The Biden administration’s release of principles to ensure integrity in voluntary carbon markets are being welcomed by observers of – and participants in – the growing marketplace, who say it’s sign that the government is following the private sector’s lead.
“It's very important to keep in mind these government agencies and entities are not leading the voluntary market initiatives, they are following. And that is very appropriate,” said Bruce Knight, who runs Strategic Conservation Solutions and is a former Natural Resources Conservation Service chief at USDA.
“This very much aligns the various agencies with the kind of leadership that we've seen out of USDA and Secretary [Tom] Vilsack – strong support for voluntary markets, but wanting to ensure that they have rigor, integrity, and are really delivering what folks are expecting out of a voluntary carbon market.”
Bruce Knight, Strategic Conservation Solutions
While the principles themselves aren't “earth-shattering or new,” they show the administration pushing toward “a robust carbon market that buyers can trust and feel confident in.” said Max DuBuisson, vice president of Impact and Integrity at Indigo Ag.
Currently, “Not everybody is adhering to these sorts of principles,” he said. “I'm optimistic that having that joint statement will mean they're at least trying to run in the same direction.”
Indigo is one of the biggest players in the market with about 7 million acres enrolled and 300,000 soil carbon credits issued for 300,000 tons of CO2-equivalent reduced.
The Voluntary Carbon Markets Integrity Initiative, an international nonprofit that focuses on the demand side, said the principles “are aligned with VCMI’s Claims Code of Practice, and will help the voluntary carbon market realize its full potential.”
The U.S. announcement “builds confidence in high-integrity VCMs and will in turn grow the market,” which could be valued at $50 billion by 2030, VCMI said.
Voluntary carbon markets are growing, but the marketplace can be difficult to navigate.
“I won't lie, it's confusing,” DuBuisson said. “It can seem muddy to a casual observer, because it's a complex landscape. You’ve got independent verification and validation bodies, you've got these independent standards bodies.”
But, he added, there are many “really good and important self-regulatory activities going on,” including the Integrity Council for the Voluntary Carbon Market (ICVCM), which is currently assessing programs that actually issue the credits, such as Verra, the Climate Action Reserve and the American Carbon Registry to see how they align with ICVCM’s core carbon principles. (Where VCM focuses on demand-side standards, ICVCM's is supply-side standards, or as, DuBuisson says, “What is a high integrity carbon credit?”)
Debbie Reed, head of Ecosystem Services Market Consortium, said she thought the administration missed a few opportunities to use the principles to clarify some issues.
Reed said the principles, by emphasizing that companies should focus on decarbonizing through their own supply chains, takes the right approach. However, she said she’s concerned about the scope 3 flexibility mechanism that would allow companies to use carbon credits meant to offset Scope 1 and 2 emissions (their own emissions and purchased energy for facilities) to meet Scope 3 goals.
Scope 3 refers to indirect emissions associated with upstream and downstream operations.
Instead, Reed said that while “there are some serious issues that still have to be worked out before companies can actually achieve scale” in reducing their supply chain emissions, "it would be more appropriate to allow flexibility in how Scope 3 reductions are accounted for, rather than undermining scope 3 activities altogether."
Reed also recommends focusing on global “interoperability,” so progress can be measured worldwide.
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“Every country has an inventory, every company has an inventory” of carbon dioxide emissions, she said. However, “They're not linked in any one place. If we had a global inventory and global interoperability, we would know what the global inventory looks like, and everybody's piece of that, and how well we're all doing towards getting there.”
Another recommendation of Reed’s is to focus on industrial sectors, as is being done by the airline industry through its CORSIA initiative to reduce GHGs. 
Debbie Reed, Ecosystem Services Market Consortium
“If I were the administration, I would say every sector has to have a commitment, and regardless of what you do with credits, offsets, Scope 2 energy credits, insets, they all have to remain within the sector,” she said.
That would mean “an emission reduction within agriculture has to be sold to a player within agriculture, so that we know what the pie looks like coming from U.S. ag. But because credits get sold elsewhere, we don't know how much we're reducing within ag. Because when you sell an offset from ag to the energy industry, that's where it's counted.”
Knight said his biggest concern is that a federal agency will inadvertently step into the middle of the process “and prevent development of carbon markets.”
“There is a lot of confusion and clutter in the ecosystem markets right now, and as such, folks sometimes say they want to have the government sort that out,” Knight said. “And I know how, intuitively and reflexively, folks reach that conclusion, but after having been on the management side of government, I don't think we want that. I think we want to sort these things out in the marketplace, and we want to sort it out privately.”
“A lot of people are saying, if the government would only put their stamp on things, we'd all feel better about it,” Reed said. “But this government doesn't have a mandate,” in the form of a law that would require it to take a regulatory role.
There’s a lot the government can do, Knight said, in terms of “standardizing the measurements, standardizing the monitoring [and] figuring out which models they should plug into,” to ensure the models “are robust enough to really facilitate market development. All of those are inherently governmental actions and very appropriate for USDA to be involved in.”
Pointing to the development decades ago of the standard for No. 2 yellow corn, Knight said, “There is a point in time when we need No. 2 two yellow carbon, and we're fast approaching that.”
Government can also help by improving the tools it has now. NRCS’s COMET-Planner, for example, “does a reasonable job” measuring soil carbon sequestration, he said.
However, “it does almost nothing on nitrous oxide and absolutely nothing on methane emissions,” he said. “So, the entire livestock sector is still needing greater development.”
The White House listed the following seven principles for "responsible participation" in voluntary markets, noting the document was signed by the secretaries of Energy, Agriculture and Treasury and White House climate and economic officials:
- Carbon credits and the activities that generate them should meet credible atmospheric integrity standards and represent real decarbonization.
- Credit-generating activities should avoid environmental and social harm and should, where applicable, support co-benefits and transparent and inclusive benefits-sharing.
- Corporate buyers that use credits should prioritize measurable emissions reductions within their own value chains.
- Credit users should publicly disclose the nature of purchased and retired credits.
- Public claims by credit users should accurately reflect the climate impact of retired credits and should only rely on credits that meet high integrity standards.
- Market participants should contribute to efforts that improve market integrity.
- Policymakers and market participants should facilitate efficient market participation and seek to lower transaction costs.
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