Biden Administration Unveils Guidelines for Carbon Credit Integrity

Biden administration unveils guidelines for carbon credit integrity

Posted by Rachel Frazin - 05/28/24 5:00 AM ET

The Biden administration on Tuesday announced new guidelines for ensuring the integrity of carbon credits or offsets.

While the practice of buying carbon offsets or credits is voluntary, the administration says it hopes to help ensure that credits being sold are actually credible.

Individuals, businesses and other entities can buy these credits to try to “offset” their emissions as part of an effort to achieve net-zero. This can entail things like paying organizations to plant trees or prevent them from being cut down.

But, markets for carbon credits have been plagued by issues including double counting. Questions have also been raised in some markets that preserve trees about whether they would have been cut down otherwise or how long they will be protected.

The guidelines issued by the Biden administration say that these credits should represent actual and additional reductions in carbon dioxide emissions. They should be permanent emissions reductions and be validated by an accredited and independent third party.

The administration also said that corporate purchasers should also make efforts to cut down their own direct emissions and publicly disclose the nature of their credits.

“These principles will help us counter glossy greenwash and other real risks in a nascent and voluntary market and, instead, catalyze mountains of capital to rigorously take on emissions and create good-paying jobs,” said National Climate Adviser Ali Zaidi in a written statement.

The principles put forward by the Biden administration Tuesday are largely in line with those put forward by non-profit entities like the Integrity Council for Voluntary Carbon Markets (IC-VCM).

Nat Keohane, president of the Center for Climate and Energy Solutions, said the White House’s backing gives a boost to such efforts.

“By the White House coming out with principles that are really aligned with the principles that the IC-VCM is implementing, I think that sends a very strong signal to the market that there is really weight behind and alignment behind what the integrity council is doing,” said Keohane, whose organization is affiliated with the IC-VCM.

In remarks at Bloomberg Philanthropies, Treasury Secretary Janet Yellen said the voluntary markets “should represent real emissions reductions or removals and there should be guardrails to avoid negative environmental and social impact and to support co-benefits like local economic development and biodiversity.”

In the past, Yellen added, “we’ve seen too many examples where credits failed to meet these criteria. We know this market can do better, and we’re committed to helping strengthen it.”

Zack Budryk contributed reporting.

Key Points:

• The Biden administration has issued new guidelines for ensuring the integrity of carbon credits.
• The guidelines say that carbon credits should represent actual and additional reductions in carbon dioxide emissions, should be permanent, and should be validated by an accredited and independent third party.
• The administration also said that corporate purchasers should also make efforts to cut down their own direct emissions and publicly disclose the nature of their credits.

What are carbon credits?

Carbon credits are a tradable permit that represents one ton of carbon dioxide or its equivalent. They are created when a project or activity reduces or removes greenhouse gas emissions. Carbon credits can be bought and sold on a carbon market.

The idea behind carbon credits is to create a financial incentive for businesses and individuals to reduce their greenhouse gas emissions. When a company buys carbon credits, it is essentially paying another company to reduce its emissions. This can help the company meet its own emissions reduction targets or offset its emissions entirely.

Carbon credits can be used to offset emissions from a variety of activities, including energy production, transportation, and industrial processes. They can also be used to fund projects that reduce emissions, such as planting trees or investing in renewable energy.

What are the benefits of carbon credits?

Carbon credits can provide a number of benefits, including:

Environmental benefits:

• Carbon credits can help to reduce greenhouse gas emissions and mitigate climate change.
• They can also help to improve air quality and public health.

Economic benefits:

• Carbon credits can create new jobs and stimulate economic growth.
• They can also help to reduce the cost of compliance with environmental regulations.

Social benefits:

• Carbon credits can help to promote sustainable development and reduce poverty.
• They can also help to protect ecosystems and biodiversity.

What are the challenges of carbon credits?

Carbon credits are not without their challenges, including:

Additionality:

It can be difficult to ensure that carbon credits represent real and additional emissions reductions. This is because it can be difficult to measure the emissions reductions that would have occurred without the carbon credit project.

Permanence:

Carbon credits can only be effective if the emissions reductions they represent are permanent. However, this can be difficult to ensure, especially in the case of projects that involve planting trees.

Double counting:

Carbon credits can be double counted if they are used to offset emissions in multiple jurisdictions. This can lead to an overestimation of the emissions reductions that are actually being achieved.

Fraud:

There have been cases of fraud in the carbon credit market. This can include selling fake carbon credits or misrepresenting the emissions reductions that have been achieved.

How can the challenges of carbon credits be overcome?

The challenges of carbon credits can be overcome by:

Establishing robust standards:

Rigorous standards can help to ensure that carbon credits represent real and additional emissions reductions.

Developing independent verification:

Independent verification can help to ensure that carbon credits are being issued and used properly.

Creating a transparent market:

A transparent market can help to reduce the risk of fraud and double counting.

Enforcing regulations:

Strong regulations can help to deter fraud and ensure that carbon credits are used for their intended purpose.

The Future of Carbon Credits

Carbon credits are a promising tool for reducing greenhouse gas emissions and mitigating climate change. However, the challenges of carbon credits need to be addressed in order to ensure that they are effective and credible.

The Biden administration’s new guidelines for carbon credit integrity are a step in the right direction. These guidelines will help to ensure that carbon credits are real, additional, permanent, and verifiable.

As the world moves towards a low-carbon future, carbon credits are likely to play an increasingly important role. By addressing the challenges of carbon credits, we can ensure that they are a valuable tool for fighting climate change.