Introductionto ERMCarbon MarketServices
Achieving global climate goals demands deep decarbonisation
...andmitigationthroughthecarbonmarketswillbeanimportantpartofthisjourney
“…it is absolutely critical for businesses to deploy every tool in the box … the Voluntary Carbon Market is a key tool and we have seen that companies who actively engage in the VCM and purchase credible, high quality carbon credits are reducing their own emissions more quickly than their peers"
ChristianaFigueres,formerUNFCCCGeneralSecretary
Thecarbonmarketsaretransformingwitharenewedfocusonintegrity andcontributiontoasustainabletransition.
Theprimaryimperativeisdirectdecarbonizationwithinacompany’s valuechain.However,tomitigatetheimpactofunabatedemissions duringthenetzerojourney,andtoneutralizetheresidualemissions, high-qualitycarboncreditshaveaveryimportantroletoplay.
ThistrajectoryisillustratedclearlywithintheScienceBasedTargets InitiativeNetZeroStandard.
Carbon markets are fast changing
Balancingtherisksandnavigatingtheopportunitiesarekeytosuccess
Geo-Political
• Currentpoliciesareinsufficienttokeep globalheatingwithinsafelevels
• Emergingregional/internationalpolicy (e.g.,Article6)israpidlyevolving
• Hostcountrypolicyshifts
• Stakeholderexpectationscanbe reactiveandunpredictable
Impact
• Importanceofwidersocialandnature contributionofcarbonprojectsis growing
• Communityacceptance,licenseto operate,trust,environmentaland socialjusticeareallvitaltocredibility
• Deliveringa‘justtransition’that protectslivelihoodsandsharesthe benefitsequitably
Market
• Highintegrityprojectsarescarceandin highdemand
• Marketvolatility,withcarbonprices fluctuating
• Accesstocapital/projectfinanceis challengingbasedonpoorperception
• Projectdeliveryrisksaresignificant
Reputation
• Pressureisgrowingtomeetnearterm emissionreductiontargetsandshow progresstowardsnetzerogoals
• Transparencyandintegrityofcarbon creditsarekeytocredibleparticipation inthemarket
• Stakeholderscrutinyoverwhether claimsrelatingtocarboncreditsdelivera realcontributiontoclimate,environment andcommunities
What makes a carbon credit project credible & when is it credible to use them?
Thecredibilityofacarboncreditprojectisgovernedbytherulesandmechanismsappliedateachstageoftheprojectcycle.
Carbon Credit Project Cycle
Source:ClimatePartner
Key integrity criteria
• Alignmentwithintegritystandards,e.g.,CoreCarbon Principles
• Highpermanence&additionality,withno‘lock-in’of high-emissionpathways
• Lowriskofleakage
• Additionalco-benefits(economic,socialand environmental
• Higherpricepointsgenerallyreflecthigher integrity projects
• Supplementary to publicly stated emissions, targets and action todecarbonisethecompany’s operationsandvaluechain
• Transparency – fulldisclosureofthenumberof creditsretired,whentheywerecreated(vintage)and theprojecttheyoriginatedfrom
• Separate accounting of emissions and offsetting –if carboncreditsareusedtocompensateforannual emissions,theymustbeseparatelyreportedwithno netaccounting
Key governance mechanisms:
Standard Bodies:
• Setmethodologies, rulesandrequirements
• Issuescarboncredits
• Robustprocessesand procedures
Acredibleclaimneedstocombineuseofcarboncreditswith adefineddecarbonisationroadmap
Registries:
• Issueindividualserial codesforcertificates
• Trackcreditsforeach verifiedandcredited emissionreducedor avoided
3rd Party validation & verification body (VVB):
• Validatescompliancewiththerulesforprojectdesign andimplementation
• Verifiesclaimedemissionsreductions
Integrity guidance (examples):
• ICVCMCoreCarbonPrinciples
• VCMIClaimsCodeofPractice
• IETAGuidelinesforhighintegrityuseofcarboncredits
• TheOxfordOffsettingPrinciples
• Independentratingsfromaratingsagency(e.g.,BeZero Calyx,Renoster,Sylvera,)
Acredibleproject Acredibleuseofcarboncredits(byanorganization)
There is growing consensus on the credible use of carbon markets
InApril2024,IETAissueditsGuidelinesforHigh-IntegrityUseofCarbonCredits.Thisoffersausefuloverviewofbest practicefororganizationsaccessingthecarbonmarketsaspartoftheirlong-termstrategy
Source:IETA_VCM-Guidelines.WEB-2.pdf(b-cdn.net)
“The buyer is ultimately responsible for careful selection and due diligence of carbon credits purchased.”
IETA’sGuidelinesaredesignedtohelp companiesgloballytoresponsiblyand crediblyincorporatehigh-qualitycarbon creditsintotheirbroaderclimatestrategy, encompassingsettinganet-zeroambition andnear-andlong-termdecarbonisation targets.
ERM can support its clients at all stages of the carbon markets journey
Carbon credit delivery
• Procurehigh-qualitycarboncredits
• Investinlong-termcarboncredit supplythroughcollectiveinitiatives
• Guidedbyanintegrityframeworkto delivera realandmeaningful contributiontoglobalclimategoals
• Leverageoraccesscomprehensive marketintelligencetoinform purchasingdecisions
Drive integrity at every stage of project development
• Feasibilityassessment
• Economicandcarbonmodelling
• Multi-stakeholderengagement
• Designanddevelopment
• Registration/validationsupport
• Social&environmentalsafeguards
• Co-benefitassessmentandmonitoring
Strategy Development Delivery
Carbon Market Services
Due Diligence
Strategic support
• Mitigationstrategydevelopment,alignedwith sustainabilityobjectives
• Riskreviewandmanagement
• Understandingandmanagingstakeholder expectations
• Decisionmakerunderstandingandbuy-in
• Implementationplans
• Commercialopportunityframing
Enhanced due diligence
• Projectintegrityandbespokeduediligenceframework
• Scrutinyofinvestment,includingimpacts,risksandco-benefits
• Methodologyandimplementationassessment
• Globalcoveragewithexpertsontheground
Independent scrutiny
• Pre-assuranceandassuranceof:
o Publicdisclosures(e.g.,mitigationclaims)
o Portfoliointegrity
o Projectco-benefits
• Projectvalidation&verification
• Carefullymanagedconflictofinterestprocesses
Extending beyond reduction and removal of GHG emissions
What makes ERM your partner of choice?
Experienceacrossend-to-end decarbonization strategyandsolutions meanswe’rewellpositionedto align your mitigation strategy with best practice and sector themes
Track record – ERMistheworld’slargest sustainabilityserviceprovider,with more than 8000 sustainability professionals globallyandhasbeenoperatingformore than50years
Ourintegrityframework,partnerships withthirdpartyratingsagenciesand accessto 15,000 voluntary carbon market projects supportyouincurating youroptimalportfolio
Our Climate Markets team has experienceofsuccessfullycontracting 40+milliontonnesofcarboncredits, demonstratingourextensiveexperience, andstrongtrackrecord
Recognizedauthorityon climate strategy, transition, risk management and integration withabilitytolayerERM servicesintocarboncreditprojects, including biodiversity and social impact monitoring.
ERMispresent40countriesand160 locationsacrosstheworld.Our boots on the ground expertise providesvitallocal insightsandregulatoryknowledgeand enhancingprojectassessment
