HomeCarbon CreditsUS Government Releases New Voluntary Carbon Credit Market Policy Guidelines

US Government Releases New Voluntary Carbon Credit Market Policy Guidelines

The Biden administration announced the release of the “Voluntary Carbon Markets Joint Policy Statement and Principles”, aiming to enhance and advance the market for carbon credits by establishing the US government’s guidelines to ensuring the high integrity of voluntary carbon markets (VCMs). 

This policy statement arrives as demand for carbon offset projects and related credits will surge. It’s primarily due to companies pursuing net zero goals and using offsets to complement their emissions reduction efforts or to balance unavoidable emissions. Notably, the Science Based Targets initiative (SBTi) recently indicated that carbon credits may be allowed in net zero targets to address Scope 3 emissions.

Despite the growth, the market faces significant integrity challenges. Participants struggle to differentiate between high and low-quality projects due to insufficient or inconsistent data on project effectiveness.

Announcing the new carbon credits guidelines, US Treasury Secretary Janet Yellen stated:

“Voluntary carbon markets can help unlock the power of private markets to reduce emissions, but that can only happen if we address significant existing challenges. The principles released today are an important step toward building high-integrity voluntary carbon markets. This is part of the Biden administration’s ambitious efforts to tackle the climate crisis and accelerate a clean energy transition that benefits all Americans.”

Here Are the Key Points of the Policy Guidelines:

  1. Certified Carbon Credits

Carbon credits and the activities that generate them must meet credible atmospheric integrity standards, representing real decarbonization. They should be certified to robust standards for design and MMRV (Measurement, Monitoring, Reporting, and Verification).

Core principles include additionality (activities wouldn’t occur without the crediting mechanism), uniqueness (one credit corresponds to one tonne of CO2 reduced or removed without double-issuance), and real, quantifiable emission reductions. Activities must prevent leakage and be validated and verified by an independent third party.

Permanence is essential, ensuring emissions stay out of the atmosphere for a specified period. More remarkably, robust baselines should avoid over-crediting and reflect advancements in climate policy and technology.

  1. Climate and Environmental Justice

Credit-generating activities should avoid environmental and social harm, supporting co-benefits and transparent, inclusive benefits-sharing. Understanding climate and environmental justice impacts is crucial, and developers should avoid negative externalities for local communities.

Safeguards must prevent adverse impacts on people and the environment, including land use, tenure rights, food security, and biodiversity. Continuous monitoring and mitigation of adverse impacts are necessary, with efforts to enhance positive impacts where possible.

Verified co-benefits, such as sustainable economic development and increased biodiversity, are encouraged. Projects should be designed and implemented in consultation with relevant stakeholders, respecting Free, Prior, and Informed Consent where applicable.

  1. Emissions Reductions Within Value Chains

Corporate buyers of credits should prioritize measurable emissions reductions within their own value chains. The use of credits involves purchasing and canceling or retiring them, and making public claims based on their climate impact. To achieve long-term climate goals, businesses must transform their models across economies.

Credit users should use VCMs to complement measurable within-value-chain emissions reductions as part of their net zero strategies. This includes taking inventory of Scope 1, 2, and 3 emissions, regularly reporting them, setting near-term emissions reduction targets, and adopting transition plans. Where feasible, companies should collaborate with their stakeholders to achieve these goals.

  1. Disclosure of Purchased and Retired Credits

Credit users should disclose purchased, canceled, or retired credits annually, providing details to assess their integrity and environmental and social impacts. This disclosure may exceed legal requirements and should be in a standardized, easily accessible format for comparability.

Users should consider reporting to aggregating resources that disseminate this information publicly, ensuring stakeholders can evaluate the credibility and impacts of the credits.

  1. Accurate Public Claims

Public claims by credit users must reflect the true climate impact of retired credits, using only high-integrity carbon credits. Claims should support ongoing incentives for within-value-chain emissions reductions and align with developing frameworks.

Credits should meet high integrity standards, avoiding claims based on reversed or failed credits unless remediated. Corporate climate strategies should prioritize within-value-chain reductions, using credible credits to complement efforts.

  1. Improving Market Integrity

Market participants should enhance market integrity by creating incentives for high-integrity carbon credits, improving transparency, and ensuring fair treatment of suppliers. Measures include preventing fraud, promoting global standards interoperability, and supporting equitable market participation.

Enhancing market functionality involves collaboration among private, public, and civil sectors, focusing on robust data, fair revenue distribution, and clear accounting practices to support the health of VCMs.

  1. Facilitating Efficient Market Participation

Policymakers and market participants should lower transaction costs and support credit providers, especially those in developing countries. Addressing barriers for suppliers can enhance VCMs’ ability to produce high-integrity credits.

Efforts should include using robust models to reduce MMRV costs and providing market certainty for long-term decarbonization investments. Supporting credible credit providers is crucial for advancing decarbonization and generating economic opportunities as part of the climate strategy.

The new US’ voluntary carbon credit guidelines was co-signed by senior administration officials, including 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.

Most Popular

Tesla Signs A Landmark Multi-Billion Dollar 15 GWh Megapack Deal

While Tesla's energy storage segment is smaller than its automotive business, it has been experiencing significant growth. This segment has rapidly accelerated and expanded...

Nickel Market in Turmoil: BHP to Halt Operations Due to Price Plunge

In recent developments within the global nickel market, the trajectory of prices has undergone a significant downturn. Consequently, nickel prices have plummeted from the highs...

HSBC Opens New Unit For Low-Carbon Finance, Alongside $1 Trillion Pledge

Global financial services group HSBC is launching a new business unit, HSBC Infrastructure Finance (HIF), to focus on infrastructure financing and project finance advisory...

Sungrow and Algihaz Join Forces for 7.8 GW Energy Storage in Saudi Arabia

Sungrow Power Supply, a Chinese photovoltaic inverter manufacturing giant recently announced to partner with Saudi Arabia’s Algihaz Holding for a massive energy storage project....

The Ultimate Guide to Understanding Carbon Credits

Everything you need to know about carbon credits, voluntary and compulsory carbon markets, and carbon investment...

Top 4 Carbon Stocks To Watch In 2024

Carbon stocks, credits and capture technology are getting a lot of interest from investors. Companies will attract even more capital in 2023.

What Is COP28? Key Issues to Watch Out at 2023 Climate Summit

After a record-breaking year of devastating effects of climate change, from record wildfires in Greece and Canada to floods in Libya, the United Nations...

Climate Disclosure: New Corporate Standards for a Net Zero World

As part of the world’s continued efforts to combat climate change and transition towards net zero, one important piece of the puzzle is new...