Navigating evolving voluntary carbon markets
By DevvStream
In recent months, we've seen a significant increase in regulation and oversight within voluntary carbon markets. These changes aim to enhance market integrity and transparency, ensuring that carbon credits are both effective and reliable. Here are some key developments:
• FASB Proposal: The Financial Accounting Standards Board has proposed new rules for accounting for environmental credits, aiming to standardize practices across the industry.
• Biden Administration Principles: The administration has released policy principles to enhance the integrity of voluntary carbon markets, ensuring more credible and accountable trading practices.
• California's AB 1305: This bill introduces new disclosure requirements for carbon offset transactions, promoting greater transparency.
• CFTC Guidance: The Commodity Futures Trading Commission has proposed guidance for trading voluntary carbon credit derivatives, addressing the need for clear and consistent regulation.
• Global Attention:
- The Science Based Targets initiative (SBTi) is considering environmental attribute certificates for Scope 3 emissions.
- The International Organization of Securities Commissions (IOSCO) has proposed measures to strengthen market integrity.
- The EU has reached an agreement on carbon removal certification.
• Challenges and Commitments: Companies continue to face difficulties in setting and meeting emissions targets. A recent SBTi report highlights that 29% of committed companies failed to set targets on time.
• Market Size and Growth: The voluntary carbon market has been valued at approximately $2 billion since 2021. However, growth is hampered by ongoing concerns over greenwashing.
• Quality and Oversight: There is an increasing emphasis on the quality of purchased carbon credits and the need for robust internal controls.
• Evolving Tools: Organizations are challenged with determining the most effective investments to mitigate carbon transition risks.
At DevvStream, we are encouraged by this clear trend toward an increase in integrity, structure, and transparency. For carbon markets to realize their full potential as a powerful instrument for both private and public sectors to drive sustainability and achieve net-zero goals, initiatives like these are essential.
As the carbon market continues to evolve, DevvStream remains dedicated to maintaining the highest standards of transparency and reliability. We fully support efforts to implement regulations that will restore trust and stimulate growth in carbon markets globally.