By Ryan Hanrahan, University of Illinois’ FarmDoc project
Bloomberg’s Jennifer A. Dlouhy and Natasha White reported Tuesday that “the Biden administration unveiled a framework for using carbon offsets to drive climate progress, with principles it says are meant to help ensure the trading regimes deliver real emissions reductions — not a green mirage.”
“The documents released Tuesday by top cabinet officials, including Treasury Secretary Janet Yellen, take the controversial step of recommending companies be able to use carbon credits to offset a portion of their so-called Scope 3 emissions, those generated by their suppliers and customers,” Dlouhy and White reported. “In other respects, the guidelines largely align with those developed by prominent industry-led governance bodies. They amount to an endorsement of voluntary carbon markets’ potential to create economic opportunities for farmers and ranchers while helping reduce planet-warming pollution, despite the controversies they’ve sparked in the past.”
Why the Guidelines Were Created
Reuters’ Valerie Volcovici reported Tuesday morning that “the U.S. government unveiled rules to govern the use of voluntary carbon credits on Tuesday, seeking to boost confidence in a nascent market after some high-profile offset projects failed to deliver the promised emissions reductions.”
“A series of high-profile controversies has shaken confidence in the market for carbon offsets, with several large companies that buy carbon credits retreating from the market as recent studies found that several large forest protection projects failed to deliver their promised emission reductions,” Volcovici reported. “Voluntary carbon markets shrank for the first time last year in at least seven years.”
“The principles for ‘responsible participation’ in offset markets outlined by U.S. officials on Tuesday include strict standards to ensure that projects deliver real and quantifiable emissions reductions, monitoring to ensure projects do not harm local communities and that corporate buyers prioritize decarbonizing their own supply chains before opting for credits,” Volcovici reported.
“‘Credibility is literally the commodity,’ said Energy Secretary Jennifer Granholm at an event announcing the policy in Washington, D.C., on Tuesday. ‘It’s a problem that VCMs haven’t always lived up to their promises,” Volcovici reported.
Details of the Guidelines
Dlouhy and White reported that “the new US guidelines, detailed in a 12-page joint policy statement and outline of principles, target the trading of credits that are meant to represent a ton of carbon dioxide reduced or removed from the atmosphere. Companies, not-for-profit groups and others can buy the credits — which help finance carbon-reducing but non-lucrative initiatives such as planting trees — as a way to compensate for their own emissions.”
“The US government principles ‘will give confidence to businesses that the rules of the carbon market promote best practice in the use and sourcing of high-integrity, project-based carbon credits,’ said Chris Leeds, head of carbon markets development at Standard Chartered,” according to Dlouhy and White’s reporting.
“Ensuring offsets truly compensate for pollution is a particular challenge, since carbon dioxide persists in the atmosphere for centuries,” Dlouhy and White reported. “The activities that underpin most credits today often lack that same longevity. For instance, trees that suck carbon dioxide from the atmosphere can burn, die or be cut down. Other options, such as injecting carbon dioxide deep underground, could offer longer-term promise.”
“The US government envisions the finance sector providing a solution,” Dlouhy and White reported. “Insurance mechanisms such as buffer pools can help address permanence shortcomings.”
What the Guidelines Mean for the Ag Industry
Newsweek reported Tuesday that Scott Henry, a partner at LongView Farms in Iowa, “said the guidelines will help give farmers clarity about how they can get support for farming that helps to reduce carbon emissions or to draw carbon down from the atmosphere and into the soil.”
Before the guidelines, he said, “the lack of standards on carbon reduction verification has hindered the flow of money into sound agricultural practices” because “farmers are leery of getting caught up in accusations of greenwashing. ‘I don’t want to be the poster child for carbon credit fraud or selling something that’s not real,’ Henry said,” Newsweek reported.
In addition, Volcovici reported that “the Agriculture Department has also created a program to help farmers, ranchers and forest owners to participate in carbon markets by helping them to identify high-integrity carbon offset programs for generating carbon credits. The agency said Tuesday it was soliciting input on implementing the program.”
