On May 28, the U.S. Secretaries of Treasury, Agriculture, and Energy, along with senior White House climate officials, issued the Voluntary Carbon Markets Joint Policy Statement and Principles (Policy Statement).  The Policy Statement provides observations regarding the current state of voluntary carbon markets, followed by a set of guiding principles for responsible market participation.  A White House Fact Sheet describes the Policy Statement as representing the U.S. government’s commitment to advancing the responsible development of voluntary carbon markets, “with clear incentives and guardrails.”  Notably, the Fact Sheet  states that, with such incentives and guardrails, voluntary carbon markets can drive significant progress toward the Administration’s goals of reaching global net-zero greenhouse gas (GHG) emissions by 2050 and limiting warming to 1.5 °C.

Voluntary Carbon Market Observations

The Policy Statement comes on the heels of a rocky two years for the voluntary carbon market marked by heightened regulator, media, and stakeholder scrutiny regarding the integrity of carbon offsets and associated GHG emission reduction claims.  The Policy Statement highlights specific critiques of carbon offsets relating to additionality, permanence, and credible GHG emissions accounting. Further, it notes the growing need for measures to ensure that credited activities respect local communities and human rights, and mitigate any negative environmental or social impacts. A key takeaway is that “clearer rules of the road would enhance market certainty for credit buyers and businesses and individuals undertaking activities to supply this market.”

The Policy Statement also highlights recent developments intended to address the previously mentioned concerns.  Those developments include multi-stakeholder initiatives to set high-integrity credit standards, technologies to support robust measurement, monitoring, reporting, and verification (MMRV) for carbon projects, and advancements in the development of market infrastructure to improve transparency and liquidity. In terms of federal government developments, the Policy Statement references the Commodities Futures Trading Commission’s 2023 proposed guidance for voluntary carbon credit derivatives and associated trading platforms, the Securities and Exchange Commission’s final climate risk disclosure rule requiring certain disclosures related to carbon offset purchases, and efforts by other agencies to improve emissions data collection.

Principles for Responsible Participation

Given the Administration’s observations, the Policy Statement includes seven principles for responsible participation in the voluntary carbon markets.  The Policy Statement notes that these principles echo, and are an effort to elevate, concepts developed by leading NGOs working toward ensuring high integrity in the voluntary marketplace.  The document describes a three-pronged approach to responsible carbon market development and participation: (1) credit or supply integrity (principles 1 and 2), (2) demand integrity (principles 3-5) and (3) market-level integrity (principles 6 and 7).  While the demand integrity principles may be most relevant to corporate buyers, each of the principles are relevant to all market participants:

  • Principle 1: Carbon credits and the activities that generate them should meet credible atmospheric integrity standards and represent real decarbonization.
  • Principle 2: Credit-generating activities should avoid environmental and social harm and should, where applicable, support co-benefits and transparent and inclusive benefits-sharing.
  • Principle 3: Corporate buyers that use credits (credit users) should prioritize measurable emissions reductions within their own value chains.
  • Principle 4: Credit users should publicly disclose the nature of purchased and retired credits.
  • Principle 5: 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.
  • Principle 6: Market participants should contribute to efforts that improve market integrity.
  • Principle 7: Policymakers and market participants should facilitate efficient market participation and seek to lower transaction costs.

Potential Next Steps

Principle 7, centered upon facilitating efficient market participation, is the only principle that expressly highlights a role for policymakers. But several additional actions could be taken from a policy perspective to further advance and bolster the integrity of the voluntary carbon market.   As just one example, on the same day that the Policy Statement was released, the USDA announced a request for information seeking public input to support the development of proposed regulations to implement the department’s GHG Technical Assistance Provider and Third-Party Verifier Program. The program aims to assist landowners by providing a list of qualified technical assistance providers and third-party verifiers who work with producers to generate credible carbon credits. The program will also list “widely accepted voluntary carbon credit protocols”, according to the department’s announcement, in an effort to further reduce market confusion for landowners. Comments to USDA on the request for information are due by June 28.

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Photo of Jayni Hein Jayni Hein

Jayni F. Hein co-chairs the firm’s Carbon Management and Climate Mitigation industry group.

Jayni joins the firm after serving as Senior Director for Clean Energy, Infrastructure & the National Environmental Policy Act (NEPA) at the White House Council on Environmental Quality (CEQ).

During…

Jayni F. Hein co-chairs the firm’s Carbon Management and Climate Mitigation industry group.

Jayni joins the firm after serving as Senior Director for Clean Energy, Infrastructure & the National Environmental Policy Act (NEPA) at the White House Council on Environmental Quality (CEQ).

During her tenure at CEQ, she oversaw the Biden Administration’s ambitious environmental and clean energy agenda, leading work on low carbon projects and climate disclosure, and advancing the successful implementation of the Infrastructure Investment and Jobs Act (2021) and Inflation Reduction Act (2022).

Jayni has extensive experience advising clients on NEPA, Clean Air Act, and Endangered Species Act issues, as well as energy development on public lands. As the former senior political appointee spearheading work to revise NEPA regulations and issue guidance on climate change and greenhouse gas emissions, Jayni offers clients first-hand experience with infrastructure projects that require federal and state permits and authorization. She helps clients identify new funding opportunities and successfully advance clean energy and other infrastructure projects, including onshore and offshore wind, solar, hydrogen, transmission, semiconductor, and carbon, capture, sequestration, and utilization (CCUS) projects.

In addition, leveraging her government experience, Jayni advises companies and investors on ESG compliance and strategy in light of increased scrutiny of corporate climate and net-zero commitments. She advises clients on the legal and policy issues relating to ESG and climate-related regulatory requirements, investor demands, global reporting frameworks, and strategic business opportunities.

Clients benefit from her ability to creatively troubleshoot issues, establish relationships across government, and engage policymakers, industry, non-profit organizations, and other key stakeholders in constructive conversations around climate change, environmental justice, and corporate decarbonization goals.

Prior to CEQ, Jayni led energy and climate work at think tanks at NYU Law and Berkeley Law.

Jonathan Wright

Jonathan Wright is a member of the firm’s Energy Industry Group, and counsels industry clients on a diverse range of transactional and regulatory matters. Mr. Wright counsels developers, investors and lenders in the development and financing of energy infrastructure assets, as well as…

Jonathan Wright is a member of the firm’s Energy Industry Group, and counsels industry clients on a diverse range of transactional and regulatory matters. Mr. Wright counsels developers, investors and lenders in the development and financing of energy infrastructure assets, as well as mergers and acquisitions, with a particular focus on renewable generation and battery storage facilities.

Mr. Wright also counsels clients on electric and natural gas matters before the Federal Energy Regulatory Commission, where he previously served as an Attorney-Advisor in the Office of the General Counsel. He specializes in matters involving electric generation interconnection, wholesale electric market design and participation, mergers and acquisitions involving jurisdictional assets, and natural gas pipeline rate proposals.