The Future of Carbon Markets: How EP Carbon is Shaping the Industry 

The voluntary carbon market (VCM) is becoming more transparent in its operations, increasingly aligned with net-zero goals, and integrated with regulatory compliance. While there are several ongoing trends in the evolution of the carbon market, this blog post seeks to emphasize the following observed market shifts which are affecting businesses, carbon project financiers, and regulatory groups alike. 

---

Design of High-Quality Credits    

With increasing interest among participating industries and regulators for higher integrity standards to ensure that carbon offsets are authentic, verifiable, and additional, the VCM has experienced increased demand to demonstrate the quality and integrity of carbon credits. These demands have warranted greater transparency and standardization of methodologies for measuring and verifying carbon reductions. In one of our blog posts earlier this year, we discussed how Verra has made significant efforts to address methodological gaps and criticisms to improve project quality in response to this increased scrutiny. 

Carbon Removal Solutions      

There is growing interest in carbon removal solutions that go beyond avoidance-based credits. Increasingly, companies are committing to science-based targets that require them to reach net-zero emissions within the next 10-30 years. Nature-based carbon removal solutions like afforestation/reforestation projects and wetland conservation projects offer a robust, long-term solution when compared to avoidance credits, which have been facing criticism due to their claims of additionality and emissions reductions impact. However, incorporating these techniques requires mature market structures and significant investment in early-stage development of removals-based projects

Integration of Voluntary and Regulatory Structures       

As companies and regulators develop their net-zero pledges, there is a growing pressure to integrate voluntary and compliance markets. These sought after integrations are driven by the need for alignment, credibility, and scalability in global climate action. The standardization and alignment of credits and methodologies help to prevent “double counting” and ensure that credits can also be used for compliance and regulatory goals. An example of this integration is that Article 6 of the Paris Agreement allows countries to trade carbon credits with other countries in order to meet their Nationally Determined Contributions (NDCs). Another example from a corporate perspective is that companies that procure voluntary credits high standards (like removal credits) may later be able to use them to meet compliance obligations as regulations tighten. This is expected to increase liquidity and investment in the VCM. 

How is EP Carbon helping to shape the carbon market industry?      

In response to the shifting integrity demands of the VCM, EP has continued to develop high-integrity projects since its founding. Since 2010, EP has supported a diverse range of clients from NGOs, community groups, government organizations, and private companies. We are equipped with the expertise and tools to work with a wide range of actors while the market shifts towards integrating voluntary and regulatory structures to develop nature-based carbon projects around the world. We provide technical services and support to projects at every stage of the development cycle in order to unlock opportunities and open the doors to long-term, durable solutions for communities and climate benefits. For years, we have been advocates of integrity in the carbon market, as our project portfolio clearly emphasizes. 

Integrating Integrity and Conservative Principles throughout the Project Development Cycle   

EP Carbon strictly follows methodology guidelines and best practices in all aspects of project development. We also actively work to develop new practices that better align field activity and carbon project documentation, for the clarity and confidence of all stakeholders. We couple innovation with rigorous analysis, modeling, and policy knowledge to dramatically reduce risk for projects. We understand the critiques of carbon projects, and work to develop high quality projects that align stakeholders for stable, long-term credit generation and impact. Our development practice addresses the most common risks to a high-impact, high quality project that is recognized as such by the market. The core principles of project development that EP abides by include the following:  

1. Projects must have a strong body of evidence to support project additionality, and must undergo rigorous assessments to ensure there are insurmountable barriers to project activities that would not occur without carbon finance  
2. Realistic baselines must be systematically calculated through the targeting of high-risk areas and the application of an objective risk analysis to ensure credibility  
3. Projects must design activities that produce verifiable climate and community co-benefits that are transparent and mitigate risk  
4. Project planning must be designed to ensure long-term permanence   
5. Stakeholder feedback must be incorporated into the project’s design and benefit-sharing plans. Lifetime monitoring of the project must be carried out to ensure that benefit-sharing is long-term  
6. Project activities, documentation, grievances, and benefit sharing must be transparently available, especially to project stakeholders  

Integrate Safeguard Guidance from Global Organizations   

EP Carbon aligns itself closely with the safeguards described in the carbon standard and methodology being used by each project we work with. Additionally, we abide by the “Core Carbon Principles” as laid out by the Integrity Council for the Voluntary Market (ICVCM), as well as the strategies described in the Voluntary Carbon Market (VCM) Access Strategy Toolkit created by the Voluntary Carbon Markets Integrity Initiative (VCMI). 

Conclusion  

In short, the VCM is shifting towards a project development system that requires high-quality, robustly verifiable, and demonstratively additional credit generation. While this presents certain challenges that users, regulators, and providers in the VCM must abide by, it ultimately trends the market towards becoming a more inclusive, scientifically sound, and impactful system. EP Carbon’s rigorous standards and best practices have aligned with these core principles and continue to incorporate the growing body of requirements that are structuring the development of high-integrity projects.