U.S. Issues Guidelines for Buying Carbon Offsets

"The Biden administration released a set of policies and principles to bolster trust in voluntary carbon markets.

The nonbinding guidelines, released Tuesday, signal the government's position that "high-integrity" voluntary carbon markets can play a role in reaching net-zero emissions globally.

"These markets have the potential to support significant decarbonization -- if we address some key challenges," Treasury Secretary Janet Yellen said. She added that corporate buyers should give priority to reducing their own emissions, and carbon-credit purchase can complement these efforts.

Companies purchase carbon offsets to reduce the overall climate impact of their activities. The offsets fund projects ranging from reforestation initiatives to high-tech carbon-removal devices.

Yet carbon offsets have fallen out of favor in recent years after a series of high-profile scandals and studies that found they have had limited impact and may be vulnerable to fraud. When the influential Science Based Targets initiative said it would allow companies to use carbon offsets as part of their net-zero strategies earlier this year, its own staff criticized the decision.

The $2 billion voluntary carbon market saw growth slow last year, according to BloombergNEF, as big companies like Nestle shied away from purchasing offsets.

Officials hope that establishing guardrails in the nascent industry will re-establish trust among corporate offset buyers, driving an influx of private capital that in turn can finance carbon-mitigation projects all over the world. "Credibility is literally the commodity," Energy Secretary Jennifer Granholm said.

Under the new guidelines, companies that use carbon offsets are asked to disclose details about their purchases so outside observers can judge for themselves whether the credits are trustworthy. These disclosures should happen in a "standardized manner that enables comparability" and occur at least once a year.

U.S. officials didn't endorse a particular set of standards, though executive directors from the Voluntary Carbon Markets Integrity Initiative and the Integrity Council for the Voluntary Carbon Market, which have established rules for buyers and sellers of carbon offsets, participated in the unveiling of the guidelines.

The U.S. is "sending a strong message to corporate buyers that they can participate with integrity in the market following these guidelines," said Lucy Hargreaves, vice president of corporate affairs and climate policy at Patch, a software platform that facilitates carbon-market transactions." [1]

1.  U.S. News: U.S. Issues Guidelines for Buying Carbon Offsets. Brown, H Claire.  Wall Street Journal, Eastern edition; New York, N.Y.. 30 May 2024: A.2.