The Clean Development Mechanism (CDM) and Joint Implementation (JI) standards provide rules for baselines, additionality, monitoring, reporting, verification, and certification of project-based emission reductions. CDM is created for projects in developing countries, while JI is intended for projects in developed countries. Projects intended to generate compliance credits (called Certified Emission Reductions or CERs) need to comply with the CDM/JI standard, governed by the Independent Executive Board of the United Nations Framework Conference on Climate Change (UNFCCC).
The CERs can also be bought for voluntary purposes. The certificates are recorded in an international registry system, with unique serial numbers, making each CER traceable to the project through which it was generated. The market credibility of these standards is high, but transaction costs are high as well, which limits adaptation to medium or large projects.
The Verified Carbon Standard was developed for exclusive use on the voluntary market. Designed by the Climate Group and the International Emissions Trading Association (IETA), it aims to create a new trading unit called a Voluntary Carbon Unit (VCU). Best practices from the existing market place were brought together, such as the additionality and baseline principles of the CDM, and the accounting principles of the GHG protocol for Project Accounting.
The CDM Gold Standard is built on the basis of the CDM standard, but includes an additional focus on sustainable development contribution and the Sustainable Development Goals (SDGs). The GS is operated by the Gold Standard Foundation, established in 2003 by a group of NGOs led by WWF. All approved projects are registered in the Gold Standard online registry, to ensure a transparent chain of ownership that does not allow double counting, carbon leakage and other credibility issues that need to be monitored to ensue credible & sustainable climate action.
The integrity of offsetting has become a big issue after reports of fraud and abuse involving the (compliance) carbon market. So it is crucial to ensure that offsetting actually provides the desired environmental benefits – also to avoid any reputational risk associated with the use of poor quality offsets. Several standards have been established to guarantee the quality of a certain offsetting credit. They can be subdivided in standards for the compliance market and standards for the voluntary market.