Voluntary Carbon Markets’ Credibility in Question Over Support for Adaptation

Voluntary Carbon Markets’ Credibility in Question Over Support for Adaptation

 Adopting a Share of Proceeds for Adaptation as part of the Integrity Council for the Voluntary Carbon Markets’ Core Carbon Principles

By Dr. Saleemul Huq, Chair of the CVF Expert Advisory Group

Heavy Monsoon Rains, Bagmati River, Nepal. Photographer name: Joerg Boethling

After years of negotiations following the adoption of the Paris Agreement itself, Parties to it and the UNFCCC haggled over implementation rules. One key point that remained outstanding between 2015 and 2022 was the level of proceeds that had been agreed in Article 6 of the Paris Agreement to flow from official international carbon transactions to support climate adaptation efforts by developing countries particularly vulnerable to climate change. At COP26 in Glasgow, one of the key outcomes was to set this level of proceeds to 5% of all transactions, a win that was celebrated by vulnerable countries like the Climate Vulnerable Forum (CVF) and its members who had long advocated for the 5%. This is because international financial resources for supporting adaptation have been woefully scant and climate change, as the IPCC has confirmed and reconfirmed time and again, has by far its most deleterious effects on those countries both least responsible and least financially equipped to cope.

The global and governmental decisions of the COP and CMA (the Paris Agreement’s supreme body) have no automatic purview over non-UN systems of international climate coordination. The voluntary carbon markets (VCMs) are self-governed and self-standing from the UNFCCC and its decisions and so far they have not allocated any proceeds towards adaptation efforts by vulnerable developing countries. As such, the voluntary standards now appear outdated and out of sync both with the quality of a formal UN system that does enable support for the adaptation needs of those worst hit by climate shocks, as well as with the reality of the climate crisis as it is hammering communities around the globe, which requires a massive scaling up of bold action on all fronts: mitigation, adaptation and loss and damage.

In light of the growing concern shared by wide-ranging  stakeholder groups about VCMs neglecting the poorest and most vulnerable countries globally, I am joining the CVF in thereby calling for addressing this issue to “Safeguard social integrity in the voluntary carbon market“.

Again, the most vulnerable countries are clearly facing the greatest risks and most dramatic consequences due to the impacts of climate change, as has been painstakingly detailed in the recent IPCC ARG WG2 report. Given the economic and financial position of these communities‑many of them least developed countries and small island developing states‑and their very marginal if not insignificant contribution to causing climate change, international support to finance adaptation in these countries is an urgent and moral imperative.

The most vulnerable countries have special adaptation needs. A 5% share of proceeds for adaptation (SoPA) to match the Paris Agreement approach would allow the VCM to provide adaptation benefits in an equitable manner, without distorting market choices (i.e., without introducing host country quotas), which would not only benefit vulnerable developing countries, but also put the VCM in the vanguard of progressive instruments to tackle the climate emergency. In fact, if the VCM does not align with the Paris system, its credibility as an instrument for the global environmental response to the climate emergency faced by the planet will be seriously in doubt.

The Integrity Council for the Voluntary Carbon Markets (IC-VCM), an independent governance body outside the UNFCCC for the VCM, has the purpose of ensuring the voluntary carbon markets accelerate a just transition to 1.5ºC (Paris Agreement Article 2.1.a), by setting and enforcing definitive global threshold standards for carbon credits to channel finance towards GHG reductions and removals. As the responsible body, the IC-VCM should also work to promote other principal objectives under the Paris Agreement, including towards increasing the ability to adapt to the adverse impacts of climate change and foster climate resilience (Article 2.1.b).

The CVF has requested, through the official submissions’ process, that the IC-VCM establish a SOPA aligned with the Paris Agreement’s COP26 rules. I now urgently call the IC-VCM to add a SOPA to its core carbon principles and that from January 2024 onwards, carbon crediting programmes shall, in alignment with the Paris Agreement, charge a share of proceeds of 5% at issuance, for the benefit of the Adaptation Fund, to assist developing countries that are particularly vulnerable to the adverse effects of climate change to meet the costs of adaptation.