Remarks by Secretary of the Treasury Janet L. Yellen on High-Integrity Voluntary Carbon Markets

As Prepared for Delivery

Good morning. Thank you to Bloomberg Philanthropies, the Center for Climate and Energy Solutions, and the Environmental Defense Fund for the great work you’re doing and for hosting us today.

The Biden Administration has been committed to addressing climate change since day one. And the Treasury Department has worked to play our part to raise ambition and deliver progress at home and abroad.

At home, the Inflation Reduction Act is the most significant climate legislation in our nation’s history. It is fueling investments in renewable energy—propelling us toward our climate goals while expanding economic opportunity for Americans across the country. Abroad, our work has included launching Just Energy Transition Partnerships and calling for the multilateral development banks to evolve so that they are equipped to help countries better address global challenges including climate. 

But we know there’s much more to do. We need to use all the tools at our disposal—creatively, thoughtfully, and at scale. I believe that harnessing the power of markets and private capital is critical. This includes efforts to grow high-integrity voluntary carbon markets.

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.

Let me discuss those now. 

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 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. 

There are also genuinely hard questions of market design, such as how VCMs can ensure that emissions-reducing activities are durable and truly additional. 

Fortunately, we’re currently seeing a renewed wave of civil society, corporate, and government resolve to address these challenges. At the Treasury Department, we have been conducting extensive market outreach to understand these challenges and what further actions need to be considered, including related to market oversight and potential regulation. I was pleased to see CFTC Chair Behnam, who has led work in this space for several years, recently propose important guidance on VCM contracts. We are also actively working with international partners, bilaterally and through multilateral fora like the G20, on these issues. 

Many of you in this room are also pursuing important efforts. Multi-stakeholder groups like the IC-VCM and VCMI are working to raise integrity standards. Groups like carbon credit rating agencies are looking to provide credit buyers with a clear view into the quality of what they purchase.  

Today, I am proud to mark the next milestone in our collective efforts. Treasury, together with colleagues from across the Administration, and after extensive stakeholder engagement, is releasing a joint statement and key principles to support high-integrity VCMs. 

Let me highlight three key aspects of the principles. 

First, supply integrity. Carbon credits should meet high-quality atmospheric integrity standards. They should represent real emissions reductions or removals and there should be guardrails to avoid negative environmental and social impact and to support co-benefits like local economic development and biodiversity. To date, we’ve seen too many examples where credits failed to meet these criteria. We know this market can do better, and we’re committed to helping strengthen it.

Second, demand integrity. Corporate buyers should prioritize reducing their own emissions, particularly through transition planning, adopting net-zero targets, and transparently reporting on progress. Treasury’s Principles for Net-Zero Financing and Investment, released last year, provide guidance here. Participation in VCMs should complement these efforts. 

Third, market integrity. Many participants have told us that transacting in VCMs is difficult. It’s a fragmented market, with high search costs and low transparency. We encourage market participants to continue efforts to address these challenges through innovative products and services and believe government could play a role here too.

Though these principles are voluntary, we believe they can help guide efforts to address the challenges and take advantage of the opportunities associated with high-integrity VCMs. 

Let me be clear: We applaud companies that finance decarbonization through purchasing high-quality carbon credits. We want this market to succeed, but that requires a widespread commitment to integrity that instills market trust. There is a lot more work to do. But if we do it well, we have the chance to enlist markets as a powerful ally in the fight against climate change. 

Thank you all for joining us here today.

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