US Government unveils principles to boost trust in voluntary carbon markets

The US Government’s ‘Principles for Responsible Participation’ aim to address integrity concerns in voluntary carbon markets (VCMs) and enhance their potential to attract private capital for carbon reduction and removal projects.

These principles outline the criteria for the credibility and effectiveness of carbon credits within voluntary carbon markets, emphasising the importance of ensuring that carbon credits accurately represent genuine decarbonisation efforts while adhering to strict atmospheric integrity standards.

Additionally, the principles underscore the necessity for credit-generating activities to avoid causing environmental or social harm and to actively support co-benefits, transparency and inclusive benefit-sharing.

Corporate buyers are urged to prioritise measurable emissions reductions within their value chains, and public disclosure of purchased and retired credits is encouraged to promote transparency.

Furthermore, the principles stress the importance of accurately reflecting the climate impact of retired credits in public claims and only relying on credits that meet high integrity standards.

Market participants are encouraged to contribute to efforts aimed at enhancing market integrity, while policymakers and market stakeholders are urged to facilitate efficient market participation and reduce transaction costs.

Carbon credits controversy

If managed effectively, carbon credits can serve as powerful tools in advancing progress toward the goals outlined in the Paris Agreement, allowing companies to decrease and eliminate atmospheric carbon emissions from the hard-to-decarbonise aspects of their business operations.

Research suggests that companies engaged in the voluntary carbon market (VCM) are surpassing their counterparts in key areas of climate action, accountability and ambition, rather than simply using credits as a method to ‘buy their way out’.

However, the issue remains that are large portion of companies are investing in the bottom end of the markets, in things known as “junk” credits. Indeed, edie has its own feature on the issue here.

Persistent issues that may downgrade credits to ‘junk’ status involve double-counting, including activities that don’t genuinely reduce emissions or sequester carbon, and ensuring the correct ‘vintage’ of credits. ‘Vintage’ refers to the timeframe of emissions reduction or removal; planting a sapling today doesn’t immediately equate to the benefits of a decades-old tree.

Nevertheless, with net-zero targets now covering 91% of the global GDP, the demand for carbon offsets and voluntary carbon markets is anticipated to grow exponentially, underscoring the need for industry standards that ensure integrity and transparency.

Industry players have welcomed the announcement of the new principles, calling it “a positive, strong signal”, particularly as corporations seek to enhance their climate action.

Industry reaction:

Dirk Forrister, chief executive, IETA:

“This is the first time the Biden-Harris Administration has spoken so positively about the critical role of the voluntary carbon markets. It’s positive, it’s a strong signal – and it comes at a critical moment when corporates are ready to scale up their climate action and market engagement.

“We are delighted to welcome such a supportive approach from across the entirety of the US Government.”

Annette Nazareth, chair,  Integrity Council for the Voluntary Carbon Market (ICVCM):

“We welcome the announcement by the Biden-Harris Administration of high-integrity principles for voluntary carbon markets that can ensure carbon credits result in genuine reductions of greenhouse gas emissions.

“While companies’ first priority must always be to make rapid cuts to their own emissions, buying high-integrity credits allows them to go further and take responsibility today for emissions they cannot yet cut.

“We are in a climate emergency, and we need every tool in the box to meet the 1.5C target. High-integrity carbon credits can mobilise private finance at scale for projects to reduce and remove billions of tonnes of emissions that would not otherwise be viable. They can also channel significant climate finance to countries in the Global South.”

Allister Furey, chief executive and co-founder, Sylvera:

“The US Government’s announcement is a positive and pragmatic step to encourage companies to leverage the carbon market to direct more funding to effective climate solutions with real community benefits.

“Hopefully, other governments, standard bodies, and organisations will follow suit to recognise the power of the high-integrity carbon market, and take similar steps, because we’re running out of time.”