October 2024 VCM Updates: Section B
This article is an automatically translated version of the original Japanese article. Please refer to the Japanese version for the most accurate information.
This is a newsletter from Sustainacraft Inc. This article is Section B (Trends in Major Overseas Regulations) of VCM Updates (Voluntary Carbon Market Updates).
This article covers the following two topics:
- Verra: Decides to Cancel 5 Million Overissued Units from C-Quest Capital Cookstoves Project
- Verra: Update on Rimba Raya (VCS-674) Project
It was announced that C-Quest Capital, one of the world's largest Project Developers, will fully compensate for 5 million units of Carbon Credits that were allegedly intentionally overissued. While this matter is new negative news indicating quality risks in the Carbon Market, we believe that the users who have utilized (Retired / Cancelled) Credits generated from these projects should not be held responsible, provided that the figure of 5 million units has been calculated appropriately.
Regarding the Rimba Raya project, our May newsletter also reported that its concession license had been revoked by Indonesia's Ministry of Environment and Forestry (MOEF). In this article, we will provide an update on subsequent developments. While this specific issue is between InfiniteEarth, the Project Developer, and Carbon Streaming, the investor, the original trigger—the revocation of the concession license—is considered to represent a policy risk in Indonesia.
Issuance of Credits from Indonesia, where multiple large-scale projects are Registered, continues to be paused. However, there is a view that this moratorium will be lifted within the year, and we will be watching closely for any announcements from the Indonesian government during the upcoming COP29.
Verra: Decides to Cancel 5 Million Overissued Units from C-Quest Capital Cookstoves Project
Source: BusinessWire (2024.6.26), Verra's Announcement (2024.6.26), U.S. SEC's Announcement (2024.10.2), IC-VCM's Announcement (2024.10.3), Verra's Announcement (2024.10.17)
«Background»
C-Quest Capital (hereafter, CQC) is one of the world's largest Project Developers, developing projects in various countries primarily using the VCS Methodology VMR0006 (e.g., cookstoves).
U.S. federal prosecutors have charged Kenneth Newcombe, former CEO of C-Quest Capital LLC and a prominent figure in the Offset industry, with fraud for allegedly falsifying Emission Reduction data to secure millions of Carbon Credits and over $100 million in investments. Kenneth Newcombe founded C-Quest Capital in 2008 after working at institutions such as the World Bank and Goldman Sachs. He also served on Verra's board of directors from 2007 until December 2023.
According to the SEC's announcement, the charges are not about the overissuance of Credits itself, but rather for defrauding investors regarding CQC's past and future ability to generate Carbon Credits sustainably while profiting from the Issuance of overissued Credits during the sale of CQC shares. Ultimately, this led to a $250 million share sale in early 2023.
Following an internal investigation at CQC, Jules Kortenhorst was appointed as the new CEO in early February 2024. CQC then voluntarily reported the findings of its review to U.S. federal law enforcement agencies, regulatory bodies, and Verra. CQC announced that, pending the completion of Verra's review and subsequent Cancellation, it has provisionally transferred the potentially affected Credits to a separate account.
Moving forward, CQC is also considering obtaining the CCP label from IC-VCM to strengthen its internal governance. In response, IC-VCM stated that the evaluation of related cookstove Methodologies is ongoing and that it does not comment on ongoing evaluations.
Incidentally, multiple cookstove-related Methodologies are currently under CCP review, including CDM-based Methodologies, Verra's VMR0006, and Gold Standard Methodologies, but the review results have not yet been announced.
«This Announcement»