Key Insights from the 2023 CIFB Summit
- Several panels have been addressing the current attacks of #ncs projects with the consensus being among different speakers that while the #voluntarycarbonmarket is far from being perfect it is continuously being improved and it represents an important tool in our toolbox for the achieving a #netzero and #naturepositive future.
- The Consolidated REDD+ AUDD methodologies proposed by VERRA will bring a harmonised new approach for avoided unplanned deforestation projects through allocated baselines and independent third-party validated activity data. The shortening of the crediting period from 10 years to 6 years will also be more fit for purpose to cope with exponential technological and scientific developments.
- The Natural Climate Solutions Alliance has published a new guidance for corporates on how to engage on the net-zero with integrity, recommending a portfolio approach and utilising carbon credits to compensate for unabated emissions on the net-zero pathway through REDD+ and HFLD credits while building up a high-quality removal portfolio over time to continue counterbalancing the residual emissions from 2050. The guide provides a practical due diligence questionnaire that can help companies navigate the complexity of NCS carbon credits. The full guide available here.
- During the sessions, we have also heard about the recently published the Tropical Forest Integrity Guidance (Version 2) which also provides additional guidance for companies interested in purchasing carbon credits in the voluntary carbon market to differentiate among forest carbon credits by impact, quality, and scale. The full guidance document is available here.
- Both guides build on the existing standards such as IC-VCM and VCMI and provide support for companies to navigate the carbon markets and enable continued and increasing climate action.
- There was agreement that integrity is required across the full value chain and we need to continue building the wider ecosystems. For example, auditors have been missing from the table and the panels but they remain crucial for the market to scale and to ensure that fraudulent projects are not passing validation and verification. We need to collectively increase the talent pool for the standards and auditors and learn from the financial markets how to build robust and scalable market infrastructure.
- We also heard about the various risk mitigation tools such as insurance or actively managed portfolios to de-risk this new asset class and increase the flow of capital to the market.
- Panelists agreed that Ratings Agencies have an important and perhaps evolving role in the rapidly changing environment providing independent guidance for investors, buyers and standards. Pre-competitive collaboration and transparency of data and related accuracy assessments across the various actors including new data providers are critical for increasing the market standards.
- On the market side, there was varied opinion whether it’s a buyer’s or seller’s market but speakers agreed that high quality newer vintages from more recent projects or crediting periods are still achieving premium prices and demand for such credits will continue to outstrip supply until we manage to effectively scale high integrity project supply.
- The importance of equitable and fair revenue share models and the need for transparent and audited financial flows for projects were also discussed in the ‘Procuring High-Quality Carbon Credits’ panel. However, more guidance and assessment frameworks will be needed, as different project types have varying economic models and financial structures which is difficult to compare.
- Nature credits and biodiversity credits are gaining momentum, with VERRA progressing with its proposed nature credits under the SD Vista standard, set to be available early next year.
- The ERS – Ecosystem Restoration Standard, launched its public consultation, aiming to pave the way for high-quality ecosystem restoration carbon credits empowering small-scale, community-driven restoration projects utilising a fully digital MRV process. See the consultation here.
- Thanks to continued scientific and technological developments, advanced spatial intelligence, eDNA from NatureMetrics, and the IUCN STAR metrics, biodiversity baseline is becoming a possibility and a crucial step for high-integrity carbon credits. There is a need to move beyond anecdotal evidence on SDGs and biodiversity to create credible co-benefits attracting premium prices.
- Similar developments are taking place on the jurisdictional side as ART has also launched a new initiative to develop an optional certification for the co-benefits of jurisdictional REDD+ beyond carbon, aiming to enable premium prices for high biodiversity and socio-cultural benefits. See more details here.
Overall, exciting to see all these developments and looking forward to continuing the conversations at the next edition of CIFB in London!