The Quest for Quality in Voluntary Carbon Markets

Everyday a different company is posting their latest voluntary, net zero target in order to win the public’s attention for their commitment to sustainability. According to a report from Climate Impact Partners, 38% of Fortune 500 companies have a net zero target, up 50% from 2021 (Climate Impact Partners, 2022). These targets are certainly admirable in promising to neutralize a company’s emissions footprint but have faced backlash when implementation is considered. Time and time again, companies have set ambitious targets only to lose credibility when their slow pace, or lack of material progress, is exposed. This issue was significantly noted in the latest Conference of the Parties theme, “together for implementation”, coined to communicate the need for action behind national climate plans (Climate Champions, 2022).

Given these circumstances, what levers do sustainability managers have to lower emissions? One route is to decarbonize operations by reducing energy consumption, improving energy efficiency, or adapting processes to low carbon inputs. Another route is to reconsider energy sourcing by purchasing clean power instead of emissions-intensive alternatives. There are many creative solutions that occupy a managers’ playbook, but existing methods haven’t met expectations. The State of Climate Action 2022 report found that we’re not on track to reach the 1.5°C Paris Accord (Systems Change Lab, 2023). Accelerated action is required to correct our current trajectory. There are also residual emissions that cannot be easily addressed. Residual, or “hard-to-abate,” emissions persist if they’re cost prohibitive to mitigate, or cannot be abated with current technologies, such as with heavy industries (Abatable, 2022). Therefore, to make meaningful progress toward near-term targets, managers must supplement their decarbonization efforts with purchasing carbon credits.

Carbon credits, or licenses to emit a specified amount of CO2 equivalents (CO2e)[1] based on corresponding offset activities,[2] have experienced explosive adoption since their early days of trading under the Kyoto Protocol (UNFCCC, n.d.). Between 2010 and 2021, the number of carbon credits retired, or purchased and omitted from the market, increased 12x to nearly 161M tons of CO2e mitigated (reduced or removed) per year. This astonishing growth validated that customers are yearning to leverage credits in their emissions mitigation efforts. However, two trends emerged in 2021. First, the cumulative volume of non-retired CO2e, or CO2e mitigated, but unsold as credits, exceeded 500 million CO2e.  Second, 2021 marked the start of a precipitous decline in credit transaction volume due to questions of underlying carbon offset quality.

Carbon offsets are verified emissions mitigation activities that are financed through credits in the voluntary carbon market. In this opaque market with limited information, offset quality can be difficult to ascertain. Quality can vary significantly upon close examination, making it a “lemon market” (like the used cars examined by George Akerlof) (Investopia, 2021). Buyers typically take a blind guess at which credits are dependable, or rely on the analysis of third-party consultants, brokers, or aggregators. Some of these guesses have resulted in litigation, fines, and public distrust. Earlier this year, AP News found that carbon credits minted from Peru’s largest carbon offset program, a deforestation project in Cordillera Azul, caused deforestation to double instead of preventing it (AP News, 2023). As a result, the quality of credits has been left in doubt. In a recent investigation into Verra (a major credit registry), The Guardian found that more than 90% of credits on the registry were worthless (The Guardian, 2023). Buyers cannot be sure of offset quality, which makes them anxious about using carbon credits to meet their public mitigation commitments. These concerns go to the heart of whether progress toward mitigation goals has actually been made. 

Companies currently report their public commitments by voluntarily disclosing emissions under widely accepted disclosure frameworks (e.g., Greenhouse Gas Protocol, TCFD), but aren’t unduly concerned since no formal auditing is required. This all may change when the SEC’s proposed rule on climate disclosures is finalized (U.S Securities and Exchange Commission, 2022). Under this new rule, public companies will have to disclose an auditable accounting of their emissions (Tellus Markets, 2023). If sustainability managers cannot be sure which programs are credible, then they will be discouraged from using carbon credits to meet their decarbonization objectives, and thus, miss the opportunity to satisfy their climate ambitions. 

These forthcoming requirements highlight the need for market coordination around regulatory frameworks that sellers and buyers of carbon credits can trust. Fortunately, on the sell-side of this market, The Integrity Council for the Voluntary Carbon Market (ICVCM) introduced a framework to help solve this problem. The ICVCM is driven by a mission to scale “an effective and efficient voluntary carbon market” and aspires to set standards of quality for carbon credits, define which crediting programs are CCP-eligible, and facilitate coordination between standards bodies. Their mission is grounded in a basic theory of change, “build integrity then scale will follow.” The ICVCM furthered this theory by introducing Core Carbon Principles (CCP) in March of this year.

The ICVCM’s CCP marks the first ever set of robust sell-side principles for carbon credit quality. These principles “set rigorous thresholds for [program] transparency, verification, environmental integrity, [and] adherence to sustainable development goals.” They are designed to be a benchmark for creating high-quality credits. Within the CCP framework, there are 10 principles that are grouped into Governance, Emissions Impact, and Sustainable Development. The categories are designed so that quality can be guaranteed (Governance), credits result in emissions mitigation (Emissions Impact), and credits align with the UN Sustainable Development Goals.We’ll dive into each category to explore the nuances.

CCP Part 1 – Governance. Good governance is the foundation of integrity for voluntary carbon markets. The ICVCM anchored the CCP on governance to build trust in credits. Under Governance, there are four principles: 

  • Effective governance: requires programs to have effective governance for transparency and accountability when adhering to CCP principles.
  • Tracking: requires programs to use a registry to record offset mitigation activities and credit issuance. This establishes credit traceability to avoid redundancies in selling and buying the same credit.
  • Transparency: requires programs to disclose information on all emission mitigation activities so that there isn’t asymmetrical information in the market (remember the lemon problem).
  • Robust independent third-party validation and verification: requires programs to attain independent, third-party validation and verification of mitigation activities (detailed in the Program-level Assessment Framework).

CCP Part 2 – Emissions Impact. This category is the primary reason for CCP existence. These principles ensure that buyers know a carbon credit results in a ton of CO2e mitigated. Emissions Impact is evaluated in accordance with:

  • Additionality: requires mitigation activities to be incremental and wouldn’t have occurred without investment from credit purchases. According to Additionality, if a deforestation restoration program has already been approved and financed, it shouldn’t receive additional funding through credit issuance.
  • Permanence: requires that programs are insulated from mitigation reversal after development. According to Permanence, a deforestation restoration program shouldn’t receive funding if it’s at risk for forest fires that could eliminate program progress.
  • Robust quantification of emissions reductions and removals: requires programs to use a robust quantification methodology for an accurately accounting of mitigation activities.
  • No double counting: requires programs to avoid duplicative accounting of mitigation activities (like Tracking the same offset program).

CCP Part 3 – Sustainable Development. The third CCP category aligns the carbon offset framework with the UN Sustainable Development Goals. There are two principles in this category:

  • Sustainable development benefits and safeguards: requires programs to have “clear guidance, tools and compliance procedures” for mitigating carbon emissions in a way that respects the rights of the host country (The Integrity Council for the Voluntary Carbon Market, n.d.). Many offset programs are executed in emerging market economies. These programs can lead to sustainable development for local communities (see Yale Environment 360 article), but without proper safeguards, can exploit communities for financial gain (see The Guardian article on “carbon pirates”). 
  • Contribution to net zero transition: requires programs to contribute to the net zero transition and avoid “locking-in” emission levels.

Recognizing that the CCP would be weak without standards for implementation, the ICVCM issued a supplementary assessment framework (Assessment Framework) and implementation procedure (Assessment Procedure). These supplements serve to define which programs/categories are CCP-eligible and establish a procedure for assessing eligibility. The Assessment Framework applies the CCP by providing “rigorous criteria and decision tools for each principle” (The Integrity Council for the Voluntary Carbon Market, n.d.). This framework has separate sections for evaluating programs (Program-level Assessment Framework) and categories of programs (Category-level Assessment Framework). The framework is used by ICVCM as part of their Assessment Procedure, by outlining the process for evaluating eligibility, tagging eligible credits, and enforcing the CCP. Together, the Assessment Framework and Assessment Procedure operationalize the CCP to offer an efficient route to adoption. Despite this groundbreaking step forward for offset quality and voluntary carbon markets, the outcome is still to be decided. It rests on whether the ICVCM can coordinate with the broader voluntary carbon market ecosystem. 

The ICVCM’s CCP function on the sell-side of the voluntary carbon market, assuring quality of carbon offset programs and their resulting credits. On the buy-side, there are “terms of use” frameworks, which are critical in defining acceptable terms of use and reporting guidelines for carbon credits. One well-known framework provider, the Voluntary Carbon Markets Integrity Initiative (VCMI), shares a common mission with ICVCM of improving credit integrity to accelerate climate action. As a result, it has announced a strategic partnership with ICVCM as part of an “end-to-end climate strategy” (The Integrity Council for the Voluntary Carbon Market, 2023).

The VCMI’s Claims Code of Practice (”Claims Code”) is intended to “build a broad sense of trust and confidence in how companies engage with VCMs” (Voluntary Carbon Markets Integrity Initiative, n.d.). The “Claims Code” does so by providing clear guidance on using carbon credits to help reach net zero targets and the Claims that companies can make regarding emissions mitigation. It presents three tiers of Claims for companies: Silver, Gold, and Platinum. Tiers increase in aspiration, with Silver representing mitigation of 20-60% of remaining emissions and Platinum representing mitigation of 100% of remaining emissions. There’s a four-step process to making a VCMI Claim from carbon credits: 


  1. Comply with the Foundational Criteria: fulfill requirements designed to ensure that companies are aligned with the long-term goals of the Paris Climate Agreement.
  2. Select a VCMI Claim to make: choose from a three-tiered list (Silver, Gold, Platinum) to define your VCMI Claim.
  3. Meet the required credit use and quality thresholds: satisfy high-quality thresholds, outlined by ICVCM in the Core Carbon Principles above, and qualify under the ICVCM Assessment Procedure.
  4. Obtain third-party assurance of reported information: acquire third-party assurance to demonstrate that the requirements have been met.


This process will be paired with a Monitoring, Reporting, and Assurance (MRA) framework, released in November 2023. That way VCMI and broader stakeholders can have faith that companies are adhering to the Claims Code when promoting their VCMI Claims.

Taken together, the ICVCM Core Carbon Principles and VCMI Claims Code of Practice forge a credible pathway for companies to thoughtfully use carbon credits to help achieve their climate goals. From origination to recognition, there’s hope that credits minted under this scheme will result in meaningful emissions mitigation. Voluntary carbon market participants have finally received the signal they’ve been yearning for. With a comprehensive solution to offset and credit quality, they can begin to build confidence in transacting these critical products. Although there’s still a long road to confirming success, the CCP and Claims Code mark a watershed moment for this promising market.


Updated and expanded August 28, 2023 - Originally published July 7, 2023

Tyler Soutendijk, Guest Author



  • If not now, when? How are companies stepping up with the urgency required to deliver climate impact, Climate Impact Partners, 2022.
  • Together for Implementation: a COP27 message from the Champions, Climate Champions, November 2022.
  • State of Climate Action 2022, Boehm et al., World Resources Institute, October 2022.
  • What are the hard to abate emissions and how can these sectors adapt?, Filmanovic, Abatable, July 2022.
  • Emissions Trading, United Nations Framework Convention on Climate Change.
  • The Voluntary Carbon Market Dashboard, Bravo and Mikolajczyk, Climate Focus, May 2022.
  • Understanding the Lemons Problem and How to Solve It, Chen, Investopedia, November 2021. 
  • Takeaways from AP examination of Peru carbon credit program, Davey, AP News, March 2023.
  • Revealed: more than 90% of rainforest carbon offsets by biggest certifier are worthless, analysis shows, Greenfield, The Guardian, January 2023.
  • SEC Proposes Rules to Enhance and Standardize Climate-Related Disclosures for Investors, U.S. Securities and Exchange Commission, March 2022.
  • An Overview of Climate Disclosure Frameworks, Johnson, Tellus Markets, April 2023.
  • The Core Carbon Principles, The Integrity Council for the Voluntary Carbon Market.
  • In Tanzania, Carbon Offsets Preserve Forests and a Way of Life, Pearce, Yale Environment 360, May 2022.The “carbon pirates” preying on Amazon’s Indigenous communities, Greenfield, The Guardian, January 2023.
  • ICVCM and VCMI join forces to operationalize a high-integrity market to accelerate global climate action, The Integrity Council for the Voluntary Carbon Market, 2023.
  • VCMI Claims Code of Practice, Voluntary Carbon Markets Integrity Initiative.


[1] Used to standardize effects of various greenhouse gases.

[2] This definition differs from carbon credits used in a mandatory carbon market, whereby credits are traded to maintain emissions levels in a respective industry.

August 2023