Streamlining Voluntary Carbon Markets: A Developer’s Perspective

Notorious for a lack of centralization, the Voluntary Carbon Market (VCM) in 2022 remains a fragmented work-in-progress. A cohesive web of carbon registries, auditors, and governments influence the direction of VCMs through enforcing standards and compliance. A common grievance expressed by developers driving the astonishing growth seen over the last few years is the lack of business friendly practices by players in the VCM.

Notably, the difficulty of proposing, reviewing and authorizing new or modified methodologies. Traditionally, most mainstream methodologies (used by developers for projects across sectoral scopes) are developed by registries such as Verra in conjunction with private enterprises and scientists. Although most methodologies reflect robust and well-developed projects (including VCS VM0009- used by Gazelle) negligible modifications can become capital intensive undertakings spanning years reducing the pace of project development and the delivery of GHG offsets in an exploding market. Common counterarguments concerned with the quality of credits defend existing approaches but fail to acknowledge the reality: developers cutting corners around existing methodologies in order to expedite hitting carbon markets circumventing established protocols. The result is a hasty implementation of methodologies with lower quality credits backlogging auditors/VVBs and the pipeline of offset projects.

On the bright side, the number of methodologies spanning sectoral scopes from afforestation to power generation are growing in number offering flexibility to developers. However, due to the complex nature and diversity in GHG reduction projects registries such as International Carbon Registry (ICR) are moving forward with proposing new protocols expediting the process for developers while ensuring quality. The recent proposal allows developers to easily accommodate modifications to a selected methodology (or develop a new methodology altogether) as per their requirements so long as they observe compliance with ISO 14064–2. Such changes reflect a growing demand for credits expected to 100x by 2050 according to McKinsey & Co. Increased accommodations for developers will allow smaller-scale projects with unique requirements to maintain adherence to internationally approved standards without needing to poorly implement rigid methodologies or forego the process altogether.

Small but meaningful steps reflect a broader shift in the VCM. A recent shift in tone from Verra toward crypto tokens (accounting for almost 1/3rd of all carbon credits) indicates a future where high-impact projects in ecosystems/locales with unique needs can flourish while enjoying ever increasing options for participating in voluntary markets.