The Biden administration on Tuesday laid out the first set of broad government guidelines for the use of carbon offsets in an effort to bolster credibility for its increasingly criticized climate change tactics.
Companies and individuals voluntarily spent $1.7 billion last year purchasing carbon offsets, which are intended to offset the climate impacts of activities like air travel by funding projects like tree planting that remove carbon dioxide from the atmosphere, but wouldn't have happened without the additional funding.
But a growing number of studies and reports are finding that many carbon offsets simply don't work: Some offsets are used to help fund wind and solar projects that would likely be built anyway, and the effectiveness of offsets aimed at protecting forests is often very hard to measure.
As a result, some scientists and researchers argue that carbon offsets are irredeemably flawed and should be abandoned altogether. Instead, they say, companies should focus on directly reducing their own emissions.
The Biden administration has now weighed in on the debate, saying that as long as guardrails are in place, offsets can be an important tool to help companies and other entities reduce their emissions.The new federal guidelines are an attempt to define “high-credibility” offsets as those that achieve real, quantifiable emissions reductions that couldn’t be achieved otherwise.
“Voluntary carbon markets can help unleash the power of private markets to reduce emissions, but they can only do so if we address significant existing challenges,” Treasury Secretary Janet L. Yellen said in a statement. She is due to discuss the guidelines with other administration officials at an event in Washington on Tuesday.
“The principles announced today are an important step towards building a credible and voluntary carbon market,” she said.
The new federal guidelines also urge companies to first focus on reducing emissions as much as possible within their own supply chains before buying carbon offsets. Some companies have complained that it is too difficult to manage their extensive networks of external suppliers and have argued that carbon offsets should be available to address pollution associated with the cement or steel they use, for example.
While the new federal guidelines are not binding or enforceable, advocates of voluntary carbon markets say they could help foster a larger market for high-quality offsets that actually work. There are also several private efforts, such as the Integrity Council for Voluntary Carbon Markets, that are trying to develop principles for what counts as effective carbon offsets.
“There are credible estimates that voluntary carbon markets could be expanded to 10 to 20 times their current size, which would actually put money into fighting climate change,” said Nat Keohane, executive director of the Climate Energy Solutions Center, an environmental group that supports the use of carbon offsets. “But it won't get to that scale unless buyers have confidence in what they're buying.”
But critics of carbon offsets say the new federal guidelines are too vague and don't do enough to explain what projects qualify as high-quality. And without the government's stronger enforcement of the voluntary carbon market, they say, there will still be plenty of cheap, ineffective offsets in circulation, allowing companies to continue buying them with impunity.
“Unless the government addresses the bottom end of the market through enforcement, I don't see low-quality credit going away,” said Danny Cullenward, a senior fellow at the Kleinman Center for Energy Policy at the University of Pennsylvania.
In California, some lawmakers have proposed legislation that would penalize companies that sell offsets that they deem not “quantifiable” or “realistic.” But the bill is also opposed by business groups and environmentalists, who say it could cut off funding for conserving and protecting forests and other natural areas.
Biden administration officials, meanwhile, say offsets could also help steer investment to poorer countries that struggle to raise funds to fight climate change. President Biden has pledged more than $11 billion a year in climate change aid to developing countries, though Congress has approved only a fraction of that.
Fighting climate change “will require mobilizing massive amounts of private capital,” said John Podesta, Biden's senior adviser on international climate policy. He said voluntary carbon markets “can support the adoption of clean energy in developing countries that stand to benefit most from new investment.”