Setting the voluntary market standard
Environmental markets pioneer Verra has helped facilitate the voluntary carbon market's rapid growth – winning Best GHG Crediting Programme and Best Registry Provider along the way. Environmental Finance talks to CEO David Antonioli
Environmental Finance: The voluntary carbon market has grown rapidly over the last 18 months – what's behind that growth?
David Antonioli: What's driving the growth is increased awareness – from governments and corporates alike – that they must take action on climate. Issuances went from 119 million VCUs [Verified Carbon Units] in 2019 to 140.5 million in 2020, and we're at 190 million in 2021 with four months still to go. Retirements have also risen, with 51 million in 2019, 69 million in 2020 and over 70 million so far in 2021. Market growth is really coming from both the supply and the demand sides.
What's also noteworthy is the increase in demand for credits with CCB [Climate, Community & Biodiversity] labels: 35 million last year to 67 million so far this year. We're also seeing more demand for SD VISta [Sustainable Development Verified Impact Standard].
There's huge appetite among buyers to demonstrate and report on their sustainable development impacts.
EF: How has Verra been developing its voluntary carbon programmes in response?
DA: Environmental integrity is paramount. We continue to optimise our programmes to ensure the integrity of the credits we issue. We're constantly updating our requirements, such as the process for setting jurisdiction-level nested REDD+ [reducing emissions from deforestation and degradation] baselines, and a parallel process is underway for project-level REDD+ baselines. We're also looking at updating our non-permanence risk tool and our rules on leakage to ensure they reflect the latest scientific evidence and best practices.
We're also enhancing our internal operations to support the growth of the market, which means processing new methodologies and responding to requests for project registrations, issuances and retirements. We're at 70 staff – double the number we had in March 2020 and when we launched the Verra registry.
EF: How has the process of taking the Verra registry in-house gone?
DA: It was a huge undertaking. We spent a great deal of time ensuring that we could provide the support the market needed and that the transition was seamless. With a registry there are quite a few moving parts that involve both the programme and finance teams, so winning the Best Registry Provider category was a welcome recognition that we were able to create streamlined and integrated processes that enable us to be efficient and effective. Owning and managing our own registry also provides us a platform for new offerings, such as our recently launched Plastic Waste Reduction Standard.
EF: You're a member of Mark Carney's Taskforce on Scaling Voluntary Carbon Markets. What impact do you anticipate it will have?
DA: We're very supportive of its recommendations, but there are a couple of them that are critical. For example, the creation of Core Carbon Principles and a governance body to assess greenhouse gas crediting programmes can provide an extra layer of confidence. The devil is in the details, and the assessment framework must be smartly designed, but if done right this will channel finance toward high-integrity programmes, scale the market, and most importantly help fight climate change.
I'm also very excited about the work of the VCMI [Voluntary Carbon Markets Integrity Initiative], which will help clarify the claims that corporates can make about offsetting. This is really important as there has been, to date, no comprehensive approach to the demand side of the equation. Voluntary action can be a game changer if corporates reduce their emissions and want to do more. At the end of the day, we can't offset our way out of this: carbon credits must complement real efforts to reduce own emissions.
EF: What are you anticipating from COP26? What is the voluntary market looking for in terms of decisions?
DA: The broader carbon market wants clarity on Article 6, which governs how governments can trade carbon and make the corresponding adjustments to their carbon inventories. To be totally clear, we fully support the application of corresponding adjustments in the government-to-government context.
However, it's crucial that COP26 doesn't ensnare the voluntary carbon market in its rules. Voluntary carbon purchases should not have to be accompanied by corresponding adjustments because those underlying emission reductions and removals never get reported to the buyer's national government; they appear only in a company's sustainability report. Requiring host governments to make corresponding adjustments would also force countries in the global South to divert scarce resources away from critical activities such health and education to find emission reductions or removals in their economies that are already being financed by the private sector on a voluntary basis.
EF: What's next for Verra's voluntary carbon programmes and for the voluntary market more broadly?
DA: We are working flat out to underpin the rapid growth of carbon markets around the world. That means formalised linkages to our registry to facilitate the growth of the secondary market in VCUs, or through the integration of new technologies to track forest biomass in real time using satellite imagery. All of these innovations are done with environmental integrity front and centre.
We continue to believe that we can provide tremendous value in helping to drive finance towards activities that solve environmental problems. Ultimately, though, we need to ensure that the voluntary market complements work done by others. Governments must toughen their regulation of emissions, and corporations must address their footprints, for voluntary markets to help in our collective fight against climate change.