The Integrity Council of the Voluntary Carbon Market (ICVCM) began a 60-day consultation on July 26 to set core carbon principles for high quality CO2 credits. ICVCM, which is one of two bodies established to address concerns over greenwashing, proposed that corporate polluters should be encouraged to pay for adaptation finance when buying carbon offsets.
The council proposed a principle of aligning with the Paris Agreement by demanding a share of carbon credits proceeds to go toward vulnerable communities. Other principles suggest ensuring strict carbon accounting and safeguarding human rights. Currently, funding for climate vulnerable countries to address climate impacts only accounts to about one-third of international climate finance.
The voluntary carbon market’s value was over $1 billion in 2021 and is expected to grow to $30 to 50 billion by 2030 as industry seeks to meet net zero goals through offsets. A 5% levy on transactions could thus bring up to $2.5 billion for adaptation annually by 2030.
A 2% levy on revenues from the Clean Development Mechanism (CDM) used to be among the most reliable sources of adaptation. The CDM market crashed in 2012 and the Kyoto Protocol – under which CDM was established – was followed by the Paris Agreement in 2015. The 2% levy still significantly contributes to the Adaptation Fund. Over $200 million (about 19%) of the resources to the Fund came from selling credits, according to CDM’s report for 2021.
CDM was established to allow emission-reduction projects in developing nations to earn certified emission reduction credits equivalent to one tonne of carbon dioxide each. These certified emission reduction credits can then be traded or sold to industrialized countries as part of their emission reduction goals according to the Kyoto Protocol. First adopted in December 1997, the Kyoto Protocol entered force in the beginning of 2005. There are 192 parties to it currently.