Why The US Government’s Voluntary Carbon Market Principles Are a Positive Step Forward For Tackling Climate Change
Jenny Ahlen, Managing Director, Net Zero, We Mean Business Coalition
Earlier this week, the U.S. government announced principles needed for high-integrity voluntary carbon markets to achieve their potential. We Mean Business Coalition welcomed this step.
Data shows us that status quo approaches to decarbonization are not working at the scale and speed we need. That is why WMBC has consistently advocated for the role high integrity voluntary carbon markets can play in advancing corporate climate action and directing finance towards chronically underfunded and urgent climate priorities, such as the protection and restoration of nature. It’s estimated that nature-based solutions (NbS) for climate can provide 30% or more of the mitigation needed to reach our global climate goals by 2030. Despite this potential, NbS receive less than 10% of international climate finance.
The US Government’s statement rightfully recognizes the challenges carbon markets have faced and details principles meant to address those concerns. This includes, how to ensure credits are credible, represent real decarbonization, and avoid harm if not provide co-benefits; and that buyers of credits prioritize emission reductions in their own value chains, publicly disclose details of any credits used, and make accurate claims using only high-integrity credits. The Biden Administration’s thinking is well aligned with our own Principles for Corporate Climate Leadership on the Role of Nature-Based Solutions.
When I was thinking about the role US leadership could play on this issue, it took me back to my childhood. As a kid, I remember hearing about the damage that acid rain could cause and worrying that we’d never solve the crisis. Years later, I was surprised to learn that the acid rain program the U.S. put in place during the 1990s used markets to drive down the pollution quickly and at less expense than originally anticipated. This left a lasting impression on me that markets not only create environmental externalities, but when well-designed, can also be used to fix them.
As the world collectively figures out how to deal with climate change, several possible tactics and solutions have arisen over the years, including voluntary carbon markets. As with anything new and voluntary, they began without rules or structures. Over time, various actors have stepped in to create standards and processes for how carbon markets should function. Climate and market experts haven’t yet reached consensus on what works best. That doesn’t mean the mechanism is ineffective, but rather, that we have yet to get the right rules in place to maximize its benefits and minimize its risks.
The US government’s announcement yesterday is a step in the right direction towards figuring out how to get carbon markets right. Importantly it reinforces the work of organizations like ICVCM, whose Core Carbon Principles are helping to pave the way for a next generation of high integrity carbon credits globally. At a time when debate around VCMs is increasingly polarizing, the US government has proposed a thoughtful and pragmatic pathway forward to mobilize greater corporate action both within and beyond company value chains.
Today, a new report revealed a significant decline in climate finance channeled through voluntary carbon markets in 2023, with a drop of over $1 billion compared to 2022. This shortfall jeopardizes essential climate solutions, particularly in developing countries and critical areas such as nature protection and restoration. It is imperative for more governments to join the efforts led by nations like the US, Colombia, and Singapore to steer the market towards a more credible and high-integrity future. Only then can we mobilize the necessary finance at the pace and scale required to address the urgent climate crisis that is sitting on our doorstep.