On September 25, 2024, Under Secretary for Domestic Finance Nellie Liang addressed the Integrity Council for the Voluntary Carbon Market (IC-VCM), the Global Carbon Market Utility (GCMU), and the Voluntary Carbon Markets Integrity Initiative (VCMI) on the topic of voluntary carbon market integrity. In her remarks, she emphasized the importance of delivering high-integrity carbon markets to meet climate goals.
Liang referred to a statement by Secretary Yellen: “We need to use all the tools at our disposal—creatively, thoughtfully, and at scale.” She noted that several US government agencies had issued the Voluntary Carbon Markets Joint Policy Statement and Principles in May, highlighting necessary improvements in supply integrity, demand integrity, and market integrity.
Liang acknowledged challenges faced by buyers in identifying high-quality credits due to numerous methodologies in the market. She praised institutions like IC-VCM for setting integrity floors for credit quality through a single Core Carbon Principle-Approved label. This initiative aims to simplify credit assessment and comparison for buyers.
Credit standard bodies are updating methodologies to ensure projects deliver additional and durable emissions impacts. Additionally, carbon credit rating firms continue issuing ratings on new and existing projects. The Commodity Futures Trading Commission (CFTC) has also published final guidance for regulated exchanges to use industry-recognized standards as evaluation tools for carbon credits underlying futures contracts.
The VCM Principles stress demand integrity, urging corporate buyers to prioritize reducing their own emissions while using high-quality carbon credits to accelerate progress toward net-zero targets. Liang emphasized that an efficient buying and selling process is crucial once supply integrity is ensured.
She highlighted issues such as opaque pricing processes and excessive search costs in purchasing carbon credits. Liang suggested developing interoperable data protocols where every carbon credit includes consistent data tags for project location, rating, description, issuance, and units. This would facilitate easier benchmarking and aggregation of product baskets.
Several market participants are exploring ways to structure accessible data across the carbon credit lifecycle through meta-registries from private entities or blockchain-based open data platforms. These efforts aim to create global data protocols.
Most transactions in voluntary carbon markets occur over-the-counter (OTC), leading to confidentiality in pricing details. Despite emerging OTC pricing data sources aiming for transparency, significant price spreads persist between OTC and exchange-listed prices.
Liang called for increased price transparency in VCMs: “Increased transparency will lead to market prices reflecting fundamental information more clearly... mitigating information asymmetries.” A repository gathering price and transaction history could transform VCMs by enabling deeper liquidity and investment.
The Treasury Department supports a high-integrity voluntary carbon market. Liang concluded by expressing confidence that improved marketplace function would help VCMs reach their full potential: “We applaud and thank the ICVCM, VCMI, and GCMU for co-hosting this event... I look forward to hearing new perspectives.”
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