The US Government’s carbon credit wish list

No legally binding guidelines, no enforcement mechanism, no regulation.

“I believe that harnessing the power of markets and private capital is critical. This includes efforts to grow high-integrity voluntary carbon markets.” That’s Janet L. Yellen, US Secretary of the Treasury speaking last week at the launch of seven new principles for voluntary carbon credits.

The launch was hosted by Bloomberg Philanthropies, the Center for Climate and Energy Solutions, and the Environmental Defense Fund.

The US government’s wish list

The seven principles are not legally binding, as Yellen acknowledges in her presentation, they are voluntary. The seven principles amount to no more than a wish list:

1. Wouldn’t it be nice (or at least better than the current voluntary carbon market shambles) if carbon credits met “high-quality atmospheric integrity standards”?

2. Wouldn’t it be nice if carbon credit projects avoided “negative environmental and social impact”?

3. Wouldn’t it be nice if the Big Polluters that buy carbon credits prioritised reducing their own emissions. Yellen mentions that last year, Treasury released “Principles for Net-Zero Financing and Investment”. What she doesn’t say is that the net-zero principles had next to zero impact on changing how corporations are destroying the planet. As climate and economic justice consultant Moira Birss points out on LinkedIn, “In fact, many banks have rolled back previous climate pledges.”

4. Wouldn’t it be nice if corporations disclosed how many carbon credits they bought and how many they retired at least annually? And wouldn’t it be nice if they disclosed the project name and type, the country, the vintage of the credits, which standard was used, and whether the credits met “third-party principles for integrity” such as the Integrity Council for the Voluntary Carbon Market’s Core Carbon Principles?

5. Wouldn’t it be nice if Big Polluters didn’t make ridiculous claims based on having bought carbon credits? Such as TotalEnergy’s claims of carbon neutral fossil fuels based on carbon credits bought from the Kariba REDD project, which massively overestimated the number of carbon credits the project generated, to give just one example that Yellen didn’t mention.

6. Wouldn’t it be nice if the those involved in carbon markets contributed “to efforts that improve market integrity”?

7. Wouldn’t it be nice if the transaction costs for carbon credit projects were lower?

Yellen acknowledges some of the systemic problems with the voluntary carbon market:

“Unlike commodities like nickel or soybeans that may be physically delivered to the buyer for inspection and use, the emissions savings associated with a carbon credit are generally ‘delivered’ to the atmosphere. This makes it more difficult to assess the quality of carbon credits — that is, whether they really are associated with emissions savings. In recent years, researchers and journalists have found that a number of projects have not delivered the quality or quantity of emissions savings they claimed. 

“There are also genuinely hard questions of market design, such as how VCMs can ensure that emissions-reducing activities are durable and truly additional.”

Yellen believes that a “renewed wave of civil society, corporate, and government resolve to address these challenges” will address these problems. She’s wrong.

She mentions the carbon credit rating agencies that have sprung up to cash in on the fact that certifying companies like Verra are incapable of guaranteeing that its carbon credits are not junk. But the carbon credit rating agencies give different ratings to the same projects.

The Finnish carbon credit company Compensate found that 91% of carbon offsetting projects did not meet its evaluation process. Nevertheless, between April 2019 and December 2020, Compensate bought 307,260 carbon credits from the Kariba REDD project.

Compensate’s evaluation process failed to notice that the carbon credits the project was selling were junk. In October 2023, Verra put the project on hold following a series of investigative reports into the fundamental problems with the project.

As Moira Birss points out,

“Principles like these are only meaningful to the extent that you have a private sector actually interested in voluntarily adhering to the principles, or a government agency that a) has jurisdiction and b) has the political will to enact binding regulations.”

Neither of these exists in the case of voluntary carbon markets. Decades of fraud and failed projects reveal this all too clearly.

The US Treasury’s principles will do nothing to deal with the cheap, junk offsets. Big Polluters can, and will, continue to buy these offsets.

Danny Cullenward, of the University of Pennsylvania, told the New York Times that,

“Absent the government doing something to address the bottom of the market through enforcement, I don’t see any of the low-quality credits going away.”

Offsetting is “actually worse than doing nothing”

There is also a more fundamental problem with offsets and carbon markets. The reality is that we urgently need to massively reduce emissions as quickly as possible and offsets allow the company or government buying the offsets to continue polluting.

In a 2023 interview, climate scientist Kevin Anderson, of Uppsala University and Manchester University, explains what’s wrong with carbon offsets:

“Certainly, some of the projects funded by offsetting are definitely worthwhile and we should continue to fund them. But in specific terms of delivering reductions, in line with our Paris commitment to hold the temperature rise to no more than 1.5°C and at the worst 2°C then I see offsetting as actually worse that doing nothing.

“It removes the incentive for us, high emitters, to make deep and rapid changes to the way that we’re emitting and often to the way that we live our lives.

“The funding that is needed in other parts of the world for helping them with development, often at a system level we’ll see a rise in emissions even if we fund renewables elsewhere, at a system level they’re likely to see an increase in development and a rise in emissions, and that should be welcomed. But it’s not an offset.

“The 30 years of failure we’ve had on climate change mean that now, in 2023, the emissions space we have left is so incredibly tight for everyone, that there is literally no flexibility for anyone to say, ‘I will take up the responsibility for someone else.’ And that’s a really key issue.

“So the Paris 1.5°C commitment, at current level of emissions, we’ve got about nine years of global emissions before we blow through 1.5°C. And even for 2°C, with much, much more climate impacts, we only have about 19 years. So in 2023, I just don’t think offsetting has any role to play and actually it’s part of the problem.

“But some of the projects that are funded by offsetting are definitely worthwhile, and we need to find another mechanism for funding them, but not call it an offset.”

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