Understand Carbon Credit Quality

Carbon credits can drive investment toward important emissions reduction and removal projects and programs. They can support broader sustainable development outcomes and can preserve ecosystems with cultural and ecological significance like tropical forests. But realizing this potential depends on carbon credits being high quality.  

Best-practice carbon credits are issued by well-governed programs that have rigorous quantification and reporting processes for credits that have a material, durable impact on emissions. Ensuring the carbon credits your company purchases are high-quality matters for your business’ reputation and bottom line, as well as for the climate. This action step outlines the key principles of high-quality carbon credits, as well as the emerging tools and resources that can assist you in assessing potential carbon credit purchases.  

The Ten Principles of High-Quality Carbon Credits 

The Integrity Council for the Voluntary Carbon Market (ICVCM) has developed the Core Carbon Principles—a global benchmark for high-quality carbon credits.¹ These principles were defined through collaboration with hundreds of stakeholders in the voluntary carbon market. The ten principles are organized into three focus areas: governance, emissions impact, and sustainable development.  

The high-quality carbon credit governance principles are: 

1. Effective governance: The carbon credit program is governed in a way that ensures transparency, accountability, improvement over time, and overall credit quality.  
2. Tracking: The carbon credit program operates or uses a registry that identifies, records, and tracks emissions reductions and removals and the carbon credits issued to ensure they can be identified securely and clearly.  
3. Transparency: The carbon credit program provides comprehensive, transparent information on all activities that generate credits. This is publicly available in electronic format and accessible to non-specialized audiences.  
4. Robust independent third-party validation and verification: There are program-level requirements for validation and verification that are completed externally and objectively.  

The emissions impact principles are: 

1. Additionality: The carbon credit will be generated by greenhouse gas emissions reductions or removals that would not have occurred without the incentive created by the carbon credit revenue. 
2. Permanence: The emissions reductions or removals from the activity funded by the carbon credit will be permanent or, when there is a risk of reversal, measures are in place to mitigate these risks or compensate reversals. As an example, high-quality credits are not generated from the preservation of an area of forest that will, five years in the future, be deforested.  
3. Robust Quantification of emission reductions and removals: The emission reductions or removals from the activity are rigorously quantified, using conservative approaches, completeness, and scientific methods. 
4. No double counting: The emissions reductions or removals are not used by multiple parties, or counted toward multiple carbon credits or multiple emission targets or claims.  

The sustainable development principles are: 

1. Sustainable development benefits and safeguards: The carbon credit program has clear guidance, tools, and compliance procedures to ensure emissions reduction or removal activities conform with or go beyond industry best practices on social and environmental safeguards, and also deliver positive sustainable development impacts (for example, related to gender equality or indigenous cultural heritage). 
2. Contribution toward net zero transition: The emission reductions or removals from the activity funded by the carbon credit avoid locking-in emissions, technologies, or carbon-intensive practices that are incompatible with achieving net zero emissions globally by mid-century.  

Assessing Credit Quality   

The IC-VCM’s Core Carbon Principles listed above provide a clear overview of the standards for high-quality carbon credit. The CCP label is expected to be applied to carbon credits beginning later in 2023. While the IC-VCM will assess carbon credit programs and categories to determine if they meet the CCPs, companies should also continue to do due diligence above and beyond these benchmarks. Resources and tools to make these assessments are emerging and will continue to develop over time.  

Further resources are also available to assist your company in assessing the quality of potential carbon credit purchases. The Carbon Credit Quality Initiative, for example, offers a free tool to assess the quality of a type of credit against seven objectives that overlap with many of the principles listed above.² The tool makes the assessment based on factors like where the activity took place and how the emissions impact was quantification.  

Other initiatives and guidance can support your assessment, including the Carbon Offset Guide,³ the Voluntary Carbon Markets Integrity Initiative (VCMI),⁴ the Business Alliance to Scale Climate Solutions (BASCS),⁵ and the Tropical Forest Credit Integrity Guide.⁶  Brokers, rating agencies, and market intelligence providers increasingly also provide ratings and rankings of carbon credit quality, presenting another avenue for examining the environmental and social integrity of the credits you are purchasing.  

Footnotes:

1. Integrity Council for the Voluntary Carbon Market (IC-VCM)
2. Carbon Credit Quality Initiative (CCQI)  
3. Carbon Offset Guide 
4. Voluntary Carbon Markets Integrity Initiative (VCMI) 
5. Business Alliance to Scale Climate Solutions (BASCS) 
6. Tropical Forest Credit Integrity (TFCI) Guide