Dive Brief:
- The Biden-Harris Administration released a joint statement and list of seven principles for “responsible participation in voluntary carbon markets,” codifying the government’s philosophy on carbon credits’ role in fighting climate change.
- The administration’s principles center around utilizing carbon credits as a complementary decarbonization tool; ensuring credits meet credible standards; and transparently disclosing any used credits. The principles also call on both market participants and policymakers to work to increase market integrity and efficiency and lower transaction costs.
- After the effectiveness of several high-profile carbon credit purchases were questioned last year, the policy statement co-signed by the Agriculture Secretary and five other administration officials responsible for energy, climate and economic policy said the integrity of the carbon credits market is “paramount.”
Dive Insight:
The policy statement acknowledges that despite the potential for carbon markets and carbon credit use to grow in alignment with decarbonization goals, popular carbon credit methodologies have been found to not produce the outcomes they claim.
The issues identified by the administration are many of the same concerns the voluntary market has faced for years, but also highlights government carbon market initiatives corporations should be aware of, Morgan Lewis partners Levi McAllister and Pamela Wu said in an emailed statement to ESG Dive. The energy lawyers said the use of carbon credits to reach net-zero emissions will continue to be scrutinized, not only by regulators but also by investors and the public at large.
“Not only have concerns been raised about the quality of the carbon credits that have been used to offset emissions, but concerns have also been raised on the use of carbon credits to offset emissions that could be mitigated or reduced by the corporations without having to turn to carbon credits,” McAllister and Wu said in a joint statement.
Ultimately, Biden administration officials said the question of how to ensure voluntary carbon markets “genuinely drive additional decarbonization action” and “does not simply shift emissions elsewhere” must be answered.
“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,” the administration’s statement said.
The joint policy statement was 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.
The officials said clear rules of the road are required to allow carbon credits to become a true complementary decarbonization tool — alongside corporations prioritizing reducing their own operational emissions — to address things like scope 3, or supply chain emissions.
The joint statement comes as the U.S. Department of Agriculture requests input on what should be considered for inclusion in its Greenhouse Gas Technical Assistance Provider and Third-Party Verifier Program, which aims to facilitate farmer participation in carbon markets by creating a list of qualified providers and commonly acceptable practices.
Allister Furey, CEO and co-founder of carbon data platform Sylvera, called the announcement a “pragmatic step” by the administration that should “encourage companies to leverage the carbon market to direct more funding to effective climate solutions with real community benefits.”
“The carbon markets’ potential is clear but legacy integrity issues continue to hamstring it, as the announcement acknowledged,” Furey said in an emailed statement to ESG Dive. “The U.S. government’s support for immediate reforms should complement the initiatives, standards and tools that have emerged to uplift market integrity over the past several years and provide positive reinforcement for continued efforts.”
Carbon planning and analysis platform Clarasight CEO Adam Braun reiterated in an emailed insight to ESG Dive both the need to develop “high-integrity” carbon markets and the importance of corporations’ prioritizing their own emissions reductions first.
“Carbon credits should be a complementary, secondary strategy to your core operational reductions,” Braun said. “As companies are held accountable to purchasing high quality credits with meaningful costs, we’ll see an increased commitment to real emissions reduction efforts by companies as well as investment in the projects that produce the most beneficial environmental and societal outcomes.”
Sarah Zimmerman contributed to this story.