Biden Administration Releases Voluntary Guidelines On Carbon Offsets

Frankfurt Kurnit Klein & Selz


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In order to advance the responsible development of voluntary carbon markets, and to help ensure that these markets drive ambitious and credible climate action, the Biden Administration...
United States Environment
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In order to advance the responsible development of voluntary carbon markets, and to help ensure that these markets drive ambitious and credible climate action, the Biden Administration just released a Joint Statement of Policy and New Principles for Responsible Participation in Voluntary Carbon Markets. The Joint Statement – which sets forth voluntary principles for market participants to follow – was co-signed by Treasury Secretary Janet Yellen, Agriculture Secretary Tom Vilsack, Energy Secretary Jennifer Granholm, Senior Advisor for International Climate Policy John Podesta, National Economic Advisor Lael Brainard, and National Climate Advisor Ali Zaidi.

In a statement announcing the release of the new principles, the Administration explained, "Observers have found evidence that several popular crediting methodologies do not reliably produce the decarbonization outcomes they claim. In too many instances, credits do not live up to the high standards necessary for market participants to transact transparently and with certainty that credit purchases will deliver verifiable decarbonization. As a result, additional action is needed to rectify challenges that have emerged, restore confidence to the market, and ensure that VCMs live up to their potential to drive climate ambition and deliver on their decarbonization promise."

Although the Federal Trade Commission did not sign onto these principles, and has not yet released its updated Green Guides, these principles set forth important considerations that marketers should take into account as they look to substantiate "net zero" and other advertising claims based on the use of carbon offsets.

Here is a brief summary of the principles:

  • Carbon credits and the activities that generate them should meet credible atmospheric integrity standards and represent real decarbonization. This principle highlights, among other things, ensuring additionality, demonstrating that the claimed reductions are real and quantifiable, using proper accounting methods, and having responsible third party certifications.
  • Credit-generating activities should avoid environmental and social harm and should, where applicable, support co-benefits and transparent and inclusive benefits-sharing. This includes the necessity of putting in place safeguards to identify and avoid potential adverse impacts on people and the environment.
  • Corporate buyers that use credits should prioritize measurable emissions reductions within their own value chains. The principles highlight that, in order to achieve our long term climate goals, the use of carbon offsets is not enough, and companies should use carbon offsets "to complement measurable within-value-chain emissions reductions as part of their net zero strategies."
  • Credit users should publicly disclose the nature of purchased and retired credits. Echoing the requirements of a recently-enacted California law, the principles say that companies should make public disclosures about their use of carbon offsets at least annually and should include details that "enable outside observers and relevant stakeholders to assess whether purchased and retired credits are of high integrity and avoid negative environmental and social impacts."
  • Public claims by credit users should accurately reflect the climate impact of retired credits and should only rely on credits that meet high integrity standards. The principles also emphasize that claims based on the use of carbon offsets "should be in the context of a corporate climate strategy that prioritizes within-value-chain emissions reductions."
  • Market participants should contribute to efforts that improve market integrity. This includes, for example, improving transparency and the publicly available data of credit-generating projects and programs.
  • Policymakers and market participants should facilitate efficient market participation and seek to lower transaction costs.

While these principles don't have the force of law, they're a strong indication of how federal agencies will develop regulations to address these issues and how regulators will enforce existing consumer protection laws.

This alert provides general coverage of its subject area. We provide it with the understanding that Frankfurt Kurnit Klein & Selz is not engaged herein in rendering legal advice, and shall not be liable for any damages resulting from any error, inaccuracy, or omission. Our attorneys practice law only in jurisdictions in which they are properly authorized to do so. We do not seek to represent clients in other jurisdictions.

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