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The standards play a key role on the voluntary carbon markets (VCM).
What is the difference between standards and registries?
In conversations surrounding the carbon markets, standards and registries are terms often used interchangeably. However, there is a distinction between the two.
A standard prescribes the requirements which a carbon credit generating project needs to meet. It acts as a stamp of authority under which credits have been issued.
A registry refers to a central database which contains all information on carbon credits linked to the standard which has issued them. This data is about projects, issuance, retirements, cancellations, vintages, crediting periods etc.
Generally, registries and standards work together, as registries will establish a standard. For instance, Verra, the registry, created the Verified Carbon Standard (VCS), the standard.
Historically, there have been four primary registries. These are Verra, the Gold Standard, the American Carbon Registry (ACR) and the Climate Action Reserve (CAR). The first two are global actors, while ACR and CAR are more focused on the North American market.
As the voluntary carbon market has evolved, newer registries have been set up. These newer registries have different areas of focus. Some are regionally-specific, such as the Label Bas Carbone in France. The Peatland Code and the Woodland Carbon Code in the UK are regionally- but also methodology-specific. Global registries might have a broader scope, such as the Global Carbon Council (GCC), while others, like puro.earth, are methodology-specific.
What role do standards have?
Standards set out the rules, procedures, and methodologies along which a certified carbon credit is generated and issued. These guidelines are developed and governed by standard organisations. These are most commonly international non-governmental organisations. They have a a regulatory branch, and a validation and verification branch. This final step is often outsourced to third parties. In some instances, governments can also support the development of a standard. The Woodland Carbon Code is being established with backing by the UK government.
Standards have a major role in shaping the quality of the market. This is because they create science-based methodologies in conjunction with various actors in the market. For instance, in August 2022, Verra released a methodology for biochar utilization in soil and non-soil applications. This methodology was produced with the consultation of various project developers (Forliance, Delaney Forestry Services, Biochar Works and South Pole).
The methodology was then assessed by TUV NORD CERT GmbH, a third-party validator. There are a number of third-party validators that standards rely upon to impartially ensure correct execution of the offsetting methodology and the project’s wider goals. These independent assessors run desk checks, and sometimes conduct fields visits to ensure the projects meets its claims. This can be carried out both when a new methodology is being formulated, and when verifying a recently established project.
What are the limitations of the standards?
Standards often act as informal regulators of project quality. There can be risks associated with the fact that it is in their interest for frameworks and guidance to be aligned with their growth and planned trajectory. When an external regulator, such as the Integrity Council for the Voluntary Carbon Market, issues a framework, the standards tend to comment on the guidance released. In the case of the Core Carbon Principles, Verra released a Course Correction, stating that the framework is unrealistic given the current state of the market.
Another potential hazard is the fact that standards are paid an issuance fee for each carbon credit. Generally, the fee is included in the price of the carbon credit, meaning that part of the price goes to the project developer, while another proportion goes to the standard. Thus, the standards have an economic incentive in issuing carbon credits to the market.
Monopoly can also be a cause for concern. Verra has a major market share and is responsible for some 80% of issuances last year. As in any market, a single actor accounting for the majority of supply can increase the risks of compromised quality, transparency and liquidity.
Plannet Zero and standards
If you would like to learn more about the standards and the carbon market, please get in touch with one of the members of the Plannet Zero team.
Edited by Tiffany Cheung
