How Does the Draft Nordic Code Complement Other Guidance on Voluntary Compensation?

This year, numerous actors are publishing guidance for voluntary compensation of GHG emissions, including the Voluntary Carbon Markets Integrity Initiative, the Nordic Dialogue on Voluntary Compensation and the Gold Standard. Important commonalities and noteworthy differences are highlighted below.

In early June, the draft Nordic Code of Best Practice for Voluntary Compensation was published for consultation under the Nordic Dialogue on Voluntary Compensation. In the same week, the provisional Voluntary Carbon Markets Integrity Initiative’s (VCMI) Claims Code of Practice was also published for consultation, and the Gold Standard published its revised Claims Guidelines.

Commonalities: Ambition, Quality and Safeguards

There are important commonalities between these guidelines, which reinforce widely accepted principles such as prioritising mitigation inside an organisation’s value chain (“internal mitigation”), ensuring environmental integrity and promoting transparency. All require setting targets and reducing an organisation’s direct and indirect value chain emissions in line with the global goal to limit warming to 1.5 degrees and using voluntary compensation only to complement, not to substitute, this internal mitigation. They all recognise that non-state actors can contribute to the collective global effort to reach net zero emissions by voluntarily using high-quality carbon credits. The use of carbon credits enables actors to support additional mitigation beyond their value chains and make related claims.

Both the Nordic and VCMI Codes require calculating direct and indirect emissions and providing publicly available information about the organisation’s targets and action plans. They also require providing information on how carbon credits are used and what claims are made. Recognised standards and third-party verification should be used for targets, emissions data and carbon credits. Moreover, the Nordic and VCMI Codes and the Gold Standard Guidelines all require respecting human rights and the rights of Indigenous Peoples and local communities. They also require applying safeguards to avoid negative social and environmental impacts, and encourage the demonstration of sustainable development co-benefits. The Gold Standard provides specific guidance and tools on these aspects.

Table 1: Comparision of selected Guidance

Differences: Approach to Claims to Avoid Double Claiming

The guidelines have different, albeit potentially compatible, approaches to defining claims related to the use of carbon credits.

The VCMI Code, for example, differentiates claims based on companies’ progress towards their internal mitigation targets and the extent to which companies address their unabated emissions with high-quality carbon credits.

The Nordic Code and the Gold Standard, on the other hand, differentiate claims based on whether the mitigation associated with the carbon credits contribute towards or beyond existing national targets. Mitigation towards existing targets can be used for supporting collective efforts to meet national targets and making related “contribution/impact” claims, while mitigation beyond existing targets can be used for counterbalancing specific emissions and making related “offsetting” (including carbon neutrality) claims.

In general, mitigation counts towards existing targets if it is within the scope of a target and reflected in the national greenhouse gas inventory. The host country can exclude such mitigation from its target by applying so-called corresponding adjustments to its emissions balance. This would make the mitigation available for other purposes, such as offsetting claims. For more information, see the Nordic Report on voluntary compensation.

VCMI allows both types of carbon credits (i.e., those counted towards vs beyond national targets) to be used for the claims included in the VCMI Code. VCMI requires companies to publicly communicate whether the mitigation outcomes associated with the carbon credits may also count towards the host country’s target. Going forward, the VCMI will analyse “the potential impacts and implications of including carbon credits associated with corresponding adjustments within voluntary carbon market transactions”.

Unlike the VCMI, the terminology of the Nordic Code differentiates between “national mitigation contribution” claims (based on mitigation contributing to national targets) and “offsetting” claims (based on mitigation beyond national targets). The Nordic Code also includes a claim about “overall mitigation in global emissions” to support mitigation beyond existing targets without counterbalancing any specific emissions.

Figure 1: Nordic Code: Claims

Another difference between the Nordic and VCMI Codes relates to their intended purpose. The Nordic Code focuses on aspirational principles of what constitutes best practice in voluntary compensation, synthesising the most ambitious requirements and recommendations for voluntary compensation. It is designed to apply also to other types of non-state actors besides companies. By contrast, the VCMI Code focuses on claims made by companies, and aims to operationalise a suite of claims that ensure that companies do not use carbon credits to substitute science-aligned emission reductions in their value chains.

Open for Comments

The draft Nordic Code has been developed under the Nordic Dialogue on Voluntary Compensation in cooperation with Nordic stakeholders. Nordic actors are invited to comment on the draft Code through an online questionnaire, with the deadline for submissions extended until 20 August 2022, due to popular request. The VCMI Claims Code is open for public consultation until 12 August 2022.

Coordination to Promote Alignment

After the consultation period, the Nordic Code will be finalised, taking into account feedback from Nordic stakeholders as well as the latest national and international developments. The final Code will be published in Q4 2022, alongside an action plan that identifies existing and emerging guidance as well as opportunities for Nordic cooperation to support the implementation of the Nordic Code in practice.

The Nordic Dialogue on Voluntary Compensation will continue to cooperate with VCMI and other relevant international and national processes with the aim to promote alignment and complementarity of efforts.

About the Nordic Dialogue on Voluntary Compensation

The Nordic Dialogue on Voluntary Compensation was launched in June 2021 to help Nordic stakeholders to navigate the fast-evolving landscape of guidance and initiatives relating to voluntary compensation, and to complement and contribute to them with Nordic perspectives. The Dialogue brings Nordic actors together to co-create a robust and coherent Nordic approach to voluntary compensation of emissions in line with the long-term goals of the Paris Agreement and the United Nations Sustainable Development Goals.

The Nordic Dialogue on Voluntary Compensation is managed by Perspectives Climate Research and facilitated by an international team of leading climate experts from Perspectives, IVL Swedish Environmental Research Institute, Carbon Limits, and Tyrsky Consulting. It is funded by the Nordic Council of Ministers’ Working Groups for Climate and Air (NKL) and Environment and Economy (NME).

For more information on the activities of and opportunities to participate in the Nordic Dialogue on Voluntary Compensation, follow us on Twitter (@Nordic_Dialogue, #nordicdialogue) and read our Q&A.

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