This most recent assessment evaluated a much larger batch of methodologies – primarily ones from renewable energy project types, as well as ones involving methane reduction. Credits from such projects – particularly renewable energy projects started under the auspices of the Clean Development Mechanism (CDM) of the Kyoto Protocol – account for a huge share of the current stockpile of unretired credits in circulation. In contrast to the previous assessment results, eight of the methodologies evaluated were rejected, i.e. deemed ineligible for the high-integrity Core Carbon Principles (CCP) label due to concerns over additionality – see our glossary for a definition of additionality. Together, those methodologies account for around 240 million credits—roughly one-third of current credits in circulation. Projects using one methodology alone – ACM0002, for crediting the emission reduction of grid-connected renewables – have generated 226 million credits currently in circulation.

On the flip side, the council approved one new methodology: the latest version of AM0023 for methane reduction in industrial facilities, which covers less than 20 million of the credits in circulation (less than 3% of the growing stockpile of unretired credits).

This analysis, the third in our series on credits in circulation, examines which of the carbon credits from major registries—ACR (formerly known as American Carbon Registry), Climate Action Reserve (CAR), Gold Standard, and Verra – are CCP-eligible and thus able to be labelled “high-quality.” As explained in our initial analysis about credits in circulation, we consider those without the CCP label unlikely to be retired/”used” and thus to be part of the “unwanted stockpile” of credits that has built up over the years rather than part of the VCM’s “usable supply.” With credits from renewable energy projects now out of the picture, the remaining stockpile of credits in circulation is limited – which makes for a significant shift in voluntary carbon market dynamics.

No ‘seal of approval’ for renewables

Almost all methodologies under renewable energy categories failed to meet the ICVCM’s integrity benchmark due to insufficient rigour in their additionality: projects using those methodologies (see Table 1) are likely to have proceeded even without financial incentives from carbon credit sales.

Out of the 775 million credits currently in circulation, a whopping 240 million credits are now not CCP eligible – this affects primarily credits from Verra (77%) and Gold Standard (24%), particularly those from wind and solar projects – see Figure 1. Of these rejected credits, 93% come from the methodology ACM0002, with AMS-I.D holding 3% and other methodologies accounting for less than 1% each.

The rejection of all versions of the renewable methodologies has resulted in even many ‘new’ credits (those generated more recently and thus often considered of higher quality) being CCP-ineligible. Half the credits from projects using rejected methodologies were generated since 2020 – only 16% were generated before 2016. Over 75% of the credits from projects using rejected methodologies come from projects in India, China, and Turkey, with India accounting for the largest share (44%).

In contrast, newly approved methodologies – such as those for methane leak detection and repair in the gas industry – account for only less than 20 million unretired credits, bringing the total number of CCP-approved credits in circulation to 28 million.

Stakeholders had largely expected these assessment results, as Gold Standard and Verra had already started limiting the eligibility of new renewable energy projects for carbon credits since 2020. They did so due to the declining costs of delivering large-scale renewable projects, along with existing government programmes that promote the adoption of renewable energy, making carbon credit projects that do so non-additional. A methodology for sulphur hexafluoride (SF6) reduction in the magnesium industry was also rejected due to unmet additionality criteria. No new standards were approved under the latest ICVCM assessment.

Not much left

Given the volumes involved, this second assessment by the ICVCM has a far greater impact on what can be called “supply” in the voluntary carbon market than the initial assessment, which merely introduced a few ‘high-quality’ credits into circulation. The rejection of renewable methodologies results in a third of carbon credits failing to meet the ‘high-integrity’ criteria. Combined with the Council’s earlier decision to approve only recent versions of certain methodologies, excluding older credits calculated with outdated methods, it has collectively rendered 35% of credits in circulation as belonging to the “unwanted stockpile” rather than to the voluntary market’s actual “supply.”

Further limiting that supply, some registries excluded certain methodologies from the assessment process altogether (Verra’s REDD methodologies for instance – see our first analysis in this series for a detailed explanation) which rules out the possibility of these credits being CCP-eligible during the current assessment period. Since over 220 million credits were generated using methodologies that were removed from the assessment process, nearly 30% of the total credits out of circulation are not even able to be considered for receiving the CCP label – see Figure 2.

This leaves 180 million credits from project types – such as afforestation and reforestation, improved forest management, and cookstoves – still under review. Given that not all of the methodologies under which they were generated will gain approval, the market for CCP-eligible credits could get tight, particularly if demand grows specifically from those buyers seeking to make claims under the Voluntary Carbon Market Integrity (VCMI) initiative.

What’s next

Since stakeholders were aware of non-additionality concerns regarding some renewable projects as mentioned above, the announcement of these assessment results will have a limited impact on the existing differentiation among credit prices in our view. Indeed buyers have been moving away from renewable credits for quite some time, as shown by the inactivity of the CBL’s Core Global Emission Offset (CGO) futures contract and the falling price of CBL’s Global Emission Offset (GEO) futures contract: both of these include many credits from renewable energy projects. We do not expect a significant change in the already entrenched pattern of low prices relative to those of so-called nature-based credits.

However, renewable energy projects are not off the table altogether: the ICVCM has expressed willingness to review new methodologies. Verra is revising its CDM additionality tools and will submit the updated methodologies for reassessment.  Verra has also launched a public consultation on an optional pathway for projects registered under the Verified Carbon Standard (VCS) to update their methodologies for past verification periods, which could potentially increase the number of CCP-eligible credits (see our analysis on this here). Meanwhile, the Paris Agreement Crediting Mechanism’s methodological expert is revising five CDM methodologies, including the two renewable methodologies (ACM0002 and AMS-I.D.) with the most credits from the recently rejected batch by the ICVCM.

We will continue our analysis next month as the ICVCM announces the next seal of approval (or lack thereof) for afforestation and reforestation, agricultural land management, improved forest management, and efficient cookstoves. Each assessment will offer deeper insights into the “real”  in the voluntary carbon market.

It is worth noting that our characterisation of CCP-approved credits as “the real supply” also has limits – it is only one metric for defining what portion of the growing stockpile of credits in circulation will be retired. Credits from renewable energy credits in fact made up the majority of those retired in the second quarter of 2024 – see our July report. In this context, the upcoming quarter will reveal if the ICVCM’s assessment of renewables credits as lacking integrity affects corporate buyers and in turn, affects which credits remain in circulation.