Voluntary Carbon Markets Guidelines: Increased Transparency to Reduce Emissions

On May 28, 2024, the United States White House announced principles to add integrity to voluntary carbon markets (VCM) offsets— and help them grow amid concerns that current practices often don’t cut greenhouse gas emissions as claimed. The landmark initiative is aimed at underscoring the growing movement supporting the role of voluntary carbon markets.  The implications for the oil and gas industry include greater data transparency linked to increased opportunities for differentiated gas market demand. 

"Credibility is literally the commodity," said Energy Secretary Jennifer Granholm at an event announcing the policy in Washington, D.C., on May 28, 2024. "It's a problem that VCMs haven't always lived up to their promises."

The Integrity Council for Voluntary Carbon Markets (ICVCM) and other organizations have started to publish principles to define high-quality offsets. According to ICVCM Council Chair Annette Nazareth, the new principles aligned with its Core Carbon Principles, emerging as the first independent global benchmark for high-integrity carbon credits.  Nazareth stated, "High-integrity carbon credits can mobilize private finance at scale for projects to reduce and remove billions of tonnes of emissions that would not otherwise be viable."

"Credibility is literally the commodity."

- Jennifer Granholm, U.S. Energy Secretary

This blog explores the details of the announcement, its implications for various stakeholders, and the potential it holds for accelerating global climate action. The U.S. market to date has been sketchy and stunted, with investigations and studies showing promised cuts to carbon dioxide don't happen, or can't be verified.  As a result, some scientists and researchers have argued that carbon offsets are irredeemably flawed and should be abandoned altogether. Instead, they argue, companies should directly focus on cutting their emissions.

Understanding Carbon Offsets and Voluntary Carbon Markets

Carbon offsets are reductions in carbon dioxide or other greenhouse gas emissions to compensate for emissions produced elsewhere. They are measured in metric tons of carbon dioxide-equivalent (CO2e) and can be achieved through various means such as renewable energy projects, reforestation, and energy efficiency improvements.

Voluntary carbon markets (VCMs) allow businesses, organizations, and individuals to purchase carbon offsets voluntarily to compensate for their greenhouse gas emissions. Unlike compliance markets –regulated by government mandates– VCMs operate independently, offering more flexibility and innovation in achieving emission reductions.

Carbon Markets Growth Projections

Data indicates there's potential to steer far more private capital into climate projects via VCMs:

• Boston Consulting Group (BCG) sees a market up $40B by 2030.
• Morgan Stanley sees up to $250B in 2050 (Center for Strategic and International Studies - CSIS).
• The U.S. Department of Energy (DOE) funds CO2 removal projects, is working to link credit buyers and sellers, and has a $35 million competition for selling removal credits directly to the agency.

According to the New York Times, companies and individuals spent $1.7 billion last year voluntarily buying carbon offsets, which are intended to cancel out the climate effects by funding projects elsewhere –such as the planting of trees– that remove carbon dioxide from the atmosphere, but that wouldn’t have happened without the extra money.

The White House Announcement: Key Components

The White House’s May 28, 2024, announcement outlined several key initiatives and policy measures designed to enhance the effectiveness, transparency, and accessibility of voluntary carbon markets. These initiatives are set to drive significant progress in global efforts to combat climate change:

1. Establishment of the National Carbon Market Authority

A central element of the announcement is the creation of the National Carbon Market Authority (NCMA). This new federal body will oversee the regulation and standardization of voluntary carbon markets in the United States. The NCMA’s responsibilities will include:

• • Setting rigorous standards for carbon offset projects to ensure their environmental integrity.
  • Implementing a robust verification and monitoring system using advanced technologies.
  • Providing a transparent platform for tracking carbon offset transactions.

The establishment of the NCMA aims to build trust in VCMs by ensuring that offsets are credible, additional, and verifiable.

2. Introduction of the American Carbon Credit Registry

To facilitate the trading of high-quality carbon offsets, the White House announced the launch of the American Carbon Credit Registry (ACCR). The ACCR will serve as a centralized database where verified carbon credits can be listed, traded, and retired. Key features of the ACCR include:

• • Blockchain integration to ensure transparency and prevent double-counting.
  • Real-time updates on the status and availability of carbon credits.
  • Enhanced accessibility for small and medium-sized enterprises (SMEs) to participate in the market.

The ACCR is expected to streamline the trading process, making it easier for participants to buy and sell carbon credits confidently.

3. Support for Innovative Carbon Offset Projects

Recognizing the importance of diverse and innovative approaches to carbon offsetting, the White House announced increased funding and support for cutting-edge projects. This includes:

• • Grants and incentives for projects focusing on natural climate solutions, such as reforestation and soil carbon sequestration.
  • Support for technological innovations, including direct air capture and carbon capture and storage (CCS) technologies.
  • Collaboration with universities, research institutions, and private companies to develop and scale up new offset methodologies.

This initiative aims to foster innovation and expand the range of effective carbon offset solutions available in the market.

4. Strengthening International Collaboration

Climate change is a global challenge, and the White House emphasized the importance of international cooperation in enhancing voluntary carbon markets. Key measures include:

• • Bilateral agreements with other nations to harmonize standards and facilitate cross-border carbon trading.
  • Participation in international forums to share best practices and promote global market integrity.
  • Support for developing countries to build capacity and participate in voluntary carbon markets.

By fostering international collaboration, the White House aims to create a more cohesive and effective global carbon market.

5. Promoting Public Awareness and Engagement

To ensure broad-based support for voluntary carbon markets, the White House announced a comprehensive public awareness campaign. This campaign will focus on:

• • Educating the public about the role and benefits of carbon offsetting.
  • Encouraging businesses and individuals to participate in voluntary carbon markets.
  • Highlighting successful carbon offset projects and their positive impacts.

The new federal guidelines attempt to define “high-integrity” offsets as those that deliver real and quantifiable emissions reductions that wouldn’t have otherwise taken place.

Implications for Businesses

Oil and gas corporations are under increasing pressure to reduce their carbon footprints and contribute toward sustainability goals.

The White House announcements have far-reaching implications for the future of carbon offsetting. The significant benefits for businesses as key participants in voluntary carbon markets include:

• Enhanced credibility and transparency of carbon offsets will boost confidence in the market.
• Easier access to high-quality carbon credits through the ACCR.
• Opportunities to invest in innovative carbon offset projects and demonstrate leadership in sustainability.
  
  

For businesses committed to reducing their carbon footprints, these measures offer a clearer path to achieving their environmental goals. Envana Software Solutions has been a pioneering force in the emissions management market. Envana's clients are renowned for their commitment to transparency, accuracy, and the use of advanced technology to verify the real impact of their oil and gas projects.  Leveraging Envana Catalyst, industry trailblazers such as PETRONAS, AkerBP, and other market leaders are gaining efficiencies, reaching sustainability goals, and increasing returns through greater transparency.  

 

To find out more about how your company can benefit from voluntary carbon markets, reach out to Envana today. Envana Software Solutions empowers your organization to account for the value chain of your emissions with governable data.  

SOURCES: Reuters, Axios, New York Times