We recently had the opportunity to speak with Lydia Sheldrake from the Voluntary Carbon Markets Initiative (VCMI), an international non-profit organization aiming to ensure high integrity in the voluntary carbon market (VCM), specifically on the demand side. Lydia is the Director of Policy and Partnerships at VCMI and works with her team on external communications, engagement and collaboration with multiple stakeholders in the carbon markets.

Key Takeaways

• VCMI aims to unlock and facilitate high-integrity voluntary carbon markets
• The Claims Code of Practice, developed by the VCMI, enhances transparency and credibility in carbon markets by providing clear guidelines for using carbon credits
• The Access Strategy Toolkit complements VCMI’s efforts by helping countries navigate the complex carbon market landscape
• VCMI follows a multi-stakeholder approach and actively engages with policymakers and officials from various countries to align its initiatives with regulatory developments

The VCMI

cCarbon: To start us off, could you provide an overview of the work done at the VCMI and your recently published Claims Code of Practice? What do you consider the most important outcome of the process thus far?

Lydia Sheldrake: VCMI was established with a mission to unlock and facilitate high-integrity voluntary carbon markets that accelerate climate mitigation and contribute significantly to the Paris Agreement and UN Sustainable Development Goals. We observed a significant increase in corporate zero-emission commitments and a growing interest in carbon markets as essential tools for climate strategies. This presented both opportunities and risks. On one hand, there was an opening to build carbon markets that could drive climate action effectively. On the other hand, the exponentially increasing demand in the voluntary carbon market raised concerns about the capacity of market players to ensure integrity.

Our mission is to bridge these gaps by addressing the challenges that exist in the carbon markets. We aim to create an end-to-end framework for high-impact voluntary carbon markets. To achieve this, we recognized a need to clarify the rules for high-integrity claims involving carbon credits. We developed the Claims Code of Practice which was released at the end of June this year. This rulebook enhances transparency and credibility in the carbon markets by providing clear guidelines for using carbon credits. It aims to reduce confusion, improve accountability, and mitigate legal and reputational risks associated with carbon credit usage.

Our framework builds upon existing work by organizations such as the CDP, GHG Protocol, and SBTi to ensure comprehensive corporate climate accountability. We also integrate efforts to define quality standards for carbon credits on the supply side as we draw upon the work done by IC-VCM. In essence, the Claims Code of Practice represents a collective view of best practices for corporate climate action. We are currently finalizing a monitoring, reporting, and assurance framework to allow companies to gain certification, further ensuring the integrity of their claims.

cCarbon: You mentioned legal challenges faced by companies regarding carbon credits. Do you believe that relying on the Claims Code of Practice could pre-empt such legal actions given the complexity of navigating both legal systems and voluntary guidance?

Lydia Sheldrake: It’s essential to recognize that our primary goal is to maintain the integrity of carbon markets and accelerate climate action. Voluntary carbon markets serve as a transition tool, helping us progress towards more comprehensive regulatory frameworks necessary to achieve the 1.5-degree target. We anticipate a future with stronger, economy-wide regulations to address climate change adequately.

Our Claims Code of Practice aims to align with emerging regulatory directions while also influencing policy development. This process goes both ways: we adapt our code to align with future regulations while also using our code to inform regulatory discussions.

However, it’s crucial for companies to understand the legal landscape in which they operate. We cannot guarantee legal compliance, so companies should seek legal advice and remain aware of relevant legal disclaimers.

cCarbon: Are you actively engaging in conversations with regulators, or does this alignment happen organically?

Lydia Sheldrake: We emphasize a multi-stakeholder approach, where different constituencies are involved in our initiatives. We actively engage with policymakers and have established a country contact group consisting of officials from approximately 40 countries. This dialogue helps shape our direction and ensures our initiatives align with regulatory developments.

The Access Strategy Toolkit

cCarbon: Shifting focus a bit, could you provide insights into your Access Strategy Toolkit, published in May? How does it differ from the Claims Code of Practice, and how do you see it benefiting countries?

Lydia Sheldrake: The Access Strategy Toolkit complements our efforts to ensure high-integrity voluntary carbon markets. While the Claims Code of Practice focuses on corporate actions and claims, the Access Strategy Toolkit addresses countries’ capacities to engage with carbon markets effectively.

Countries need support to navigate the complex carbon market landscape, make informed decisions, and develop policies and institutions to maximize the benefits of carbon markets. While capacity-building initiatives exist for compliance mechanisms and international frameworks, there was a gap regarding voluntary carbon markets’ strategic engagement.

The Access Strategy Toolkit serves as a toolkit to guide policymakers in assessing the opportunities presented by voluntary carbon markets. It helps countries understand how they can strategically engage with carbon markets and leverage them for financing opportunities. It provides a holistic view of the carbon market landscape and encourages countries to consider how these markets fit into their broader financing strategies. As Article 6 negotiations progress, we have observed growing interest in the Access Strategy Toolkit as countries recognize the importance of effectively engaging with voluntary carbon markets.

cCarbon: Back to the Claims Code of Practice: The tiers outlined by the Code are perceived by some as overly ambitious for a sizeable segment of corporations aiming to take action by engaging in the VCM. What do you think of this observation, and does the VCMI have plans of addressing it?

Lydia Sheldrake: The tiered approach of silver, gold, and platinum, as outlined in the Claims Code of Practice, sets a high bar for corporate action. It encourages companies to aim for ambitious climate goals.

However, we understand that regional and sectoral variations exist, affecting the financial implications of meeting these tiers. Therefore, we plan to expand the Claims Code with additional guidance modules, including additional claims tiers. These modules will provide pathways for broader participation in the VCMI framework, accommodating various circumstances.

Looking ahead

cCarbon: Finally, looking ahead, how do you envision the development of VCMI over the next 5-10 years?

Lydia Sheldrake: We are currently in an exciting phase of VCMI’s development. There is tremendous energy and momentum, with collective efforts and collaborations aimed at transforming the voluntary carbon markets into a more mature and high-integrity market. This year, especially with the upcoming COP28, we hope to achieve market integration, demonstrating how all the pieces fit together coherently.

Our goal is to show the world how high-integrity, legitimate carbon markets work and the role they play in addressing climate change effectively. We anticipate that this demonstration will set the stage for dramatic growth and impact in the voluntary carbon market over the next few years. Our aim is to create a market that is transparent, trusted, and guided by clear rules for engagement, ultimately contributing significantly to global climate action.

Analyst contact:

Eszter Bencsik (ebencsik@ccarbon.info)

Urvashi Thakur (uthakur@ckinetics.com)