The US government unveils new rules for voluntary carbon markets

The U.S. government on Tuesday unveiled rules governing the use of voluntary carbon credits, seeking to boost confidence in the nascent market after some high-profile offset projects failed to deliver promised emissions reductions. The heads of the Departments of Treasury, Energy and Agriculture, as well as President Joe Biden’s top climate and economic advisers, announced a joint statement of policies and principles to guide participation in voluntary carbon markets as part of a broader effort to support their development.

“Voluntary carbon markets can help unleash the power of private markets to reduce emissions, but this will only be possible if we address the significant challenges that exist,” said Treasury Secretary Janet Yellen. “The principles published today are an important step towards building voluntary carbon markets with high fairness.”

Many companies “offset” their own greenhouse gas emissions by purchasing voluntary carbon credits, which mean emissions are avoided or removed through projects mainly in developing countries. However, a series of high-profile controversies have shaken confidence in the carbon offset market, and several large companies buying carbon credits have withdrawn from the market as recent studies have shown that several large forest conservation projects have failed to achieve promised emissions reductions.

Voluntary carbon markets contracted last year for the first time in at least seven years. Principles for “responsible participation” in offset markets outlined by U.S. officials on Tuesday include rigorous standards to ensure projects will result in real and measurable emissions reductions, monitoring to ensure projects do not harm local communities and that corporate buyers prioritize decarbonizing their own supply chains before opting for loans.

The US move to ensure “fairness” in voluntary carbon markets comes as several organizations, such as the Integrity Council on Voluntary Carbon Markets (ICVCM), have begun publishing rules for defining high-quality offsets. ICVCM Board Chair Annette Nazareth said the new rules are in line with her own Core Carbon Principles, which are emerging as the first independent global benchmark for high integrity carbon credits.

“We are facing a climate crisis and we need all the tools at our disposal to achieve the 1.5°C target,” she said. “Highly fair carbon credits can mobilize large-scale private financing for projects to reduce and remove billions of tons of emissions that would otherwise not be viable.” WWF senior vice president for climate change Marcene Mitchell said carbon credits “have the potential to unlock significant investment in a range of climate solutions” but “evidence-based science and guidance” is needed to enable companies to transform their own operations and value chains .

Last year, the Department of Energy announced it would buy credits for projects to remove carbon dioxide from the air to improve the technology. The Department of Agriculture has also created a program to help farmers, ranchers and forest owners participate in carbon markets by helping them identify highly fair carbon offset programs to generate carbon credits.

Meanwhile, the State Department has established the Energy Transition Accelerator, a carbon offsetting program aimed at helping developing countries transition away from coal, and the LEAF coalition, which aims to halt deforestation in tropical areas.

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