Stockholm (NordSIP) – A storm began brewing this January in the Voluntary Carbon Markets (VCM) following the publication in the UK’s Guardian and Germany’s Die Zeit newspapers of a review into the methodology employed by the industry’s largest standard setter Verra. This was shortly followed by a Follow the Money (FtM) exposé of alleged sales of phantom carbon credits by leading provider South Pole. This wave of negative publicity caused 49 members of the rather fragmented VCM industry to scramble together in an attempt to defend their cause. This all unfolded against the backdrop of ongoing efforts by the newly formed Integrity Council for the Voluntary Carbon Market (ICVCM) to draw up its proposed Core Carbon Principles (CCPs) by the end of March 2023.
Verra in methodology U-turn
Despite issuing a strongly worded rebuttal to the Guardian article on January 31, Verra has since apparently capitulated by announcing that it will be phasing out its current offsets programme over the coming two years. The organisation plans to release a new Reducing Emissions from Deforestation and Forest Degradation (REDD+) methodology in the third quarter of 2023. Verra was an outspoken critic of the original ICVCM proposals during the CCP public consultation period in December 2022, and it is not immediately clear how these changes tie into the Q3 implementation of the supervisory body’s new framework.
Most carbon credits traded in the VCMs are based on the concept of “avoided deforestation.” The proliferation of net-zero targets in recent years has led to a boom in demand for carbon offsetting schemes, for which the nascent industry was arguably not ready. The lack of a robust common methodology left room for interpretation and in certain cases inadvertent – or deliberate overselling.
Following investigative journalism platform FtM’s article on the topic, South Pole CEO Renat Heuberger has been vehemently defending his organisation’s track record. FtM had obtained internal records of discussions about South Pole’s flagship Kariba forestry project in Zimbabwe, which appeared to reveal in-house knowledge of a discrepancy amounting to 27 million tonnes of CO2 while the equivalent offsets were still being sold to clients. Heuberger has claimed that the FtM claims amount to disinformation and are jeopardising forest conservation. FtM has addressed his accusation by reiterating their original point-by-point criticism of the Kariba programme.
End of the offsetting Gold Rush
With an estimated $1 billion company valuation at its peak, it is perhaps not surprising that South Pole CEO Heuberger is fighting back. Nevertheless, FtM are holding firm and justifying their stance largely on internal South Pole communications and materials. Moreover, regulators and industry net-zero initiatives are moving to steer their members away from offsetting programmes based on avoid deforestation in favour of projects that can demonstrate actual decarbonisation. This could signal an end to the carbon offsetting “gold rush” of recent years, with stricter requirements leading to a shrinkage of the volume of carbon credits available for sale and a drastic reduction in miss-selling opportunities. It remains to be seen whether the entire VCM will adopt the forthcoming Core Carbon Principles, which could be fundamental for reestablishing the industry’s credibility.
