While 2024 may have witnessed a surge in "greenlash" – a new term added to the climate vernacular, meaning a political and societal backlash against climate policies – the rate of policy change impacting the voluntary carbon market showed no signs of backsliding. 2025 is set to follow the same trajectory.
There are several key updates companies will want to stay ahead of and in this article, Chris Duck - Claims and Assessment Director at Climate Impact Partners, will outline some which companies should have on their radar in 2025, including: Article 6, CORSIA, EU legislation, California legislation, and the ICVCM and VCMI.
New year, new NDCS
As we say happy 10th birthday to the Paris Agreement this year, countries will update their Nationally Determined Contributions (NDCs) – their self-defined emissions reduction targets made under this agreement.
New targets must be more ambitious than the last and this is critical in 2025 – last year was confirmed as the warmest year on record globally and the first year the average global temperature exceeded 1.5°. Current national pledges fall far short of the necessary ambition. The latter half of this decade is critical in determining whether we can stay on track for a 1.5° world. Emissions must be slashed by 42% by 2030 and 57% by 2035. Yet, current trajectories point towards a 3% increase in emissions.
The UK was an early leader, with the Prime Minister announcing at COP29 in November 2024, that the UK is committing to an at least 81% reduction in GHG emissions by 2035 relative to 1990 level – up from 78%. At the other end of the scale, the US President is requesting a withdrawal from the Paris Agreement, stepping away from the USA’s NDCs altogether.
While government commitments can feel removed from company action, they play an important role in building the climate landscape, offering signals of potential regulation that may be coming down the line. In this context, for some companies it will be necessary to get ahead of regulation, setting climate goals and acting now before it's mandated. For others it will be about doubling down, knowing that mitigating climate change is critical to future-proofing their business.
Article 6
COP29 in November 2024 marked a pivotal moment for international carbon markets. Article 6 rules were finalized following nearly a decade of debate, establishing a framework for countries to cooperate in reducing greenhouse gases - trading carbon credits to meet their NDCs.
- Article 6.2 involves two country governments – a buyer wishing to purchase credits (known as Internationally Transferred Mitigation Outcomes or ITMOs) to meet their nationally determined contributions (NDCs) and a host country where the activity happens. Although this market is currently nascent, there are a growing number of political agreements between buyers and host countries. Interest in A6.2 is expected to grow following the next generation of NDCs in the coming months.
- Article 6.4 – now called the Paris Agreement Crediting Mechanism (PACM) - is a centralized international carbon crediting mechanism. It has a UN Supervisory Body, responsible for developing and supervising the requirements and processes needed to operationalize it. Many are expecting PACM to be ready for new projects towards the middle/end of 2025, once methodologies have been approved. With a UN Supervisory Body stamp of approval, companies may consider purchasing PACM approved credits.
CORSIA takes off
In 2025, airlines from 128 volunteer states will participate in the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). A global scheme, it requires airlines to offset any growth in CO2 emissions above 2019-2020 levels by purchasing and retiring Eligible Emissions Units (EEUS) from approved carbon projects. CORSIA EEUs fall under Article 6.2 rules- they are Internationally Transferred Mitigation Outcomes (ITMOs), requiring authorisation by the host country.
Currently in Phase 1, it is forecasted that the industry will need between 65-160 million credits. The challenge, there are currently only seven million credits available – issued by Guyana under the Architecture for REDD+ Transactions (ART) standard.
The demand for high-quality EEUs is expected to increase significantly as airlines fulfil their offsetting obligations. With demand currently outstripping supply we can expect to see this impact the price of these credits in 2025.
Further demand may also come from industries outside of aviation who are looking to purchase high-quality CORSIA approved credits. Get in touch with our team if you would like to discuss how CORSIA may impact your business.
EU legislation - Empowering Consumers for the Green Transition Directive
The EU has introduced new Directives that aim to prevent greenwashing by making environmental claims about products and services more transparent and reliable.
The Empowering Consumers for the Green Transition Directive introduces restrictions on how companies can communicate the sustainability of products (climate claims), and is expected to come into force across EU countries in early 2026. This includes a ban on terms like ‘carbon neutrality’ or ‘compensation’ where carbon credits are involved.
A second piece of legislation, the Green Claims Directive, is due to enter trilogues in the EU in early 2025. It reinforces the decisions within the Empowering Consumers Directive, and extends to the requirement to substantiate and verify green claims. This includes broader claims made by organisations, beyond products.
Any companies that sell products or operate in the EU need to plan now, to ensure their communications and claims align with the new law.
Companies should prepare in 2025 by:
- Keeping abreast of the latest developments in the Directive's legislative process.
- Conducting a claim audit - reviewing all existing environmental claims to assess their compliance with the proposed requirements.
- Preparing for data collection - begin gathering the necessary data to support environmental claims, such as emissions data, and material sourcing information.
- Engage with experts - consult with legal and sustainability experts to understand the implications of the Directive
California Assembly Bill
California's Assembly Bill 1305 (AB 1305), also known as the Voluntary Carbon Market Disclosures Act (VCMDA), mandates that companies must disclose information about their use of carbon credits. It is designed to create great transparency around the role of carbon credits in achieving climate goals.
Companies that must comply include those operating within California that purchase or use carbon credits that make claims including carbon neutrality, net zero or achievement of significant reductions in GHG emissions.
Companies are required to:
- Publicly disclose details on their website about the carbon credit projects they have supported including project type, standard, and the protocol used to estimate emissions reduction or removal benefits
- Share details around how they have calculated their climate claim e.g. carbon neutral or net zero, and how they measure progress towards their targets
Companies can lean on the partners they work with to share key information to meet their reporting obligations.
ICVCM
The Integrity Council for the Voluntary Carbon Market was busy in 2024, reviewing and approving several methodologies for their "Core Carbon Principles” (CCP) label – their marker of high-quality. The latest, the approval of the VM0047 ARR (Afforestation, Reforestation and Revegetation) methodology, followed the approval of three REDD+ methodologies.
This year, we can expect to see the first wave of carbon credits issued under these approved methodologies come to the market. Demand for these credits is set to be high. This could lead to a differentiation in the market, with higher prices for ICVCM-labelled credits. If you are interested in purchasing CCP Labelled credits please let us know. We will keep you updated on progress and let you know when approved credits become available.
The ICVCM will continue to refine its methodologies and standards, address emerging issues, and respond to evolving market needs. The next announcement, due any day, will outline whether any clean cooking methodologies currently meet their CCP label requirements.
VCMI
On the other side of the coin, the Voluntary Carbon Markets Integrity initiative (VCMI) continued its work through 2024 following the release of its Carbon Integrity Claim and Claims Code of Practice which lays out a best practice framework for companies seeking to make a high quality claim regarding their use of carbon credits.
As it works on an additional Scope 3 claim, the VCMI’s focus will no doubt be to engage with the private sector and build the momentum behind its Carbon Integrity Claim to accelerate climate impact.
Looking ahead
2025 promises to be another year of dynamic change, with new regulations, evolving standards, and increasing demand for high-quality carbon credits.
We can help companies stay informed of these developments, assess their potential impacts, and adjust their strategies accordingly – enabling companies to embrace the opportunities by the growing carbon market.
For some companies it will be necessary to get ahead of regulation, setting climate goals and acting now before it's mandated. For others it will be about doubling down, knowing that mitigating climate change is critical to future-proofing their business.
