(Bloomberg) -- A key oversight body has approved new standards for nature-based offsets, a move that could help restore investors’ confidence in a market battered by greenwashing concerns.
More than 400 million nature-based offsets currently in the pipeline are set to be eligible for the Core Carbon Principles label set by the Integrity Council for the Voluntary Carbon Market. The credits fall under three so-called REDD+ methodologies newly approved by the body, with each credit representing a ton of CO2 emissions avoided through preventing deforestation. REDD+ refers to reducing emissions from deforestation and forest degradation in developing countries.
Among them are methodologies by Verra, whose REDD+ projects have attracted criticism after several studies indicated that their impact on the ground has been limited. Spot prices in the REDD+ market have collapsed to an average of $3.60 per credit this year from $12.50 in 2022, according to MSCI Carbon Markets.
“If you have inconsistent quality, and there are cases of corruption or human rights abuses, that taints the whole market,” Annette Nazareth, chair of the ICVCM, said in an interview, adding that the new standards will help boost both supply and demand for nature-based credits.
The council said the approved REDD+ methodologies will reduce the risk of “over-crediting,” whereby project developers overstate deforestation rates to claim greater carbon savings. For instance, under Verra’s new methodology, there will be set baselines against which deforestation reduction is calculated, instead of leaving that task to the developer, said Gabriel Labbate, co-chair of the expert panel at ICVCM.
Critics say Verra’s new methodology doesn’t meet the carbon principles’ standards and shouldn’t have been approved. REDD+ projects in particular “require carefully designed programs driven by local priorities,” which the methodology doesn’t guarantee, said Barbara Haya, director of the Berkeley Carbon Trading Project. Without that assurance, there are “some projects that have resulted in harm.”
Nazareth said that the council strives for continuous improvement of its standards, and is satisfied with how it addressed issues such as the rights of local communities.
Projects using Verra’s old REDD+ methodologies, which make up more than a quarter of credits in the market, will have to transition to the new one to be certified.
They will have to recalculate the amount of offsets they can issue based on the new methodology, and that is likely to be lower than previous estimates, said Labbate.
--With assistance from Natasha White.
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