Recommendations for enabling the voluntary carbon market
Climate change is a global issue that requires a co-ordinated global response. The Sharm el-Sheikh Implementation Plan agreed at COP27 concluded that a global transformation to a low-carbon economy is expected to require investment of at least USD $4-6 trillion a year.
The Voluntary Carbon Market (VCM) presents an opportunity for immediate climate action by delivering the significant private funding to climate positive investments. The VCM also enables companies to support decarbonisation beyond their own carbon footprint and accelerate the broader transition to a lower carbon future.
As the need for climate action becomes increasingly urgent, and the number of firms committing to net-zero continues to grow rapidly, the VCM could reach USD $50 billion in value by 2030. However, uncertainties surrounding Article 6 of the Paris Agreement and its implications for the VCM are holding back activity.
The City of London Corporation, the UK Voluntary Carbon Markets Forum and Clifford Chance LLP have collaborated on this research paper to identify and help address some of the most pertinent uncertainties and other issues facing the Paris mechanisms and the VCM. It is intended to promote useful discussion on the topic globally and drive forward progress.
The issues can be summarised into three key themes:
- Areas of uncertainty preventing engagement in the Paris mechanisms and the VCM
- Concerns regarding the integrity and credibility of carbon credits
- Lack of government support
Catherine McGuinness, Chair of the UK Voluntary Carbon Markets Forum’s communications workstream, said: “Carbon credits are an important tool in securing a path to net zero. They can bring clear climate benefits, including enabling the efficient channelling of investment to support nations in the global south who have made significant Paris-based climate commitments and offer the world an array of nature-based solutions. As a global financial centre at the forefront of pioneering new green financing tools and techniques, London is keen to accelerate the development of a high quality, high integrity VCM. That means overcoming existing uncertainties to ensure carbon credits can be used to finance the climate action required to meet the Paris objectives.”
Nigel Howorth, Partner and Global head of the Environment Group at Clifford Chance added: “The international community needs to act with urgency on climate change. We’ve therefore outlined eleven specific issues and uncertainties that exist between the Paris mechanisms and the VCM which, if not resolved, may hinder the opportunity presented by the VCM to deliver that immediate climate action. To promote useful discussion on the topic globally and drive forward progress we’ve identified short, medium and long-term recommendations aimed at unlocking the true potential of the Paris mechanisms and the VCM. We must act decisively, with a commitment to integrity and delivering real climate impact, if the ambition of the Sharm el-Sheikh Implementation Plan is to be realised.”
* The full report is available to download here.
Notes to Editors
About the City of London Corporation
The City of London Corporation is the governing body of the Square Mile dedicated to a vibrant and thriving City, supporting a diverse and sustainable London within a globally-successful UK. www.cityoflondon.gov.uk
About Clifford Chance
Clifford Chance is one of the world's pre-eminent law firms with significant depth and range of resources across five continents. As a single, fully integrated global partnership, we pride ourselves on our approachable, collegial and team-based way of working. We always strive to exceed the expectations of our clients, which include corporates from all commercial and industrial sectors, governments, regulators, trade bodies and not-for-profit organisations. We provide them with the highest-quality advice and legal insight, which combines the firm's global standards with in-depth local expertise.
About the UK Voluntary Carbon Markets Forum
The UK Voluntary Carbon Markets Forum was established in April 2021 to support the growth of a high-integrity scaled Voluntary Carbon Market in the UK and to support and amplify the work of global governing bodies such as the Integrity Council for Voluntary Carbon Markets and the Voluntary Carbon Markets Integrity Initiative.
The Forum is chaired by Dame Clara Furse, with City of London Corporation providing secretariat support.