The Biden-Harris Administration (the Administration) today released the Voluntary Carbon Markets (VCM) Joint Policy Statement and Principles (the Principles), along with an accompanying fact sheet (the Fact Sheet). The Principles represent the U.S. government’s affirmation that high-integrity VCMs can and should play a meaningful role in reducing and removing global greenhouse gas (GHG) emissions and support the objective of global net-zero emissions by 2050. The Principles support the Administration’s commitment to ensuring VCMs effectively channel private capital into innovative technological and nature-based solutions, while also protecting natural ecosystems and supporting the U.S. and international partners in achieving their climate objectives.
The Principles follow other key U.S. climate-related legislation and policies, including the Inflation Reduction Act (see our earlier bulletin here), climate adaptation and resilience plans for federal agencies (see our earlier bulletin here), and the U.S. Department of the Treasury’s Principles for Net-Zero Financing and Investment, released last year, supporting the development and execution of strong net-zero commitments and transition plans by financial institutions, with a focus on Scope 3 financed and facilitated GHG emissions.
This bulletin briefly summarizes the Principles, their anticipated role in addressing climate change, and other ongoing U.S. government actions to support VCMs.
Principles for high-integrity VCMs. The Principles provide seven principles for high-integrity VCMs, drawing from existing best practices for credit certification standards, including the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), the G7’s Principles for High-Integrity Carbon Markets, the Commodity Futures Trading Commission’s proposed guidance regarding the listing of voluntary carbon credit derivative contracts (December 2023), the Integrity Council for Voluntary Carbon Markets (ICVCM) Core Carbon Principles (see our earlier bulletin here), and relevant decisions under Article 6 of the Paris Agreement. The Principles are as follows:
- Carbon credits and the activities that generate them should meet credible atmospheric integrity standards and represent real decarbonization.
- Credit-generating activities should avoid environmental and social harm and should, where applicable, support co-benefits and transparent and inclusive benefits-sharing.
- Corporate buyers that use credits should prioritize measurable emissions reductions within their own value chains.
- Credit users should publicly disclose the nature of purchased and retired credits.
- Public claims by credit users should accurately reflect the climate impact of retired credits and should only rely on credits that meet high integrity standards.
- Market participants should contribute to efforts that improve market integrity.
- Policymakers and market participants should facilitate efficient market participation and seek to lower transaction costs.
The role of high-quality VCMs in addressing climate change. The Fact Sheet outlines the important role of high-quality, high-integrity, and well-functioning VCMs in addressing climate change and delivering high-integrity credits, including by:
- delivering steady, reliable revenue streams to a range of decarbonization projects that scale up carbon removal;
- providing important co-benefits in the U.S. and internationally, including supporting economic development, sustaining livelihoods of Tribal Nations, Indigenous Peoples, and local communities, and conserving land and water resources and biodiversity; and
- advancing environmental justice and identifying and avoiding adverse impacts of credit-generating activities through the implementation of adequate safeguards.
Actions to develop VCMs. The Fact Sheet also sets out key U.S. actions to support the development of VCMs, including:
- Public input and opportunity for farmers and forest landowners. The Department of Agriculture (USDA) today published a Request for Information (RFI) seeking input relating to protocols used in VCMs, which will be used in implementing the Greenhouse Gas Technical Assistance Provider and Third-Party Verifier Program as part of the Growing Climate Solutions Act. This program aims to lower barriers to market participation and enable farmers, ranchers, and private forest landowners to participate in VCMs.
- Credit purchases and carbon dioxide removal (CDR) technology. The Department of Energy’s (DOE) Regional Direct Air Capture (DAC) Hubs program invests up to $3.5B from the Infrastructure Investment and Job Act (i.e., the Bipartisan Infrastructure Law) in demonstration projects that aim to help DAC technology achieve commercial viability at scale while delivering community benefits. The DOE also issued a notice of intent to launch a Voluntary CDR Purchase Challenge, which aims to catalyze CDR credit purchases and improve transparency of the CDR credit supply.
- International standards setting and market development. The Administration and the U.S. government are engaged in several efforts to support the development of high-integrity VCMs in international markets, including:
- the Energy Transition Accelerator, which is focused on sector-wide approaches to accelerate just energy transitions in developing markets;
- the LEAF Coalition, which the U.S. State Department helped found and continues to coordinate U.S. government participation;
- U.S. Agency for International Development (USAID) programs that offer financial aid and technical assistance to projects and programs seeking to generate carbon credits in developing markets, including the Acorn Carbon Fund, which mobilizes $100M to unlock access to carbon markets and build the climate resilience of smallholder farmers; and
- the Administration’s whole-of-government effort to enhance the government’s ability to measure and monitor GHG emissions, including the release of the first-ever National Strategy to Advance an Integrated U.S. Greenhouse Gas Measurement, Monitoring, and Information System.
Global support for the Principles. Key international VCM organizations also released statements announcing their support for the Principles, including:
- ICVCM, with ICVCM Chair, Annette Nazareth, stating that “the U.S. government supply side principles are aligned with the [ICVCM]’s Core Carbon Principles”;
- Voluntary Carbon Markets Integrity Initiative (VCMI), noting that the Principles “will help the VCM realize its full potential” and are aligned with and “fully compatible with VCMI’s Claims Code of Practice”; and
- the International Emissions Trading Association (IETA), stating the Principles “provide a significant boost to the credibility of a carefully designed VCM” and “closely complement” IETA’s Guidelines for High Integrity Use of Carbon Credits.
For further information or to discuss the contents of this bulletin, please contact Lisa DeMarco at lisa@resilientllp.com
