how to define mitigation activities will be tricky – for example, will the ICVCM divide broad categories, such as reforestation, into more granular categories, such as commercial plantations versus natural forest regeneration?  And, if so, who is responsible for classifying such projects?  For example, many afforestation/reforestation projects are a mix of activities and may include planting native species for conservation as well as commercial timber for harvest.

2. Do you have a sense of timing for issuing the first labels?

August 1, 2023 | This is not yet clear. The ICVCM first intends to convene a working group to decide on the categories to assess, which will include identifying categories to “fast track.” It is expected that the categories for “fast track” will be the first to get the label, but the ICVCM has not yet set up the working group, nor have they assessed any programs (which also must occur prior to any credits getting tagged), so it might be some months before any credits receive a label.

3. Can you explain the 40-year permanence provision and its impact on nature-based projects?

August 1, 2023 | Carbon crediting programs must require, for categories with material non-permanence risk, monitoring and compensation for 40 years, from the start of the first crediting period. Currently, neither VCS nor Gold Standard meets this requirement. By contrast, ACR just meets it – as the minimum monitoring for forest & land projects is 40 years. CAR exceeds the requirement by requiring 100 years of monitoring post vintage, i.e. if a project has a 30-year crediting period, it would be required to monitor for those years, plus an additional 100 years (for a total of 130 years of monitoring).

It is worth noting that VCS has a public consultation out currently to consider extending the project duration for nature-based projects to a minimum 40-year period. However, it is unclear how this may impact existing projects – in particular those that voluntarily selected a longer duration (40 years or more), or if existing projects with shorter durations could extend this to be grandfathered in. Regardless, VCS would need to first adopt a new rule setting a 40-year minimum.

As a final note on this topic, the final version of the Assessment Framework (decided by the Board) diverged from the Expert Panel recommendations (which are publicly available in summary form). The Expert Panel recommended monitoring for 50 years post vintage, which at this time would mean only CAR would meet such provisions, although VCS has proposed a 100-year monitoring system that could also meet this recommended approach. 

The Board, however, made a decision of 40 years without any requirement of post-vintage monitoring. That means if a reforestation project started in 2010 and runs to 2050, removals that occurred in 2010 will be monitored for 40 years. However, removals that occur in 2049 are only monitored for one year, after which they could be cut down. By contrast, the Expert Panel was suggesting that a project should be monitored for 50 years after the last vintage year of removals claimed. In this example, it would mean ensuring the trees are still standing until 2100. 

This is why, at Calyx Global, we provide “vintage ratings” for many forest projects – because most do not have “post-vintage” monitoring requirements, the guarantee of permanence declines over the lifetime of a project. Stay tuned as next week we will provide details on all of our “ratings by vintage” approaches!

Note: We subsequently published our “Rating by Vintage” blog for subscribers only.

4. We are interested in understanding your view on how the CCP label process will work. If a developer has a registered ARR project under the AR-ACM0003 methodology what process would the developer follow to add the CCP label to the project’s offsets?  

October 17, 2023 | Currently it is not the developer, but the carbon crediting program under which the project is registered that is responsible to first apply to the ICVCM to first have its overall program assessed (see Question 1 above). That is a necessary, but not sufficient, step.

In parallel, the ICVCM has started to identify “categories” (also described in Question 1). The “Categories Working Group” began its work this week, discussing how to ‘slice and dice’ the market into “project type + methodology” combinations. As it does so, it may also provide input to the Board on which categories should be fast-tracked for receiving the CCP “tag” immediately, which ones should move to multi-stakeholder working groups (MSWGs) for further assessment or which ones are unlikely to meet the CCP requirements.

That means, unfortunately, that a project developer must simply wait for the process to play out. 

5. Will AR-ACM0003 qualify for the CCP label? In particular, our team is interested in understanding if you believe reforestation with native species using AR-ACM0003 will qualify for the CCP label by ICVCM?  

October 17, 2023 | As mentioned in Question 4 above, the Categories Working Group is now making determinations on “project type + methodology” combinations and how they might be classified (e.g. fast-track, MSWG or unlikely to meet the CCPs). The ICVCM has not made public the categories being discussed, including afforestation / reforestation (AR).

It is unclear whether AR, including the AR-ACM0003 methodology, would go to a MSWG process. That said, we see quite high variability in the GHG integrity of these projects. The only way AR projects could be “fast-tracked” is if the ICVCM allows projects under methodologies such as AR-ACM0003 to be further disaggregated – for example, separating commercial monoculture plantations in countries where this is common practice from, for example, smallholder agroforestry projects in developing countries. It is still unclear how finely the ICVCM is willing to “slice and dice” categories.

With regard to reforestation with native species, it is difficult to know where the ICVCM will land. Our research and analytics team would only suggest this ‘category’ is fast-tracked if it were a protective plantation with no harvesting and no subsidies. Where there is harvesting and/or subsidies, we believe a closer look at the project is needed to confirm that carbon revenues were, in fact, decisive for the project. The challenge is that the current AR methodologies do not require, e.g. financial analysis – even when the project may be receiving substantial funding from timber revenue or government support.

6. What is the expected timing for each part of the CCP process? Will previously issued offsets be grandfathered in with the CCP label?

October 17, 2023 | The Chair of the ICVCM recently stated that the first batch of credits to be tagged with the ICVCM label will be in early 2024.

The ICVCM has not yet made publicly available which categories are under discussion, and therefore it is challenging to opine on which categories may be “fast-tracked” to get the earliest tags. If previously verified credits fall under the category that is fast-tracked, they should be able to receive tags.

7. Are there any safe havens where someone can invest in carbon credits and they can be confident the credits will come out with the CCP label? We don’t want to buy a lot and then they are devalued because they lack the label.

October 17, 2023 | It is very difficult to know where the ICVCM will land with regard to CCP tags, especially before the first ones are given, to calibrate how decisions are being made. It remains unclear how stringent the Board will be in labeling credits – as there can be considerable leeway, or flexibility, in the decision making. 

Another reason it is difficult to “guess” is described above (Question 5), i.e. it is not clear how finely the organization will be willing to slice “categories.” Will they make “in or out” decisions purely based on the methodology, or will they create subsets of methodologies. For example, will they separate landfill gas flaring (only) from utilization (the additionality issues are very different for these two cases)? Or, as mentioned above, protective plantations of native species with no harvest from commercial timber operations?  

Therefore, until we see the first ICVCM tags, it is very difficult to identify “safe havens.”