US government backs the carbon credit industry’s push to fix itself

The Biden administration throws its weight behind the industry’s attempts to boost integrity in the beleaguered market

US government backs the carbon credit industry's push to fix itself

President Joe Biden speaks at an Earth Day event on April 22, 2024 in Triangle, VA. (Photo by Samuel Corum/Sipa USA)


The US government is seeking to bolster support for carbon offsets by putting its weight behind industry-led efforts to reform a market that has faced growing criticism. 

The Biden administration has laid out for the first time a set of principles that attempt to define how “high-integrity” carbon credits can play “a meaningful role” in helping cut greenhouse gas emissions and channelling “a significant amount of private capital” to combat climate change.

A 12-page policy document released by the US government on Tuesday includes provisions to ensure that carbon credit projects deliver real emission reductions, avoid harming local communities and encourage companies to decarbonise their own operations before buying offsets.

But it also recommends that businesses should be allowed to use carbon credits to cancel out some of the emissions generated by their suppliers and customers, known as “Scope 3”. A similar move by the board of the Science Based Targets initiative (SBTi), a leading arbiter of corporate net zero plans, sparked a major backlash from staff last month.

The US government guidelines are neither binding nor enforceable. However, proponents hope they will reinforce a number of ongoing initiatives led by carbon credit developers, buyers and green groups to raise standards and boost the role of carbon markets in climate and nature protection.

Troubled market

Polluting companies, including major fossil fuel producers and airlines, spent an estimated $1.7 billion last year on voluntary carbon offsets meant to compensate their direct emissions by funding climate-friendly activities elsewhere, such as planting trees or rolling out renewable energy sources.  

But a series of revelations questioning the environmental and social benefits claimed by some developers and users of carbon credits have dented confidence in the market.

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Scientific studies and investigative reports – including by Climate Home – have found that a growing number of projects failed to deliver the emission reductions promised. NGOs have also denounced instances of human rights abuse and environmental damage caused by carbon-offsetting activities.

“Voluntary carbon markets are a huge distraction and a waste of time and resources,” said Mohamed Adow, the Nairobi-based founder of the Power Shift Africa think-tank. “It’s sad to see politicians in the Global North desperately trying to find any way they can to avoid actually just cutting their carbon emissions,” he added.

Every tool needed

In its announcement, the US government acknowledged the shortcomings in voluntary carbon markets (VCMs), saying that “in too many instances” credits do not live up to the high standards required.

“For good reasons a lot of folks outside this room are skeptical,” National Climate Advisor Ali Zaidi told attendees at the policy launch in Washington. “[They are] scared off by news stories of things that went wrong and gloss of greenwash.”

US National Climate Advisor Ali Zaidi speaks during a press briefing at the White House in Washington, U.S., January 26, 2024. REUTERS/Julia Nikhinson

But, he added, that should not be seen as “an excuse to slow down but as an occasion to speed up” and do things better.

The Biden administration wants to be a leader in guiding “the development of VCMs toward high-quality and high-efficacy decarbonization actions”, the White House said. Its principles closely align with those of industry-led governance bodies that are trying to revamp the carbon market.

The Integrity Council for the Voluntary Carbon Market (ICVCM) is currently assessing project methodologies as part of its efforts to establish the first independent global benchmark for “high-integrity” carbon offsets, known as the “Core Carbon Principles”.

“We are in a climate emergency and we need every tool in the box to meet the 1.5°C [global warming] target,” said ICVCM Council Chair Annette Nazareth. “High-integrity carbon credits can mobilise private finance at scale for projects to reduce and remove billions of tonnes of emissions that would not otherwise be viable.”

Substitute for government aid

As most of the world’s largest carbon offsetting projects are based in the Global South, many rich governments view the market favourably as a way of getting dollars to developing nations without tapping into public budgets.

That is the case in the US where climate funding has fallen victim to political polarisation. President Joe Biden promised to increase international climate finance to over $11.4 billion per year by 2024. But Congress approved only a fraction of that as part of this year’s government budget: $1 billion of a spending package totalling $1.59 trillion.

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The White House’s Zaidi said voluntary carbon markets can move “mountains of capital” if their integrity is improved. Better regulation could expand the market from its current size of around $1.7 billion to $1.1 trillion by 2050, according to predictions by BloombergNEF. 

Gilles Dufrasne, global policy lead at Carbon Market Watch, told Climate Home the US government will need to “walk the talk and ensure that its promises of transparency and integrity are followed up by actions”.

“There is currently no public data to measure how much finance is flowing to climate action through carbon credits and how much is staying in the pockets of Global North intermediaries and consultants,” he added.

International negotiations

The US government is also a strong proponent of private sector-led carbon credit initiatives in international climate circles.

In discussions at the COP28 climate summit last year on setting the rules for a new carbon market governed by the United Nations, Washington championed what observers described as a “light-touch, no-frills” approach that could hand a prominent role to private-sector players from the voluntary market.

The move was rejected by the European Union, causing a breakdown in the negotiations, which will resume at the mid-year UN climate talks in Bonn starting next week.

“By undermining the multilateral process … and placing more faith in private sector-governed voluntary carbon markets, the US appears to be shirking its responsibilities for financing climate action and offloading them onto the private sector,” said Trishant Dev, a carbon market expert at the Delhi-based Centre for Science and Environment.

(Reporting by Matteo Civillini and Joe Lo; editing by Megan Rowling)

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