Janet Yellen Secretary of the Treasury | Twitter Website
On May 16, 2024, Secretary of the Treasury Janet L. Yellen delivered remarks on high-integrity voluntary carbon markets (VCMs) at an event hosted by Bloomberg Philanthropies, the Center for Climate and Energy Solutions, and the Environmental Defense Fund.
Yellen highlighted the Biden Administration's commitment to addressing climate change from its inception. She emphasized that the Treasury Department has been actively involved in raising ambition and delivering progress both domestically and internationally. Domestically, she pointed to the Inflation Reduction Act as a significant piece of climate legislation that is driving investments in renewable energy and expanding economic opportunities across the country. Internationally, efforts include launching Just Energy Transition Partnerships and advocating for multilateral development banks to evolve to better address global challenges like climate change.
"We need to use all the tools at our disposal—creatively, thoughtfully, and at scale," Yellen stated. She stressed the importance of harnessing market power and private capital to grow high-integrity VCMs.
Yellen outlined several challenges facing VCMs, including assessing the quality of carbon credits since emissions savings are "delivered" to the atmosphere rather than physically inspected. She noted that some projects have failed to deliver promised emissions savings, raising questions about market design and ensuring emissions-reducing activities are durable and additional.
Despite these challenges, Yellen expressed optimism due to renewed efforts from civil society, corporations, and governments. The Treasury Department has been engaging extensively with market participants to understand these issues better and consider further actions related to market oversight and potential regulation. Yellen acknowledged CFTC Chair Behnam's recent proposal on VCM contracts as a positive step forward.
She also recognized multi-stakeholder groups like IC-VCM and VCMI for their work in raising integrity standards within VCMs. Additionally, she mentioned carbon credit rating agencies' efforts to provide buyers with clear insights into credit quality.
Yellen announced a new milestone: Treasury's release of a joint statement with key principles supporting high-integrity VCMs after extensive stakeholder engagement across the Administration.
The three key aspects of these principles include:
1. **Supply Integrity**: Carbon credits should meet high-quality atmospheric integrity standards representing real emissions reductions or removals while avoiding negative environmental impacts.
2. **Demand Integrity**: Corporate buyers should prioritize reducing their own emissions through transition planning, adopting net-zero targets, and transparent reporting.
3. **Market Integrity**: Efforts should be made to address market fragmentation, high search costs, and low transparency through innovative products and services.
While these principles are voluntary, Yellen believes they can guide efforts in addressing challenges associated with high-integrity VCMs. "We applaud companies that finance decarbonization through purchasing high-quality carbon credits," she said. "We want this market to succeed but that requires a widespread commitment to integrity that instills market trust."
Yellen concluded by expressing hope that markets could become powerful allies in combating climate change if guided correctly.
"Thank you all for joining us here today," she said.
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