On May 28, 2024, the Biden-Harris Administration introduced new guides that aim to improve the quality and integrity of the voluntary carbon markets (VCMs). The American government’s initiative took place in the context that the big corporations have voluntarily bought carbon offset credits to show their commitment to the net-zero goal. According to Morgan Stanley, the VCM size would reach $ 100 billion in 2030. However, the VCMs have been vulnerable to fraud, resulting in numerous high-profile scandals in recent years. Indeed, the Wall Street Journal points out that approximately 95% of buyers don’t satisfy the standards of this industry. The low integrity of the VCMs is the opposite, with the high hope that they will be a powerful tool to remove greenhouse gases (GHGs) and mitigate global warming. As a result, some well-known firms, such as Nestle, have partially withdrawn from these markets to focus on their own GHG reduction projections along their value chain.
To restore the integrity of the VCMs, the Biden-Harris has announced new principles to promote the quality and integrity of these markets. This announcement also indicates the leadership and commitment of the United States (U.S.) to GHG emission reduction to cut it in half in 2030 and achieve net zero in 2050. The Administration’s new principles focus on seven topics. In essence, these seven themes mostly emphasize that the carbon offset credits have to generate measurable decarbonization, resulting in positive climate impact. In addition, firms cannot exploit these markets to replace their own GHG emission reductions in their current value chain. In other words, firms have to make efforts to reduce their GHG emissions from the operations along their value chain first. Buying offset carbon credits is the complementary solution that helps organizations offset the rest of the emissions that firms cannot remove by other means.
In addition to the 7 seven principles that the VCMs’ participants must adhere to, the Administration announces some new projects to advance the integrity and quality of the VCMs. These projects cover a wide range of activities, including the creation of new opportunities for America’s farmers and forest landowners, the advancement of innovation in carbon dioxide removal (CDR), the participation in international standard settings, and support of international market development, and clear guidance to financial institutions that support net zero goals. In short, the Biden-Harris Administration’s introduction of the seven principles and numerous projects aims to boost the quality of carbon offset credits and ensure that the VCMs cannot be the culprit of greenwashing. The point was echoed by the Secretary of Treasure, Jenet Yellen, who cosigned these new principles. Furthermore, these initiatives signal that the American leadership has been back on the world stage in the fight against climate change and global warming, which the previous
Administration less emphasized.
Author: Bao Hoang, Ph.D.
