Biden Administration Announces Principles to Advance Voluntary Carbon Markets

The Biden administration on May 28 announced a policy statement and new principles to develop high-integrity voluntary carbon markets, or VCMs, that can unlock private capital to drive decarbonization efforts. The move is intended to support the responsible development of VCMs with “guardrails in place,” so that the market is equipped to spur credible climate action and generate economic opportunity.

The new action aims to strengthen the market for carbon credits and enable VCMs to deliver on their potential. In announcing the release, the White House underscored the need for action to help VCMs achieve their potential, noting that “observers have found evidence that several popular crediting methodologies do not reliably produce the decarbonization outcomes they claim.” As credits do not fulfill the high standards necessary to ensure transparency and certainty that they deliver verifiable decarbonization, there is a need to address challenges that have emerged and restore market confidence. Achieving this objective requires robust standards for carbon credit supply and demand, enhanced market functioning, fair and equitable treatment of participants and advancing environmental justice, and fair distribution of revenue.

VCMs are markets in which carbon credits are traded by companies, non-governmental organizations, governments, and others on a voluntary basis. Apart from the ability to drive decarbonization efforts, VCMs can generated economic opportunity for many including farmers, ranchers, and small suppliers.

The White House announcement highlights the many initiatives that the administration is pursuing to advance responsible development of VCMs. These include the U.S. Energy Department’s direct carbon removal purchases and the buildout of market infrastructure and support by the U.S. Agriculture Department. The State Department has helped found and continues to coordinate U.S. participation in the LEAF Coalition, which is the largest public-private VCM effort that involves jurisdictional-scale approaches to help stop tropical deforestation. Further, the Treasury Department has released guidance for financial institutions supporting the transition to net zero, and plans to host a dialogue later this year on speeding up the deployment of transition finance as well as a forum on further improving market integrity in VCMs.

The “Joint Statement of Policy and New Principles for Responsible Participation in Voluntary Carbon Markets” was issued by 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.

With new policy and principles to govern the use of carbon credits, VCMs are expected to fulfill their intended purpose to drive private capital toward innovative technological and nature-based solutions and support the collective efforts of the U.S. and its international partners in meeting ambitious climate goals.