Treasury Secretary Yellen Calls for Enhanced Integrity in Carbon Credit Markets

Treasury Secretary Janet Yellen offered support for voluntary credit carbon markets in a May 28 statement, but also signaled the need for greater “integrity” in those markets and said that the Treasury Department is looking at potential guidance or regulation for those markets, along with the Commodity Futures Trading Commission (CFTC) and other federal government agencies.

Yellen said that to succeed in their mission voluntary carbon markets require “supply integrity”, “demand integrity” and “market integrity”.

The CFTC issued proposed guidance in December, seeking feedback by the end of February. Yellen’s comments appear to reinforce that voluntary carbon markets will become more structured following a series of accounts from news organizations and environmental groups questioning the value of some carbon offset packages.

“High-integrity VCMs offer significant potential economic and climate opportunities. They can enable buyers to source cost-effective credits from different technologies, ecosystems, and geographies. And they can channel capital towards the most effective climate solutions. Today, VCMs are relatively small. But these markets have the potential to support significant decarbonization—if we address some key challenges”, she said.

She continued, “Unlike commodities like nickel or soybeans that may be physically delivered to the buyer for inspection and use, the emissions savings associated with a carbon credit are generally “delivered” to the atmosphere. This makes it more difficult to assess the quality of carbon credits—that is, whether they really are associated with (carbon) emissions savings. In recent years, researchers and journalists have found that a number of projects have not delivered the quality or quantity of emissions savings they claimed.”

Full text of Janet Yellen’s remarks can be found here: https://home.treasury.gov/news...