Treasury and other agencies issue voluntary carbon market rules

Excess carbon emissions from manufacturing, energy production and agriculture are driving climate change, which is expected to worsen without stronger interventions. The United States and other countries have adopted a goal of achieving “net zero” carbon emissions by 2050.

To achieve this goal, a small portion of U.S. businesses have set their own goals to reduce or eliminate greenhouse gas emissions by a specific time. Some participate in the voluntary carbon market (VCM) to meet their emissions reduction goals.

In VCM, a company receives a credit for every tonne of carbon dioxide emissions it reduces. Businesses can buy and sell credits that match their carbon reduction needs.

However, according to a Treasury press release, VCMs are being inundated with greenhouse gas emission reduction projects that “fail to deliver the promised positive climate impacts.” As a result, companies avoided VCM.

The goal of the agency’s joint policy statement is to make VCM more fair and ultimately encourage more companies to participate, Treasury said.

The 12-page statement urges companies to have procedures in place to prevent the risks of double counting, double registration, double issuance and double selling of credits, and to start with accurate baseline measurement.

The announcement follows efforts by other federal agencies to provide VCM guidance for their regulated industries. In December, the Commodity Futures Trading Commission proposed guidelines for the listing of voluntary carbon credit derivative contracts.

The policy was the responsibility of the White House and was released by Treasury Secretary Janet Yellen, National Economic Advisor Lael Brainard, Secretary of Energy Jennifer Granholm, Secretary of Agriculture Tom Vilsack, National Climate Advisor Ali Zaidi and Senior Advisor for International Climate Policy John Podesta.

“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,” Yellen said in a Treasury news release. “The principles published today are an important step towards building high-integrity voluntary carbon markets. This is part of the Biden administration’s ambitious effort to address the climate crisis and accelerate the clean energy transition for the benefit of all Americans.”