Biden Administration Weighs In On the Need For and Appropriate Use of Carbon Credits

The Biden Administration published a joint policy statement and set of principles for participating in the voluntary carbon markets (“VCMs”) on Tuesday, which is available here.

The set of principles recognize the role that carbon credits have in promoting the country’s climate goals and unlocking economic potential; however, the principles acknowledge that widespread confidence in the integrity of credited emissions reductions and removals is critical for VCMs to reach their potential.”

We highlight some of the key takeaways below.

  • The activities that generate the credits and the credits themselves should be certified to a robust standard that accounts for the following considerations:
    • The activity should be additional. The principles define additionality as an activity that would not have occurred in the absence of the incentives of the crediting mechanism and is not required by law or regulation. This definition accounts for incentives” as well as legal requirements, so is broader than the FTC’s definition in the current Green Guides, which only accounts for legal requirements.
    • The credit should be unique in that it corresponds to only one tonne of carbon dioxide (or its equivalent) reduced or removed from the atmosphere and is not double-counted.
    • The claimed emissions reductions or removals are based on credible methodologies and leakage does not occur, which means the carbon dioxide is not just displaced outside the project or program boundary.
    • The activity design should be validated and the results should be verified by a qualified, accredited, independent third party.
    • The emissions removed or reduced should be permanent.
    • Baselines for emissions reductions and removals should be based on rigorous methodologies and avoid over-crediting.
  • Corporate buyers that use credits should use VCMs to complement measurable within-value-chain emissions reductions as part of their net zero strategies. This includes working with suppliers on efforts to pursue decarbonization activities.
  • The principles recommend that credit users disclose when credits are purchased, cancelled, or retired on an annual basis, a recommendation that the principles acknowledge may be more than what is required by applicable law.
  • The principles note that standards for public claims based on carbon credits are constantly evolving, but that standards-setting organizations should allow companies to count reductions and removals based on carbon credits toward their Scope 3 emissions where it would be unreasonable to expect a company to fully abate those emissions within a given timeframe.

Some of these principles are addressed in the FTC’s current Green Guides, such as core integrity considerations around additionality and double counting, but overall the principles are far more robust than the FTC’s guidance on this topic. We do not expect the FTC will issue guidance in the revised Green Guides that would be contradictory to these principles, so marketers should closely review the principles and ensure that they are adhering to them when making claims based on carbon credits.