The Core Carbon Principles: implications for market participants

Key Contacts: Lev Gantly – Partner  |   Anna Hickey – Partner  | Simon O’Neill – Partner  |  Tom Conway – Partner  |  Gerald Byrne – Partner Inez Cullen – Partner  |  Philip Lee – Partner

The Integrity Council for the Voluntary Carbon Market (the IC-VCM) recently launched its flagship Core Carbon Principles (the CCPs) alongside the Program-Level Assessment Framework and Assessment Procedures (the PL Assessment Framework). This briefing note outlines the purpose of the CCPs and the PL Assessment Framework and considers questions that may arise for deal-making within the Voluntary Carbon Market.

What are the CCPs and the PL Assessment Framework?

As described by the IC-VCM, the CCPs are a global benchmark for high-integrity carbon credits that set rigorous thresholds on disclosure and sustainable development. They promote a credible and rigorous means of helping investors identify high-integrity carbon credits that create real, verifiable climate impact based on the latest science and best practice. The PL Assessment Framework is a tool for operationalising the CCPs and provides criteria, metrics and a decision-making toolkit for each stated principle.

The ten CCPs are listed below, split out under the three categories designated by the IC-VCM:




The IC-VCM has confirmed that carbon credits will receive the CCP label only if both the carbon-crediting program that issued them and the credit category are assessed by the IC-VCM and meet its criteria for high-integrity, as mandated by and set out in the CCPs. A “credit category” is essentially a “methodology-type” although the IC-VCM defines it more broadly[1].

The PL Assessment Framework (which is a Program-Level framework) enables the IC-VCM to ensure that carbon-crediting programs can be assessed on an objective, consistent and reliable basis. The Category-Level Assessment Framework (the CL Assessment Framework and, together with the PL Assessment Framework, the Assessment Framework) will perform a similar function with respect to credit categories. The CL Assessment Framework is scheduled to be released later this year.

Viewed through a single prism, the CCPs together with the Assessment Framework should provide a set of standards for existing and new methodologies to follow in order to attract a CCP label. Exactly how carbon programs such as Verra and Gold Standard will apply CCP labels to methodologies (or “categories”) and possibly to carbon credits themselves remains to be seen. We expect that clarity around this will be forthcoming later this year after the CL Assessment Framework is published and the IC-VCM begins assessing both programs and credit categories. The IC-VCM’s objective is to commence labelling of approved programs, credit categories and, possibly, credits themselves, later this year.

To minimise the burden on existing carbon-crediting programs, the IC-VCM has determined that programs already eligible under CORSIA shall also be eligible under the PL Assessment Framework provided that they meet certain requirements.

Additionality and Permanence

While a deep dive into the CCPs is beyond the scope of this note, it is worth taking a closer look at two specific principles – CCP 5 (Additionality) and CCP 6 (Permanence).

CCP 5 (Additionality) has been drafted to ensure that credits are only awarded to activities that would not have occurred without the carbon credit revenues.  The Assessment Framework will determine the overall likelihood of additionality in relation to an activity pursuant to which carbon credits will be issued (e.g. afforestation) as well as how well a program assesses additionality.

In respect of CCP6 (Permanence), it is important that carbon credits ensure the permanent reduction or removal of greenhouse gases. Depending on the risk associated with the activity, certain tailored mechanics to address reversal may be required. A high level of assurance of permanence would be required for credits to be high quality and result in IC-VCM approval as being compliant with the CCPs.

At first glance, there is nothing particularly new or innovative about the approach taken by the IC-VCM with regard to the principles of additionality and permanence – both are long-established quality indicators for projects in the voluntary carbon market.  What will be interesting is how the IC-VCM applies the Assessment Framework to assess compliance with these principles.  Traditionally market participants would have relied on carbon standards themselves to make a determination on additionality and permanence of a project before validating a project’s design documentation or issuing a volume of credits off the back of a verification report for a project. Now, however, we have an objective, third-party organisation in the IC-VCM tasked with making these assessments.  To put it another way, from now on the standard-setters will themselves be held to an objective standard.

Additional Attributes

In response to market interest, the CCPs also enable the tagging of CCP-Approved carbon credits with three additional attributes or “features” associated with the mitigation activity.  These are:

  • Host country authorization pursuant to Article 6 of the Paris Agreement: whether the host country has authorised the carbon credit (“mitigation outcomes”, the GHG emission reductions or removals represented by the carbon credit) for “other international mitigation purposes” under guidance adopted pursuant to Article 6 of the Paris Agreement.
  • Share of Proceeds for Adaptation: whether the mitigation activity makes a voluntary contribution to the Adaptation Fund of the UNFCCC. The Adaptation Fund helps communities in developing countries adapt to the effects of climate change.
  • Quantified positive SDG impact: whether the mitigation activity makes a quantified contribution to sustainable development. Such quantified positive SDG impacts must align with the sustainable development priorities of the host country, where those are relevant to the mitigation activity.

What is the intended impact of the CCPs and Assessment Framework on the market?

Investors should be confident that projects they fund are registered with programs that the IC-VCM considers to be high quality, and that such projects use high-quality methodologies.  Investors and stakeholders alike will take comfort that these projects are likely to have a genuine impact on the reduction and/or removal of carbon as well as, in some cases, the UN’s Sustainable Development Goals (see above in relation to Additional Attributes).

It is important to note that the IC-VCM’s assessment process does not extend to individual projects – it is limited to carbon programs and categories.  Thus, the CCPs are likely to act as a first filter, giving an investor comfort in selecting a carbon program and credit category/methodology for its portfolio.  The project-level challenge will likely remain per the status quo – prudent investors should continue to carry out project and jurisdiction specific environmental, technical, tax and legal due diligence before committing funding to any project.

What do the CCPs mean for existing contracts?

Investors and project developers that have already contracted to fund and develop carbon projects should proactively review the terms of their contracts. An investor (and indeed, ultimate corporate buyers) may be aggrieved if it transpires that its investment relates to a program or methodology that ultimately fails to meet the CCP threshold and may look to exit the agreement or seek a price adjustment. Difficulties may also arise for project developers seeking to refinance a project.

Contractual provisions governing change in law, change in standard rules, force majeure and all associated defined terms should be carefully considered. If a party to an existing agreement is concerned about the CCP thresholds being met, early discussions will be advisable on any amendments. These will allow the contract to continue whilst preserving its commercial integrity for the ultimate benefit of the project and the communities which may benefit from its implementation. If a project is yet to be validated, mutually acceptable modifications to the project design documentation should be considered.

What do the CCPs mean for new contracts?

The answer to this question will depend on the driver for a proposed investment.  If an investor is basing its investment decision on the premise that the project is validated by an IC-VCM approved program, and utilises a methodology that carries a CCP label, then it would be important to protect these features contractually.  Workable remedies should be included in the event that any such approvals or labels are lost or jeopardised. Tailored representations, warranties and covenants should all be carefully considered along with suitable remedial measures. Such measures might include requiring the project developer to cooperate with the applicable standard or any relevant third party to revise the non-conforming methodology (or project design documentation) or possibly to use a different methodology that meets the IC-VCM’s assessment criteria. The inclusion of a specific concept in the documentation such as an “IC-VCM Adverse Event” should be considered in order to legislate for adverse events such as the IC-VCM revoking the approval status of a program or credit category/methodology.

Sometimes an investor will be evaluating a project in circumstances where the applicable program and/or methodology has yet to complete the IC-VCM approval process (often with a “promise” from a project developer that the approval will be forthcoming). In such cases, a different set of contractual measures should be considered. These may include conditions precedent or subsequent, covenants and/or undertakings as well as remedies that may require the project developer to offer replacement projects to the investor or make close-out payments to compensate the investor for its costs of entering into a transaction based on a promise that did not materialise.

In both cases, the regimes around change in law, change in standard rules and force majeure should all be carefully considered.


The CCPs and the Assessment Framework are a welcome development in a market that requires consolidation as regards integrity and quality to enable it to achieve its critically important potential and bolster confidence amongst corporates and other investors.

The impact of this development will only become clear once the IC-VCM begins to apply the Assessment Framework.  Ensuring that it does so with the clarity, transparency, objectivity and integrity that it champions will be key to the successful implementation of the IC-VCM’s integrity regime.  Although the impact on existing and new investment and emission reduction purchase agreements is not currently clear, market participants would be wise to review their existing documentation and begin thinking about how their positions can be best protected in light of these developments.

[1] The IC-VCM’s definition of a “Category”, is worth noting as it includes but is broader that just a methodology-type: “A group of carbon credits that have the following characteristics in common: (1) the carbon credits are from the same type of mitigation activity as defined by the Integrity Council, (2) the mitigation activity is registered under the same carbon-crediting program and complementary standard as applicable, (3) the emission reductions or removals were quantified using the same version of the same quantification methodology, including any tools or modules referred to in the quantification methodology, (4) the carbon credits have other common features as defined by the Integrity Council in its assessment of categories of carbon credits, as necessary, such as the geographical location or technical features.”​

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