US to Outline Vision for Carbon Offsets Dogged by Controversy
(Bloomberg) -- Top Biden administration officials, including Treasury Secretary Janet Yellen, are set to lay out the first broad US government guidelines for carbon markets next week, a major win for advocates of emission offsets as a weapon against global warming.
The move is a bid by the US to encourage a new era of what it calls “high-integrity carbon markets” and help rehabilitate a climate solution that’s been dogged by controversy. Although there’s increasing interest in using offsets to unlock billions of dollars for decarbonization, the credits have drawn intense criticism after revelations that multiple projects never delivered on their emission-cutting claims.
The market for offsets is currently worth about $2 billion, but a signal of support from the US government could help unlock greater demand. BloombergNEF predicts its value could reach $1 trillion by 2050 if standard-setters ease some rules and officials allow their use in regulated emissions trading and carbon tax systems.
![](https://assets.bwbx.io/images/users/iqjWHBFdfxIU/i7J27ZddrE.U/v1/-1x-1.jpg)
Yellen will unveil the US framework at a May 28 event in Washington, DC, along with Agriculture Secretary Tom Vilsack, White House senior climate adviser John Podesta and Energy Secretary Jennifer Granholm. (Supporters of the event include Bloomberg Philanthropies, the philanthropic organization of Michael Bloomberg, who is the founder and majority owner of Bloomberg LP, the parent company of Bloomberg News.)
They will say that high-integrity carbon credits should represent real, additional and permanent emission reductions that wouldn’t have happened otherwise, according to people familiar with the matter who asked not to be named describing the effort before it’s announced publicly.
The framework also will assert that companies shouldn’t use credits to displace efforts to directly cut so-called Scope 3 pollution from their suppliers and customers, the people said. These are the trickiest emissions for businesses to reduce because companies don’t have direct control over them. Whether offsets should be used to effectively cancel them out has deeply divided climate experts.
The principles are set to overlap with emerging standards on the generation of credits and the kind of claims their buyers can make. But they will not explicitly endorse any of the regimes, the people said, including the core carbon principles developed by the Integrity Council for the Voluntary Carbon Market and Voluntary Carbon Markets Integrity Initiative, the most prominent industry-led governance bodies.
The US officials will underscore the government’s stance that voluntary carbon markets have a role in reaching net zero, as long as they promote high-integrity emissions reductions and channel meaningful amounts of capital into nature-based projects today as well as carbon-removal technologies in the future, one of the people said.
Carbon market supporters celebrated the move as a welcome US embrace of an approach they say can drive much-needed dollars toward sustainable projects, particularly in developing countries.
“This announcement is bringing the weight of the US government,” said Pedro Barata, an associate vice president at the Environmental Defense Fund and co-chair of the ICVCM’s panel of experts. It gives “an imprimatur of confidence from a very important stakeholder.”
Still, critics argue that offsets can do more harm than good, especially if the credits don’t represent actual emission reductions and divert funding away from real carbon-cutting work. Skeptics say credits have too often been a tool for greenwashing instead of actual climate progress, allowing businesses to claim emission reductions that never materialize.
Danny Cullenward, senior fellow with the Kleinman Center for Energy Policy at the University of Pennsylvania, said he was “saddened” that the Biden administration “has thrown its weight behind a policy model that has failed for 30 years.” There’s little reason to believe this time will be different, he said, given a lack of strong enforcement to back up what now amounts to “industry self-regulation.”
Some US officials, including former Special Presidential Envoy for Climate John Kerry, have argued that carbon credits are perhaps the fastest way to unleash hundreds of billions of climate finance. Kerry has maintained that no government can deliver the huge sums needed to arrest global warming, a potential point of friction at United Nations climate talks this November, which is why mobilizing corporate money is so important.
A series of laws, including the 2022 Inflation Reduction Act, have brought climate finance to the fore in the US. They’ve created new federal incentives for carbon capture projects and compelled the Agriculture Department to make it easier for farmers, ranchers and forest owners to get involved.
A host of agencies have been working on the new US framework since last fall, with the Treasury Department advancing language around the importance of price and market transparency and the Agriculture Department elevating an interest in fair revenue distribution, the people said.
The guidelines won’t rule out companies using credits to offset emissions in their own supply chains but will signal they should be reserved for special circumstances, such as when those improvements aren’t technically feasible today. There will be parameters indicating what might be considered credible uses of carbon credits in those instances, a person familiar with the matter said.
The US guidelines could help mobilize “billions and billions of dollars that are currently sitting on the sidelines,” said Alexia Kelly, who heads carbon market development at the philanthropy High Tide Foundation, which funds the ICVCM. “I see it as a really important kind of signal for CEOs and other companies.”
©2024 Bloomberg L.P.
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