PARIS, June 22, 2023 – Today, the UAE COP28 Presidency and the Glasgow Financial Alliance for Net Zero (GFANZ) co-hosted a high-level roundtable on Voluntary Carbon Markets (VCMs), as an official side event to the Summit for a New Global Financing Pact. His Excellency COP28 President Designate Dr Sultan Al-Jaber and GFANZ Co-Chair and UN Special Envoy for Climate Action and Finance Mark Carney addressed the session, which brought together policymakers, market standard setters, and leaders in business and finance committed to scaling climate finance.
The session confirmed the urgency of ensuring that high-integrity voluntary carbon markets (VCMs) are scaled, given the critical role they can play in mobilizing significant flows of cross-border financing to emerging markets and developing economies (EMDEs). Participants highlighted the role VCMs can play in financing some of our most urgent priorities, such as nature-based solutions, the accelerated phaseout of coal assets and investment in new climate technologies.
The discussion addressed that mobilizing VCMs, at the pace and scale needed to preserve nature and the carbon budget, would require addressing any remaining uncertainty on how compliance and voluntary, domestic and cross-border markets come together, and providing capacity building for those countries seeking to leverage the VCMs. Common foundations were needed, across a range of credit types, and coalescing around new supply and demand-side standards being developed by ICVCM and VCMI was critical. Important work to develop the supply of new types of credit – including those designed to accelerate much needed energy transition – was addressed.
The session also addressed the need to enable high integrity demand pathway to net zero for corporate buyers, whereby reductions of absolute emissions are prioritized, with appropriately defined scope to recognize compensation of residual emissions. The discussion emphasized that to secure the foundations of a high integrity, liquid market in 2023, efforts to align supply, demand, legal, and accounting standards must be facilitated and supported.
More specifically, participants addressed:
- Overarching purpose and rules. The session highlighted the specific role VCMs play in generating cross-border finance for nature preservation, energy transition, and new climate technologies, and the need to build understanding of how compliance and voluntary, domestic, and cross-border markets complement and interact with each other. It was noted that there need be no tradeoff between domestic mitigation and raising cross-border finance, even where host countries retain emissions reductions from voluntary projects to count towards their Nationally Determined Contributions (NDCs).
- High-integrity supply and demand. Speakers applauded progress made on the important work initiated at COP26, to build supply and demand-side standards to secure credibility, integrity, and transparency. Speakers noted the importance of supporting and coalescing around the final standards, led by ICVCM and their Core Carbon Principles and Assessment Framework on the supply side, and VCMI and their provisional Claims Code of Practice on the demand side.
- Building high integrity demand. Lessons learned by corporates and financial institutions seeking to finance high-integrity carbon projects were discussed. Participants noted the need for the private sector to prioritize absolute emissions reductions but with appropriately defined scope to recognize compensation of residual emissions. Participants noted that these efforts sit within a broader architecture of carbon accounting standards and net-zero frameworks and recognized these need to come together in a consistent and efficient way.
- Capacity building and de-risking. The challenges associated with building and scaling high-integrity carbon projects in EMDEs were recognized, as well as the need for innovative financing mechanisms to de-risk these projects in these regions. Attendees also emphasized the need to ensure that local communities and indigenous peoples remain at the core of project design and are able to reap maximum co-benefits.
Following the event, COP28 President-Designate, His Excellency Dr Sultan Al Jaber, said: “Voluntary carbon markets have the potential to be a powerful enabler in financing decarbonization efforts across industries, cities and entire economies, especially in emerging and developing economies. In order to achieve their potential, we must enhance the credibility of carbon markets and ensure that the highest-integrity standards are firmly in place. This can only be done through collaboration between governments, organizations, and civil society to create a supportive regulatory environment, establish a level playing field, and raise universal standards. By working together, acting in unity and focusing on integrity, the value of this vital tool in our collective decarbonization efforts will increase.”
UN Special Envoy on Climate Action and Finance and GFANZ Co-Chair, Mark Carney, said: “With only seven years left to halve emissions and keep 1.5 degrees alive, we cannot afford to leave major sources of climate finance untapped. Voluntary carbon markets could channel hundreds of billions of dollars to nature-based solutions and accelerated coal phaseout. Critical work this year to deliver supply and demand side standards for these markets can support a high ambition path to net zero, where companies prioritize decarbonization and compensate for residual emissions along the way.”