(Bloomberg) -- A key oversight body monitoring the voluntary carbon market has had two members of its expert panel resign in protest over its decision to back methodologies for forestry credits they say lack credibility.
The Integrity Council for the Voluntary Carbon Market, as the oversight group is called, last month approved three models for generating carbon credits that expert-panel members Juerg Fuessler and Lambert Schneider say shouldn’t have made it through.
The methodologies don’t ensure “that credits will have sufficient environmental integrity,” Fuessler, managing partner at sustainability consultancy Infras, said in a statement on Tuesday.
Schneider, a research coordinator for international climate policy at think tank Oeko-Institut, said the ICVCM “could play a crucial role in addressing the integrity issues in the voluntary carbon market.” Instead, “the decision that has now been taken calls this into question,” he said in a separate statement.
Schneider was co-chair of ICVCM’s expert panel from 2021 to 2023, and Oeko-Institut was a founding member of the group.
The ICVCM approved three methodologies for creating credits based on activities that reduce emissions from deforestation and forest degradation, known as REDD+. ICVCM’s decision, made public in November, means credits based on the methodologies will be eligible for its quality label, which is supposed to weed out units that don’t lead to verifiable emissions reductions.
Amy Merrill, chief executive of ICVCM, said in a statement that the board “carefully considered the opinions and positions expressed by all involved” during its assessment process. The overall conclusion was that the methodologies comply with the ICVCM’s framework, she said.
The group will now “monitor the implementation of these methodologies” and “be attentive to integrity risks,” Merrill said.
REDD+ credits are generated by estimating the rate of deforestation that would have occurred without a given carbon project. But the three methodologies that were approved “do not appropriately address the inherent uncertainty” associated with such a counterfactual scenario, Fuessler and Schneider said in a separate statement elaborating on their concerns and signed by two additional expert advisers to the ICVCM.
The upshot is that using the approved methodologies may result in a “large overestimation” in climate benefits, and “could lead to large volumes of credits not backed by any actual emission reductions,” they said.
Each credit is supposed to represent the avoidance of one ton of CO2 emissions. Companies can buy the credits and then claim to have compensated for their emissions. But carbon credit projects — and REDD+ projects in particular — have drawn scrutiny in recent years as investigations revealed that many overstated their climate impact.
Many in the private sector have taken note.
Companies including Delta Air Lines Inc., Alphabet Inc.’s Google and EasyJet Plc have started retreating from the market, while Shell Plc is now looking to sell a majority stake in its portfolio of nature-based carbon projects. Meanwhile, HSBC Holdings Plc has shelved plans to build out a carbon trading and finance desk.
The market for REDD+ credits dropped to $436 million last year, down from a peak of $599 million in 2022, according to MSCI Carbon Markets. The entire voluntary carbon market is estimated to be around $1 billion.
More than 400 million credits generated using the approved methodologies stand to be granted the ICVCM’s quality label. Projects using old REDD+ approaches, which make up more than a quarter of credits on the market, can apply to transition to the new methodologies and be certified.
The ICVCM’s decision to give the methodologies their approval “sets a problematic precedent,” Fuessler, Schneider and the other experts said.
(Adds ICVCM comment from 7th paragraph.)
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