On Tuesday morning the climate heavy hitters from the Biden administration released its first official stance on the voluntary carbon markets, firing a signal flare into the darkness that the US backs market mechanisms for addressing climate change.

Is this the biggest news for carbon credits in 2024? Barring 6.2 and 6.4 clarity, yes. What did the guidance say? A lot and nothing at the same time. Will the market come roaring back? Don't hold your breath. Was the most important information a single sentence in Secretary Yellen's remarks? Absolutely.

The US has never given this sort of policy blessing to the carbon markets, it's barely given it a thought in the +25 years the mechanism has been around. Now, when the markets are reeling and at a critical inflection point the US not only comes out in support of the market but does it with the secretaries of treasury, agriculture and energy who affirm the role voluntary markets will play in the new carbon economy.

The Joint Policy Statement lays the groundwork for how corporates can and should use carbon credits. Through seven principles, the Biden administration delivers broad strokes on how the markets can improve. It touches on what credit suppliers must do to generate trustworthy claims, on what corporates need to undertake first before using credits, and how markets need to evolve to function better.

Without going line-by-line, it directly makes recommendations for four market participants. The most interesting or surprising callouts for each:

• Credit Generators (Suppliers, Project Developers): What the US considers to be high integrity credits have to show clear additionality, it's the first point mentioned and it featured prominently in the pre-release statement of the guidelines. They also need to transparently show how the calculations were performed, in line with California's AB1305. Third parties must verify the claim; how this is implemented will determine the ease of discovery of new methodologies. Finally, credits must come with a timed guarantee of carbon removal or emissions reductions and mitigation if reversal occurs during that period.

• Registries/Standards: Essentially do the ICVCM's CCP, but be more transparent, assure local communities aren't impacted, and go for co-benefits.

• Credit Users: Report all your emissions regularly, decarbonize first, decarbonize second, then go for credits for your Scope 3 emissions in difficult to abate scenarios. Insetting activities get the Yellen Yell of Approval, and companies need to publicly disclose the credits they retire and purchase (goodbye green hushing, we farely knew ye).

• Market Coordinators/Infrastructure: Be more transparent with transaction volumes and prices, and you better be interoperable with everyone else.

That is mostly all in line with what the industry has been moving towards via the ICVCM and VCMI, and echoes many of the recommendations made by the Taskforce for Scaling Voluntary Carbon Markets which led to the ICVCM.

So that's it, America has come in and saved the carbon markets and the day. Game, blouses.

Someone very smart in the markets even remarked that any company not compelled to act following this announcement was exhibiting a profound lack of sophistication. My instinct tells me that was more of a prayer whispered to the heavens then the relaying of the current ground truth reality.

When you read the joint policy statement, and the White House's Fact Sheet you realize that all of these initiatives and guardrails are supply-side oriented. They're operating under the belief that if you fix the credibility of the credits then demand will flow freely again, markets will operate more efficiently and angels will sing as the world is saved.

But the market needs help with demand. Demand side actors need incentives to participate or disincentives from avoiding action. Nothing within this policy statement and guidelines gives any business more of a reason to purchase credits. If anything, the guidance on transparency of credit usage and focus on capex intensive decarbonization efforts are more likely to dissuade a credit purchaser from participating in the market.

This is because there is nothing being done to draw or push corporate emitters into decarbonization pathways and the voluntary carbon markets... yet.

I don't think the prediction that companies will be compelled to act off this pronouncement is wrong, I just think it's early. Reading between the lines here, and taking Secretary Yellen at her words paints an interesting possibility. The US is planning on being a heavy-handed participant in the market to assure its usefulness as a tool in the fight against climate change. Incentives and disincentives are coming, but they will take time. Why do I believe this?

1. During Secretary Yellen's remarks she said: "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." Clearly she is referring to the US stepping in to put legal guardrails in place on the market as it exists, which would be welcomed considering how vague most of the policy statement was. Though in a world where the US is regulating voluntary carbon markets is it too far fetched for the Treasury Department to incentivize corporate participation in the market?

2. You don't get three cabinet secretaries and the National Economic Advisor to sign a joint policy statement, and give remarks at an event to leave it at that. This is the opening salvo in a multi-pronged strategy to improve these markets and build an American comparative advantage.

The US announced its presence on the world stage on Tuesday. It mostly followed the script that the industry has written on how it needs to improve, but the Joint Policy Statement did make some interesting excursions. It may spur some sophisticated US actors in the short term, but doesn't yet address the core challenge the market has to reach scale. And we should expect the US to regulate the market in the future.

On Tuesday morning the climate heavy hitters from the Biden administration released its first official stance on the voluntary carbon markets, firing a signal flare into the darkness that the US backs market mechanisms for addressing climate change.

Is this the biggest news for carbon credits in 2024? Barring 6.2 and 6.4 clarity, yes. What did the guidance say? A lot and nothing at the same time. Will the market come roaring back? Don't hold your breath. Was the most important information a single sentence in Secretary Yellen's remarks? Absolutely.

The US has never given this sort of policy blessing to the carbon markets, it's barely given it a thought in the +25 years the mechanism has been around. Now, when the markets are reeling and at a critical inflection point the US not only comes out in support of the market but does it with the secretaries of treasury, agriculture and energy who affirm the role voluntary markets will play in the new carbon economy.

The Joint Policy Statement lays the groundwork for how corporates can and should use carbon credits. Through seven principles, the Biden administration delivers broad strokes on how the markets can improve. It touches on what credit suppliers must do to generate trustworthy claims, on what corporates need to undertake first before using credits, and how markets need to evolve to function better.

Without going line-by-line, it directly makes recommendations for four market participants. The most interesting or surprising callouts for each:

• Credit Generators (Suppliers, Project Developers): What the US considers to be high integrity credits have to show clear additionality, it's the first point mentioned and it featured prominently in the pre-release statement of the guidelines. They also need to transparently show how the calculations were performed, in line with California's AB1305. Third parties must verify the claim; how this is implemented will determine the ease of discovery of new methodologies. Finally, credits must come with a timed guarantee of carbon removal or emissions reductions and mitigation if reversal occurs during that period.

• Registries/Standards: Essentially do the ICVCM's CCP, but be more transparent, assure local communities aren't impacted, and go for co-benefits.

• Credit Users: Report all your emissions regularly, decarbonize first, decarbonize second, then go for credits for your Scope 3 emissions in difficult to abate scenarios. Insetting activities get the Yellen Yell of Approval, and companies need to publicly disclose the credits they retire and purchase (goodbye green hushing, we farely knew ye).

• Market Coordinators/Infrastructure: Be more transparent with transaction volumes and prices, and you better be interoperable with everyone else.

That is mostly all in line with what the industry has been moving towards via the ICVCM and VCMI, and echoes many of the recommendations made by the Taskforce for Scaling Voluntary Carbon Markets which led to the ICVCM.

So that's it, America has come in and saved the carbon markets and the day. Game, blouses.

Someone very smart in the markets even remarked that any company not compelled to act following this announcement was exhibiting a profound lack of sophistication. My instinct tells me that was more of a prayer whispered to the heavens then the relaying of the current ground truth reality.

When you read the joint policy statement, and the White House's Fact Sheet you realize that all of these initiatives and guardrails are supply-side oriented. They're operating under the belief that if you fix the credibility of the credits then demand will flow freely again, markets will operate more efficiently and angels will sing as the world is saved.

But the market needs help with demand. Demand side actors need incentives to participate or disincentives from avoiding action. Nothing within this policy statement and guidelines gives any business more of a reason to purchase credits. If anything, the guidance on transparency of credit usage and focus on capex intensive decarbonization efforts are more likely to dissuade a credit purchaser from participating in the market.

This is because there is nothing being done to draw or push corporate emitters into decarbonization pathways and the voluntary carbon markets... yet.

I don't think the prediction that companies will be compelled to act off this pronouncement is wrong, I just think it's early. Reading between the lines here, and taking Secretary Yellen at her words paints an interesting possibility. The US is planning on being a heavy-handed participant in the market to assure its usefulness as a tool in the fight against climate change. Incentives and disincentives are coming, but they will take time. Why do I believe this?

1. During Secretary Yellen's remarks she said: "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." Clearly she is referring to the US stepping in to put legal guardrails in place on the market as it exists, which would be welcomed considering how vague most of the policy statement was. Though in a world where the US is regulating voluntary carbon markets is it too far fetched for the Treasury Department to incentivize corporate participation in the market?

2. You don't get three cabinet secretaries and the National Economic Advisor to sign a joint policy statement, and give remarks at an event to leave it at that. This is the opening salvo in a multi-pronged strategy to improve these markets and build an American comparative advantage.

The US announced its presence on the world stage on Tuesday. It mostly followed the script that the industry has written on how it needs to improve, but the Joint Policy Statement did make some interesting excursions. It may spur some sophisticated US actors in the short term, but doesn't yet address the core challenge the market has to reach scale. And we should expect the US to regulate the market in the future.