On May 28, the White House released a statement of principles aimed at guiding stakeholders participating in voluntary carbon markets. The document aims to address existing flaws in global carbon markets and propose steps towards greater transparency and efficiency. Although it signals the Biden administration’s interest in directing private-sector capital towards climate mitigation activities, it does not introduce new ideas, commit to immediate government action, or recognise the role of new technology in creating high-integrity carbon credits.
The current market suffers from a lack of transparency and standardisation, resulting in low-quality carbon credits. Without regulatory oversight, the market remains fragmented, with different NGOs and non-profit organisations enforcing varying rules and standards. This inconsistency leads to confusion regarding methodologies and projects.
While the principles identify these issues, they fall short in providing clear definitions that market participants require. For instance, “additionality” often forces an offset project to prove a counterfactual scenario about what would have occurred in its absence. This concept is widely debated within the carbon space. Similarly, defining “permanence” is challenging, with some project types considering 50 years as permanent, while others set the threshold at 10,000 years.
Ensuring a carbon credit represents real emissions reductions requires robust quantification of carbon from the bottom-up, rather than a top-down review against external criteria. If a project can accurately document what, when, and how it happened through accessible and reliable data, concepts such as additionality and permanence can be properly evaluated by buyers.
Current technology allows for the collection of emissions data across sectors for carbon projects. At a minimum, this data should be independently collected using objective methods. No single data point should be considered the sole source of truth, making multiple contextually relevant sources crucial for strengthening mitigation claims. Importantly, the data supporting these credits should be immutable, auditable, and accessible by third parties.
Context Labs is eager to continue collaborating with federal agencies to integrate these principles into carbon accounting programmes. Examples include the Department of Energy’s global coordination of measurement, monitoring, reporting, and verification (MMRV) of methane emissions, and the Commodity Futures Trading Commission’s proposed criteria for listing carbon credits.
These initiatives are vital initial steps, but the world is progressing swiftly on this issue. In February, the EU announced its Carbon Removal Certification Framework, the world’s first regulatory framework for certifying carbon removal credits, potentially setting a global standard in the voluntary carbon market. For the US to lead in climate investment and establish a high-integrity domestic voluntary carbon market, a mere statement of principles will not suffice.
i(x) Net Zero plc (LON:IX) is an investing company which focusses on Energy Transition and Sustainability in the Built Environment, and was founded in 2015 by Trevor Neilson, Pär Lindström and Howard W. Buffett. It has holdings that are committed to facilitating and accelerating the transition away from energy that is derived from fossil fuels to clean and renewable energy sources including Context Labs.
