By Wally Adeyemo
Over the past three and a half years, the Biden-Harris administration has pursued an aggressive climate agenda, and Treasury has been proud to play a leading role. We lead the implementation of the many tax provisions of the Inflation Reduction Act, which are driving a record level of private sector investment in clean energy. We published the Principles for Net-Zero Financing and Investment to support financial institutions in pursuing credible and consistent net-zero commitments. And we are working to identify and address climate-related financial risks.
What we know and what all of you know is that this challenge requires all of us – government, the private sector, nonprofit organizations, experts, and academics. The need for our collaboration is clear when we think about Voluntary Carbon Markets (VCMs).
VCMs have the potential to create both economic and climate opportunities by channelling private capital to high-impact and cost-effective climate projects across technologies, ecosystems, and geographies. But today’s markets face significant challenges that are holding back their growth.
That’s why in May, with partners across our government, we launched the Principles for Responsible Participation in Voluntary Carbon Markets. We hope that these Principles can bring us closer to achieving functioning, high-integrity VCMs that live up to both the economic and climate potential we all believe in. I’m grateful not only for those of you in this room who helped us form these Principles, but I’m also grateful for the work we’ve all done to make progress since their release.
The Principles emphasize the importance of supply integrity – the idea that credits should represent real emissions reductions or removals and avoid harm. In recent months, we’ve seen steps taken to improve supply integrity. For example, the IC-VCM has started applying its Core Carbon Principle-approved label to several methodologies. And, the CFTC provided final guidance for listing voluntary carbon credits on exchanges. These approvals and regulatory guidance are technical steps. They may lack the luster of a splashy investment announcement. But they are the exact kinds of steps we have to take to achieve the ambitious goals we are aspiring to.
The principles also emphasize demand integrity – the idea that companies should make every effort to reduce direct emissions within their own value chains and then pursue carbon credits to complement those efforts. We have been happy to see companies developing transition plans and pursuing other efforts, alongside considering participation in VCMs. Because while VCMs are crucial to our goals, they are not in themselves sufficient, especially in their nascent stage.
Lastly, the principles emphasize market integrity – the need to improve a currently fragmented market with more transparency. Increasing transparency around pricing and transaction data would help buyers reduce their risk, developers better predict their revenues, and financiers develop new products. I’m glad that you’ll get to hear later today from treasury under-secretary Nellie Liang on these issues and how we can make progress.
There’s no question that we have much more work to do. We at Treasury look forward to continuing to work with counterparts across our government, civil society organizations, the private sector, and international partners – bilaterally, and through groups like APEC and the G20.
VCMs hold significant potential. But we can only realize their promise if we are willing to take steps to overcome their challenges. I have confidence we can meet the moment because of the creativity, talent, and leadership of those of you in this room.
Thank you again for having me here today; I look forward to being your partner in this work.
