Government Guidelines Signal Hope Ahead in Voluntary Carbon Markets

By Dan Lambe

The raucous waves of the voluntary carbon market in the last year have unsettled even the most seasoned of market leaders. Failed carbon credit projects have come under great public scrutiny and the ensuing criticisms have clouded the space with mistrust. Understandably, corporate leaders have become hesitant to purchase or invest. As a result, the market has remained woefully underutilized. The persistent uncertainty has proven a challenge in the Arbor Day Foundation and other’s efforts to leverage the market to accelerate the protection and restoration of forest ecosystems.

Yet in this moment, I feel nothing but hope.

In May, leaders at the federal level released the “Principles for Responsible Participation in Voluntary Carbon Markets.” The document is a recognition of the significant progress that’s been made in the market and a resounding affirmation of its critical function in the fight against climate change.

Up until now, private entities and voluntary initiatives have largely led the conversation in the voluntary carbon markets. Agencies like the Integrity Council for the Voluntary Carbon Market (ICVCM) and the International Carbon Reduction and Offset Accreditation (ICROA) have been incredible leaders in the industry, strengthening processes that weed out bad actors and create confidence for buyers. As a result, for the first time, the federal government has thrown its weight behind the market in a major way, signaling trust in its credibility. The joint response acknowledges that — as long as certain principles are upheld — the voluntary carbon markets have the potential to be a game changer in the scope of global climate action.

Treasury Secretary Janet Yellen announced these principles in collaboration with Agriculture Secretary Tom Vilsack, Energy Secretary Jennifer Granholm, as well as senior climate and economic advisors. Despite their differing priorities and areas of focus, these leaders are all united by the urgent need for engagement in the voluntary carbon market. They recognize that bolstering these markets yields not just a win for one, but a win for all.

When the government raises its hand and affirms the immense importance of the voluntary carbon market, it evokes convictions that will hopefully make corporate leaders feel more secure in taking steps toward investment. As an emerging market, it certainly needs rapid continuous improvement and actors with high integrity. But there’s no need to wait for perfection in order to act. There are knowledgeable leaders that can help corporations navigate challenges and adhere to the clearly defined principles now identified by the government.

While Yellen and her co-authors make it clear the list of principles stated in their guiding document is non-exhaustive, we at the Arbor Day Foundation are encouraged to see many of the government’s priorities align with our own. In our more than 50-year legacy, we have partnered with hundreds of corporations to help protect and restore critical ecosystems through reforestation. Many of those private sector leaders have chosen to invest in the forestry carbon market and our team of industry experts have helped match them to high-quality products. We engage in rigorous due diligence processes that includes fully vetting developers and their projects. We assess not only potential reputational and financial risks to corporate leaders, but also the likelihood of any environmental or social harm created by the project.

Like the government, the Foundation believes that carbon credit projects should be designed to deliver ‘co-benefits’ to local communities. Through forests, we can achieve this by providing food security, improving water quality, protecting wildlife and supporting livelihoods. The principles also encourage market participants to get involved in improving market integrity. At the Arbor Day Foundation, we are deeply invested in the effort to improve market integrity. Within our networks and within our team the Foundation’s work is executed by experts, including the Foundation’s managing director of carbon markets and former chair of ICROA, Jeremy Manion. The collective insights of our network are instrumental in our success in helping nurture a more robust and transparent market.

The Foundation is also glad to see the government inspire carbon credit users to publicly disclose the nature of their credits annually, at least. Increasing transparency is a way to ensure a rush to quality and, hopefully, encourage more people to get involved. As our team discussed in the Foundation’s 2023 Insights Summary, some corporate leaders have avoided talking about their carbon credit projects, for fear of being accused as ‘greenwashing.’ The effect, known as ‘greenhushing’, has led to more corporations sitting on the sidelines largely because they’ve rarely seen newcomers enter the market, assuming they must be perfect. Overall, it’s a roadblock in the growth of the market and the growth of high-quality supply.

At the Arbor Day Foundation, we hope these guidelines will steady the stormy waters of the market and restore trust, because our planet urgently needs more trees. In the end, that’s what this market is all about. By growing critical forest lands, we have the power to foster resilient communities and ecosystems worldwide.

This is important work. So, let’s start today.