On Tuesday, US Treasury Secretary Janet Yellen will underscore the imperative for companies to prioritize reducing their carbon emissions rather than solely relying on purchasing carbon credits as a solution to combat climate change.
Yellen will introduce new guidelines for voluntary carbon credits, which have become a favored avenue for companies seeking to offset their emissions. However, these credits have faced criticism for falling short of delivering the promised carbon removals.
While the Biden administration aims for carbon credit markets to thrive, it underscores the necessity for integrity in both credit developers and corporate buyers. Yellen will emphasize that corporate initiatives should concentrate on reducing their own emissions through strategic transition planning, adopting net-zero targets, and transparent reporting.
While encouraging participation in voluntary carbon markets, Yellen emphasizes the importance of ensuring that purchased credits authentically represent emissions reductions or carbon removals, addressing previous deficiencies where credits failed to meet these standards.
“Corporate buyers should prioritise reducing their own emissions, particularly through transition planning, adopting net zero targets, and transparently reporting on progress. Participation in [voluntary carbon markets] should complement these efforts.”
Janet Yellen
Numerous projects have undergone scrutiny due to discrepancies in their carbon accounting methods. A recent study highlighted the inefficacy of a particular type of carbon credit used by companies like Eon, Shell, easyJet, and British Airways in justifying ongoing pollution.
Despite these hurdles, US officials are committed to fostering high-integrity markets, recognizing the significance of harnessing markets and private capital to tackle climate change.
Former US climate envoy John Kerry champions voluntary carbon credit markets and initiated a state department-led initiative in 2022 aimed at decarbonizing regional power sectors. This initiative seeks to enhance existing models by utilizing national data and measuring emission reductions against historical benchmarks rather than speculative future projections.
Several companies, including Bank of America, Morgan Stanley, and Standard Chartered, have thrown their support behind the initiative, along with prominent tech companies like Amazon, Mastercard, and Salesforce. Kerry acknowledges the need to rectify past deficiencies, noting that certain operations offering low-cost carbon credits have undermined climate mitigation efforts.