US President Joe Biden’s administration on May 28 took steps to improve the integrity of voluntary carbon markets. The Biden-Harris Administration is today releasing a Joint Statement of Policy and new Principles for Responsible Participation in Voluntary CarbonMarkets (VCMs)that codify the U.S. government’s approach to advance high-integrity VCMs. The principles and statement, co-signed by Treasury Secretary Janet Yellen, Agriculture Secretary Tom Vilsack, Energy Secretary Jennifer Granholm, Senior Advisor for International Climate Policy John Podesta, National Economic Advisor Lael Brainard, and National Climate Advisor Ali Zaidi, represent the U.S. government’s commitment to advancing the responsible development of VCMs, with clear incentives and guardrails in place to ensure that this market drives ambitious and credible climate action and generates economic opportunity.
The President’s Investing in America agenda has crowded in a historic surge of private capital to take advantage of the generational investments in the Inflation Reduction Act and Bipartisan Infrastructure Law. High-integrity VCMs have the power to further crowd in private capital and reliably fund diverse organizations at home and abroad –whether climate technology companies, small businesses, farmers, or entrepreneurs –that are developing and deploying projects to reduce carbon emissions and remove carbon from the atmosphere.
However, further steps are needed to strengthen this market and enable VCMs to deliver on their potential. Observers have found evidence that several popular crediting methodologies do not reliably produce the decarbonization outcomes they claim. In too many instances, credits do not live up to the high standards necessary for market participants to transact transparently and with certainty that credit purchases will deliver verifiable decarbonization. As a result, additional action is needed to rectify challenges that have emerged, restore confidence to the market, and ensure that VCMs live up to their potential to drive climate ambition and deliver on their decarbonization promise. This includes: establishing robust standards for carbon credit supply and demand; improving market functioning; ensuring fair and equitable treatment of all participants and advancing environmental justice, including fair distribution of revenue; and instilling market confidence.
The Administration’s Principles for Responsible Participation announced today deliver on this need for action to help VCMs achieve their potential. These principles include:
- Carbon credits and the activities that generate them should meet credible atmospheric integrity standards and represent real decarbonization.
- Credit-generating activities should avoid environmental and social harm and should, where applicable, support co-benefits and transparent and inclusive benefits-sharing.
- Corporate buyers that use credits should prioritize measurable emissions reductions within their own value chains.
- Credit users should publicly disclose the nature of purchased and retired credits.
- Public claims by credit users should accurately reflect the climate impact of retired credits and should only rely on credits that meet high integrity standards.
- Market participants should contribute to efforts that improve market integrity.
- Policymakers and market participants should facilitate efficient market participation and seek to lower transaction costs.
The Role of High-Quality Voluntary Carbon Markets in Addressing Climate Change
Today’s release of the Principles for Responsible Participation in Voluntary Carbon Markets furthers the President’s commitment to restoring America’s climate leadership at home and abroad by recognizing the role that high- quality VCMs can play in amplifying climate action alongside, not in place of, other ambitious actions underway.
High-integrity, well-functioning VCMs can accelerate decarbonization in several ways. VCMs can deliver steady, reliable revenue streams to a range of decarbonization projects, programs, and practices, including nature-based solutions and innovative climate technologies that scale up carbon removal. VCMs can also deliver important co-benefits both here at home and abroad, including supporting economic development, sustaining livelihoods of Tribal Nations, Indigenous Peoples, and local communities, and conserving land and water resources and biodiversity. Credit-generating activities should also put in place safeguards to identify and avoid potential adverse impacts and advance environmental justice.
To deliver on these benefits, VCMs must consistently deliver high-integrity carbon credits that represent real, additional, lasting, unique, and independently verified emissions reductions or removals. Put simply, stakeholders must be certain that one credit truly represents one tonne of carbon dioxide (or its equivalent) reduced or removed from the atmosphere, beyond what would have otherwise occurred.
In addition, there must be a high level of “demand integrity” in these markets. Credit buyers should support their purchases with credible, scientifically sound claims regarding their use of credits. Purchasers and users should prioritize measurable and feasible emissions reductions within their own value chains and should not prioritize credit price and quantity at the expense of quality or engage in “greenwashing” that undercuts the decarbonization impact of VCMs. The use of credits should complement, not replace, measurable within-value-chain emissions reductions.
VCMs have reached an inflection point. The Biden-Harris Administration believes that VCMs can drive significant progress toward our climate goals if action is taken to support robust markets undergirded by high-integrity supply and demand. With these high standards in place, corporate buyers and others will be able to channel significant, necessary financial resources to combat climate change through VCMs. A need has emerged for leadership to guide the development of VCMs toward high-quality and high-efficacy decarbonization actions.
