Biden Administration Rolls Out Guidelines For Carbon Markets And Credits

Biden Administration Rolls Out Guidelines For Carbon Markets And Credits - Carbon Herald
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Earlier today three key departments and President Biden’s administration released a joint statement addressing the challenges and solutions facing the integrity and impact of voluntary carbon markets.

Signed by the Secretary of the Treasury Janet Yellen, Secretary of Energy Jennifer Granholm and Secretary of Agriculture Thomas Vilsack, the statement addresses a number of key issues which have been raised over the last year after high-profile investigations by The Guardian and Bloomberg, resulting in scepticism of the role of voluntary markets.

Chief among them is the actual impact of carbon projects and ensuring they remove carbon dioxide “beyond what would have otherwise occurred”. According to the factsheet accompanying the statement, more science-based and stringent requirements will be enforced on the supply side to guarantee its quality.

On the demand side there are also more guidelines aimed at corporates. Prioritizing emission reductions is front and center here, followed by requirements for publicly reporting on the use of credits as a tool to compensate for emissions that can’t be avoided.

This follows in the footsteps of the SEC which unveiled new rules for standardizing climate-related disclosures for companies on March 6th. According to them larger companies will have to report their Scope 1 and 2 emissions but requirements stopped short of disclosing Scope 3 from supply chains after pushback from business organizations. On March 15, 2024, a federal appellate court ruled that a judicial review is necessary and imposed a temporary stay on the requirements.

Aligning on principles

In the “Principles for Responsible Participation in Voluntary Carbon Markets (VCMs)” the statement focuses attention on key points related to additionality, the ability to measure and verify impact and credits, as well permanence and the use of reliable baselines.

Annette Nazareth, Chair of The Integrity Council for the Voluntary Carbon Market (ICVCM), commented on the announcement by saying: “The U.S. government’s supply side principles are aligned with the Integrity Council’s Core Carbon Principles, which establish the first independent global benchmark for high-integrity carbon credits.

A number of other governments and regulators have announced support for the CCPs or for high-integrity principles that are closely aligned with the CCPs including the UK government, the International Swaps and Derivatives Association, the Commodity Futures Trading Commission, and the Monetary Authority of Singapore.

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. Evidence shows this also spurs on their efforts to decarbonise their operations and supply chain.”

2024 saw some of the largest carbon credit programs like American Carbon Registry, ART, Climate Action Reserve, Gold Standard and VCS (operated by Verra) cover CCP requirements and can use it as a label for existing and new credits.

Allister Furey, CEO and cofounder of carbon data company Sylvera also commented: “The U.S. government’s announcement today 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, from protecting the natural environment to scaling emerging technologies like DAC. 

The carbon markets’ potential is clear but legacy integrity issues continue to hamstring it, as the announcement acknowledged. The US 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. Hopefully, other governments, standard bodies, and organizations will follow suit to recognize the power of the high-integrity carbon market, and take similar steps, because we’re running out of time.”

Focus on carbon market standards

The creation of robust standards is also among the priorities for the current administration. The global Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is mentioned as a positive example, as well as efforts to establish the G7’s Principles for High-Integrity Carbon Markets.

The U.S. involvement in designing a global carbon market Article 6.4 carbon crediting mechanism is also pointed out as a priority.

The latter, combined with U.S. efforts for the growth of international voluntary markets through initiatives like the LEAF Coalition and the Acorn Fund, could become some of the levers used to establish markets that span more than single countries and regions.

Carbon removal included

Programs related to carbon dioxide removal also received a share of the spotlight in the statement. The broad Inflation Reduction Act distributes funds through the 45Q tax credit and is aimed at carbon capture and removal.

More focused programs like the Regional Direct Air Capture Hubs (investing up to $3.5 billion) and the Carbon Negative Shot pilot initiative are also included, with the latter awarding $100 million in grants for small-scale projects that showcase and expand solutions such as biomass carbon removal and storage, as well as small mineralization efforts.

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