Biden Administration releases Statement of Principles to support development of a high-integrity voluntary carbon market

On May 28, 2024, the Biden Administration unveiled a Joint Statement of Policy and new Principles for Responsible Participation in Voluntary Carbon Markets (VCMs), co-signed by a number of senior Administration officials, including Treasury Secretary Janet Yellen, Agriculture Secretary Tom Vilsack, and Energy Secretary Jennifer Granholm.

The White House’s announcement of the statement reiterated President Joe Biden’s “commitment to restoring America’s climate leadership at home and abroad by recognizing the role that high-quality VCMs can play in amplifying climate action alongside, not in place of, other ambitious actions underway.”

The Biden Administration Principles (the Principles) outline values for high-integrity voluntary carbon markets (VCM), targeting it from supply, demand, and market-level perspectives. The Principles are as follows:

Supply integrity	Credit integrity: Activities that generate credits, and the credits themselves, should be certified to a robust standard, applying procedures that deliver on core integrity principles, such as additionality; uniqueness (ie, not double-issued); real and quantifiable atmospheric impact; validation of activity design and verification of results by a qualified, accredited, independent third party; permanent greenhouse gas benefits; and robust baselines. Credit certification standards bodies play an essential role in ensuring credit integrity. These bodies and their standards should: Effectively govern their standards to ensure transparency, accountability, and responsiveness (eg, to evolving best-practice, science, and policy landscapes) Operate or make use of a registry to transparently track the attributes, issuance, ownership, and retirement and/or cancellation of credits Ensure robust measuring, monitoring, reporting, and verification (MMRV) of emissions reductions and removals Have procedures in place to effectively address double-counting risks, including to prevent double-registration and issuance Require publicly available and accessible, comprehensive, and transparent information on crediting activities Ensure verification of reported emissions reductions and removals, and validation of the relevant project or program, is undertaken by independent, accredited third parties Ensure their governance procedures address real or perceived conflicts of interest in relation to the standards body’s own governance, and Support a robust enabling environment for equitable participation, including by projects and programs in developing countries. Climate and environmental justice: Credit-generating activities should avoid environmental and social harm and should, where applicable, support co-benefits and transparent and inclusive benefits-sharing.
Demand integrity	Credible credit use: Corporate buyers that use credits should prioritize measurable emissions reductions within their own value chains. Public disclosures: Credit users should publicly disclose the nature of purchased, canceled, and retired credits. High integrity standards: 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 integrity	Stakeholder collaboration: Market participants should collaborate and contribute to efforts that improve market integrity. Policymakers and market participation: Policymakers and market participant should facilitate efficient market participation and seek to lower transaction costs.

Consistency with, and support for, existing efforts to improve VCM quality

In releasing the Principles, the Biden Administration joins the Commodity Futures Trading Commission (CFTC), which released guidance on derivative contracts for carbon credits in December 2023, and non-governmental initiatives, such as the Oxford Offsetting Principles and the Integrity Council for the Voluntary Carbon Market (ICVCM), in seeking to develop quantity and integrity standards for the VCM. The Principles are broadly aligned with these efforts in substance as well, focusing on prioritization of direct reductions and within-value-chain mitigation, environmental integrity, and transparency and public disclosure.

One notable omission from the Principles is any reference to the transition from reduction/avoidance credits to removal credits, and the use of carbon offsets in the interim period before a net-zero target is reached.  In contrast, the Oxford Principles and the Science Based Targets initiative (SBTi) have called for the use of only durable removal credits for net-zero claims.

The Biden Administration's Principles are non-exhaustive and seek to elevate concepts already developed by civil society, international organizations, governments, and multilateral to further guide the development of carbon markets and ensure they contribute effectively to the goals of the Paris Agreement. As such, and because they are largely consistent with other initiatives, the Principles may not have a direct and specific impact on the VCM.  Rather, their impact is likely to consist of a more general rallying of support for the VCM as a tool to fight climate change and for corporations to address their climate impact.

Integration into the Biden Administration's climate policy

The new principles for a high-integrity carbon market are a strategic component of the Biden Administration's broader climate policy. They build on existing and ongoing efforts across the Biden Administration climate agenda, such as the Inflation Reduction Act, which includes significant investments in clean energy and climate resilience, and the Department of Energy's (DOE) grant program, which supports innovative technologies and infrastructure to reduce emissions.

The Biden Administration other initiatives to develop VCM include:

• Creating new climate opportunities for America’s farmers and forest landowners to participate in voluntary carbon markets
  
  
• Conducting first-of-its-kind credit purchases[1]
  
  
• Advancing innovation in carbon dioxide removal (CDR) technology
  
  
• Leading international standards setting that helps shape the quality of activities and credits that often find a home in VCMs


• Supporting international market development
  
  
• Providing clear guidance to financial institutions supporting the transition to net zero
  
  
• Enhancing measuring, monitoring, reporting, and verification (MMRV) by releasing the first-ever National Strategy to Advance an Integrated U.S. Greenhouse Gas Measurement, Monitoring, and Information System.
  
  
• Advancing market integrity and protecting against fraud and abuse,[2] and
  
  
• Taking a whole-of-government approach to coordinate action.

Endorsement of carbon markets and implications for the voluntary carbon market

VCMs have received heavy criticism after a series of media investigations suggested that the emissions reductions and climate benefits of carbon offsets are exaggerated, identifying instances of mismanagement of funds and human rights violations in several high-profile projects aimed at avoiding deforestation. At the same time, and based in part on these allegations, the very concept of companies using carbon credits as part of a net-zero or carbon neutral strategy has been labeled a form of greenwashing by some critics.  Further, in a few cases, companies have been sued by consumers or regulators over climate-related claims backed by offsets.

These developments have proven a significant headwind for the carbon offset market, leaving some to argue that carbon offsets are inherently flawed, while the majority of discourses revolve around the need for “high-integrity” offsets to support carbon emissions reduction, especially for residual emissions. The Biden Administration’s guidance aims to fill such gap by providing guidelines to categorize offsets as "high-integrity" when they result in genuine, additional, and measurable emissions reductions. By establishing principles for high-integrity carbon markets, the Administration is also signaling its belief in the potential of market-based mechanisms to drive meaningful progress on climate goals.

This endorsement could revitalize the voluntary carbon market by:

• Enhancing the credibility and appeal of carbon credits to potential buyers
  
  
• Encouraging innovation and investment in carbon reduction and removal projects, and
  
  
• Providing a clear policy signal that supports the growth and maturation of the market.

Key takeaways

These principles echo broader efforts to establish benchmarks within the VCM. However, like similar guidelines and initiatives, they provide overarching goals and direction rather than setting strict standards. Yet, the endorsement from the Biden Administration may suggest the development of more robust VCM standards in the future.

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