VCMI unveils carbon offset rules, with plans for Scope 3 carve-out

New Claims Code of Practice sets out best practice for firms using carbon credits in net zero strategies.

Companies could be allowed to offset some of their Scope 3 emissions and still remain aligned with best practice, according to plans announced this week.

The Voluntary Carbon Markets Initiative (VCMI), the primary standard setter in the space, has released guidance on how carbon credits should be used to support credible net zero strategies.  

The new Claims Code of Practice sets out expectations for offsetting in an attempt to restore confidence in the market, following years of bad press – including accusations that it enables corporate greenwashing.

Just this week, Greenpeace accused PetroChina, CNOOC Gas & Power and Shell of being involved in trading ‘carbon neutral’ gas linked to low-quality forestry credits. Greenpeace suggested that more than 80% of the trees being planted to generate the credits were at risk of burning down in future, potentially creating more carbon, rather than less.   

Shell is among a growing list of big companies that have backed away from the voluntary carbon markets over the past 12 months, along with EasyJet and Nestle.   

One sell-side analyst described the carbon markets as “in turmoil” and “as good as collapsed”.

“It’s now purely a source of reputational risk, and companies are really angry about it,” he added. “They were told offsetting was the appropriate thing to do for the emissions they couldn’t reduce right now, and, having spent millions buying up credits, they’re now being told off for it.”

The Claims Code

VCMI hopes to create a clearer distinction between good and bad practice in the voluntary carbon markets through its new Code, which allows companies to make ‘carbon integrity claims’.

To do so, they must buy and retire high-quality carbon credits according to one of three criteria: Platinum, Gold and Silver.  

Credits can only be used to offset emissions that remain once a company has achieved its annual targets by decarbonizing its own value chain.

In the final version of the code, VCMI has lowered the thresholds for two of its tiers. To qualify for a Silver label, companies must now offset at least 10% of their remaining emissions, instead of the 20% initially proposed. For a Gold label, the minimum is now 50% instead of 60%.

VCMI’s Executive Director Mark Kenber told REP: “We lowered the threshold for the Silver claim because we recognised that even buying and retiring credits to cover 10% of remaining emissions can represent both a significant expenditure for many companies, especially in the industrial sector, and a potentially significant contribution to global mitigation.”

The criteria for ‘Gold’ was adjusted accordingly, he added. Platinum claims can still only be made if a company offsets all of its remaining emissions.

Special provisions are being considered for SMEs, companies in the Global South and those with low profit margins, VCMI said.

Scope 3

The initiative also launched a draft version of what it’s calling a ‘Scope 3 flexibility claim’, intended to help companies struggling to reduce their indirect emissions (those generated by their goods, services and supply chains).

Once finalised, it will permit firms to offset up to half of their Scope 3 emissions on the condition that they gradually reduce this level over time, bringing it to zero by 2035 at the latest.

“Not all companies who are climate leaders can meet near-term targets for value chain emissions,” said VCMI in a statement. “The Scope 3 Flexibility Claim will enable companies to act and be recognised for climate leadership, while increasing internal decarbonisation.”