The ICVCM and REDD+ Standards: Implications for Voluntary Carbon Markets

Understanding REDD+

REDD+ stands for Reducing Emissions from Deforestation and Forest Degradation, with the "+" representing the additional focus on conservation, sustainable management, and forest carbon stock enhancement. Originally formalized under the 2010 Cancun Agreements of the United Nations Framework Convention on Climate Change ("UNFCCC"), REDD+ provides results-based payments to nations for reducing deforestation and forest degradation. Over time, private sector entities began adopting REDD+ principles for voluntary carbon markets, with standards such as the Verified Carbon Standard (VCS, now Verra) and Climate, Community & Biodiversity ("CCB") Standards certifying REDD+ projects for carbon credit trading.

REDD+ credits, based on avoided deforestation or degradation, have faced increasing scrutiny over inflated baselines. These baselines project a hypothetical "business-as-usual" scenario of deforestation without intervention. The carbon credits generated by a REDD+ project are based on the difference between this hypothetical baseline and the actual emissions observed. 

Studies have found that some projects significantly overstated deforestation risks, leading to issuance of "phantom credits" that fail to deliver real climate benefits. These discrepancies undermine trust in the voluntary carbon market, prompting the need for stricter oversight and transparency.

ICVCM's Core Carbon Principles ("CCPs")

To restore credibility, the Integrity Council for the Voluntary Carbon Market ("ICVCM") stepped in to address these concerns by creating stricter benchmarks through its CCPs. These principles aim to enhance the credibility and integrity of carbon credits, ensuring they represent real, measurable emissions reductions. In 2024, the ICVCM approved three REDD+ methodologies aligned with the CCPs:

• The REDD+ Environmental Excellence Standard ("TREES") v2.0, developed by the Architecture for REDD+ Transactions ("ART"), emphasizes jurisdictional-scale programs at the national or subnational level, encompassing entire countries or large regions, rather than focusing on individual, project-based initiatives. TREES enables countries participating in UNFCCC REDD+ program to also monetize forest conservation efforts through carbon trading, with safeguards to prevent double counting.
• VM0048, issued by Verra, updates and replaces older methodologies (e.g. VM0006, VM0037) responsible for a significant share of retired credits in 2023. Existing projects must transition to VM0048, recalibrate baselines, and issue credits under the updated framework to qualify as CCP-approved.
• The Jurisdictional and Nested REDD+ ("JNR") Framework v4.1, also developed by Verra, facilitates integration (or "nesting") of smaller project-level activities within broader jurisdictional REDD+ programs, tackling systemic drivers of deforestation like agriculture or illegal logging. 

By emphasizing jurisdictional rather than project-specific baselines, the ICVCM aims to standardize crediting processes. While this shift is intended to improve market credibility, it also raises concerns about potential manipulation by governments seeking to maximize revenues. 

Implications for the Voluntary Carbon Market

The ICVCM's approval of these methodologies marks a significant step toward improving the integrity of REDD+ credits. High-integrity credits that reflect genuine emissions reductions are expected to command premium market prices, incentivizing investment in quality projects. 

However, transitioning to new standards creates challenges for existing projects reliant on outdated methodologies, potentially rendering their credits obsolete. This highlights the necessity of planning for future standards development at the outset of a project. "Set it and forget it" is not a viable approach when the underlying credit scheme is subject to scrutiny and change. By aligning projects with the updated benchmarks, project developers can ensure their initiatives remain credible and competitive as market standards continue to evolve.

Message to Companies Relying on Voluntary Carbon Offsets

The U.S. presidential transition and resulting change in federal policy on climate change place an emphasis on deregulation and diminished federal prioritization of emissions reductions, which may attenuate incentives for U.S.-based companies to engage in the voluntary carbon market. However, for companies that maintain commitments to emissions reduction—particularly those subject to scrutiny from institutional investors or non-governmental organizations—prioritizing CCP-aligned credits becomes a strategic necessity. High-integrity credits can mitigate reputational risks tied to accusations of greenwashing or offset ineffectiveness, potentially providing an additional layer of defense for voluntary climate actions. 

Additionally, for multinational companies based in countries that remain signatories to the Paris Agreement, REDD+ credits compliant with ICVCM standards constitute a critical tool for aligning corporate offset strategies with internationally recognized climate targets and ensuring their carbon strategies align with the best practices on credibility and effectiveness. 

Companies participating in the voluntary carbon market should review their carbon credit portfolios, prioritize ICVCM-approved methodologies as they are being continuously improved, and verify the quality of their offsets to mitigate litigation and reputational risks and to achieve real-world climate benefits.