Carbon Offsets, a Much-Criticized Climate Tool, Get Federal Guidelines

The Biden administration on Tuesday laid out for the first time a set of broad government guidelines around the use of carbon offsets in an attempt to shore up confidence in a method for tackling global warming that has faced growing criticism.

Companies and individuals spent $1.7 billion last year voluntarily buying carbon offsets, which are intended to cancel out the climate effects of activities like air travel by funding projects elsewhere, such as the planting of trees, that remove carbon dioxide from the atmosphere, but that wouldn’t have happened without the extra money.

Yet a growing number of studies and reports have found that many carbon offsets simply don’t work. Some offsets help fund wind or solar projects that likely would have been built anyway. And it’s often extremely difficult to measure the effectiveness of offsets intended to protect forests.

As a result, some scientists and researchers have argued that carbon offsets are irredeemably flawed and should be abandoned altogether. Instead, they say, companies should just focus on directly cutting their own emissions.

The Biden administration is now weighing in on this debate, saying that offsets can sometimes be an important tool for helping businesses and others reduce their emissions, as long as there are guardrails in place. The new federal guidelines are an attempt to define “high-integrity” offsets as those that deliver real and quantifiable emissions reductions that wouldn’t have otherwise taken place.

“Voluntary carbon markets can help unlock the power of private markets to reduce emissions, but that can only happen if we address significant existing challenges,” said Treasury Secretary Janet L. Yellen in a statement. She is scheduled to discuss the guidelines at an event Tuesday in Washington with other administration officials.

“The principles released today are an important step toward building high-integrity voluntary carbon markets,” she said.

The new federal guidelines also urge businesses to focus first on reducing emissions within their own supply chains as much as possible before buying carbon offsets. Some companies have complained that it is too difficult to control their sprawling network of outside suppliers and that they should be allowed to use carbon offsets to tackle pollution associated with, for instance, the cement or steel they use.

While the new federal guidelines are neither binding nor enforceable, proponents of voluntary carbon markets say they could help foster a larger market for high-quality offsets that actually work. There are also several private efforts, such as the Integrity Council for the Voluntary Carbon Market, that are trying to lay out principles for what counts as an effective carbon offset.

“There are credible estimates that the voluntary carbon market could grow to 10 or 20 times what it is today, and then you’d be talking about real money to tackle climate change,” said Nat Keohane, president of the Center for Climate and Energy Solutions, an environmental group that supports the use of carbon offsets. “But we’re not going to get to that scale unless buyers have confidence in what they’re buying.”

Critics of carbon offsets, however, say the new federal guidelines are too vague and don’t do enough to describe what sorts of projects count as high-quality. What’s more, the critics say, without stricter government enforcement of voluntary carbon markets, there will still be plenty of cheap, ineffective offsets floating around that businesses can continue to buy without consequences.

“Absent the government doing something to address the bottom of the market through enforcement, I don’t see any of the low-quality credits going away,” said Danny Cullenward, a senior fellow at the Kleinman Center for Energy Policy at the University of Pennsylvania.

In California, some lawmakers have proposed a bill that would penalize companies that market offsets that were unlikely to be “quantifiable” or “real.” But that bill has been opposed by business groups and even some environmentalists, who argue that it could choke off a source of funding for conserving and protecting forests and other natural lands.

Biden administration officials, for their part, say that offsets can also help channel investment toward poorer nations that are struggling to raise funds to tackle climate change. While President Biden has pledged more than $11 billion in annual climate aid to developing countries, Congress has approved only a small fraction of that.

To fight climate change, “we need to mobilize enormous amounts of private capital,” said John Podesta, Mr. Biden’s senior adviser for international climate policy. Voluntary carbon markets, he said, can “support clean energy deployment in developing countries that can benefit most from new investment.”