Permanence in the VCM: Experts’ Proposals to Guide the ICVCM

On May 21, the ICVCM’s CIWP (Continuous Improvement Work Program), a group of leading experts in the voluntary offset market, published its first report addressing the issue of permanence within the VCM. The group, launched in July 2023 alongside the ICVCM's CCP, was created to evolve, harmonise, standardise, and modernise the supply of high-integrity carbon credits. 

Permanence, the central concept addressed in the report, refers to the requirement that carbon removed or reduced through an offset project remains out of the atmosphere for a sufficient duration to effectively mitigate the climate impact of CO₂ emissions. In other words, it aims to reduce reversal risk: the re-release of greenhouse gases, which would undermine the purpose of carbon offsetting. These risks can be human-induced (e.g., an afforestation project converted to cropland) or nature-induced (e.g., an afforestation project destroyed by wildfire).

In recent years, permanence has become a critical concern in carbon offsetting, particularly with the increasing frequency and severity of wildfires often causing significant reversals in nature-based solutions (NbS). In response to these concerns, Verra released a Digital Non-Permanence Risk Tool and is currently developing a new Methodology for Avoided Forest Conversion from Decreased Wildfire.

To address these permanence concerns within the VCM, the CIWP’s report focuses on six possible improvements in the ICVCM’s Assessment Framework and broader VCM market: the monitoring and compensation periods, the buffer pool (a percentage of credits set aside to compensate if a reversal were to happen) and their requirements, the reversal risk assessment tools and procedures, the insurance products and mechanisms, and novel approaches to managing permanence and reversal risk.

Current Approach to Permanence in the ICVCM’s CCP Assessment Framework

Permanence is one of the ten Core Carbon Principles (CCP) of the ICVCM, aimed at ensuring the genuine climate impact of carbon credits. To be CCP-eligible, projects must meet specific permanence criteria outlined in the ICVCM’s Assessment Framework.

Under the Permanence CCP, project categories must comply with CORSIA-related permanence requirements, along with additional provisions based on the assessed reversal risk. For categories where material risk is present, projects must include a monitoring and compensation period of at least forty years, starting from the initial crediting period or extending to the end of the crediting period, whichever occurs later. Additionally, the carbon-crediting program must cancel a carbon credit for each tonne of CO₂ equivalent that is reversed, or require project proponents to do so. Projects must estimate reversal risk, and maintain a pooled buffer reserve proportionate to this risk, or at minimum, 20% of the total carbon credits issued from the mitigation activity.

Continuous Improvement Work Program report: Permanence

The ICVCM’s CIWP report on permanence outlines three categories of recommendations: proposed changes to the Assessment Framework, actions the ICVCM should undertake, and options to explore further.

Proposed changes to the ICVCM’s Assessment Framework

• Recommendation 1: The next refinement of the ICVCM’s Assessment Framework should include a definition of what is an avoidable and unavoidable reversal. Although Section 9.4 of the framework currently discusses measures taken against reversals, no standard definition is mentioned, requiring carbon crediting programs to define and apply the criteria. As an example, Verra states that unavoidable reversals are reversals where the project proponent has no control (natural disasters etc.), whereas CAR considers reversals unavoidable unless caused by gross negligence or willful misconduct. While similar, these differing interpretations can result in inconsistent risk management practices.
  
  
• Recommendation 2: The next refinement of the Assessment Framework should clarify that cessation of monitoring and verification should result in a compensation liability equivalent to the amount of credits that a project previously contributed to a pooled buffer reserve. Without monitoring, reversals cannot be quantified; thus, the entire buffer pool contribution should be cancelled to reflect a worst-case scenario.

Proposed actions for the ICVCM to take

• Recommendation 3: The ICVCM should pilot stress testing for pooled buffer reserves, and, based on the results of the pilot, consider whether and how to incorporate mandatory stress testing into the Assessment Framework. Stress testing at a minimum should be conducted every five years, which is aligned to the validation and verification cycle for enrolled projects. These tests would simulate worst-case scenarios and evaluate buffer pool resilience. The ICVCM should also develop stress-testing protocols in collaboration with crediting programs and industry experts.
  
  
• Recommendation 4: The ICVCM should provide guidance on the types of risks addressed and acceptable data sources used in project-level risk assessments conducted by carbon crediting programs. Currently, buffer pool contributions vary due to differing risk assessment methodologies. The CIWP recommends standardizing these processes to improve consistency across programs.

Options that the ICVCM should explore further

• Recommendation 5: The ICVCM should explore options for extending the 40-year monitoring and compensation period tied to the beginning of the project crediting period in a way that distributes liability amongst other market participants and allows for the use of novel compensation mechanisms. In other words, each credit issued would have a 40-year required monitoring period (instead of the 40-year period starting when the project starts issuing credits). This would provide a stronger long-term incentive for projects to prevent reversals.
  
  
• Recommendation 6: The ICVCM should explore the creation of an innovation sandbox that could be used to pilot new, innovative changes to CCP-Approved methodologies while retaining the CCP-Approval. This would enable rapid experimentation and learning, while maintaining CCP approval status. The sandbox could be used to test and refine the recommendations put forth in this report.

The report strongly advocates for standardized risk management across the VCM, including uniform definitions of reversals and consistent risk assessment methodologies. It also emphasizes the need for enhanced buffer pool governance—such as cancellation of buffer contributions when monitoring ends and mandatory stress testing—and proposes shifting to an issuance-based monitoring framework.

While the ICVCM is not obligated to adopt the CIWP’s recommendations, the report is set to inform further development of the ICVCM regarding permanence. These innovations aim to reinforce environmental integrity, align with evolving regulatory landscapes, and minimize moral hazard and conflicts of interest. Ultimately, they seek to restore stakeholder confidence in the VCM.

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