Carbon market's crunch time

Aug 01, 2023

THE BIG IDEA

Wind turbines operate near a fossil fuel facility.

A standard-setting group is aiming to breathe life into the voluntary carbon market by restoring its reputation. | AFP via Getty Images

NEIGHBORHOOD WATCH — The beleaguered voluntary carbon market is going for a reboot.

You’ve heard that from us before (who could forget our Taylor Swift-style analysis of the market's reputational woes). But this time, the standard-setter is putting more meat on the bones of its plan to bring credibility to carbon offsets — a plan that promises a deep dive into the murky issues clouding the market’s reputation and one that’s sure to come with pitfalls of its own.

The Integrity Council for the Voluntary Carbon Market on Thursday released the criteria it will use to assess whether carbon crediting programs — as well as individual categories of projects, like forestry or cookstove replacement projects — meet the group’s “Core Carbon Principles” and, therefore, whether they can be labeled as such.

The effort is likely the best hope for restoring the market's battered reputation, which has been keeping offset prices low and scaring away corporate customers.

“There’s a real lack of consistent quality, and that’s been a significant challenge and a problem for the market,” said Nat Keohane, a senior adviser to ICVCM and the president of the Center for Climate and Energy Solutions. “What we're looking to do is create a signal for quality that not only helps buyers today, but also pushes the market toward high integrity by creating incentives.”

Keohane said he expects the market will embrace and adopt the ICVCM’s assessment framework’s key criteria, which include principles of additionality, permanence and conservative accounting of the emissions impact.

Now the actual standard-setting begins. Two working groups are forming: one to make recommendations on which categories of projects should be “fast-tracked” for approval and which should not, and another that will assess the categories that “raise more complex issues.”

Obvious questions emerge: Even if the entire category of forestry projects, for instance, is deemed CCP-friendly, there’s inevitable variability between projects within the same category. Because ICVCM isn’t a regulator, Keohane said, the best the body can do is promote “high levels of quality across the market.” The group is aiming to start assessing programs and project categories by the end of the year.

Environmental watchdogs are hopeful but moderating their expectations.

“The coming months will be the ICVCM’s most important test so far," said Gilles Dufrasne, policy lead on global carbon markets at Carbon Market Watch, a nonprofit. "We will see how far it is willing to go to exclude problematic activities from eligibility under its label.”

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WASHINGTON WATCH

PRICING NATURE'S BOUNTY — The Biden administration is trying to put a price tag on disturbing nature, Jean Chemnick reports for POLITICO's E&E News.

Draft guidance the White House Office of Management and Budget and Office of Science and Technology Policy will unveil on Tuesday targets for so-called ecosystem services — benefits to people derived from natural features like woods, wetlands and watersheds.

While these have sometimes appeared in the cost-benefit accountings that agencies routinely perform to support their rules and policies, there has never been a government-wide directive for agencies to grapple with them or any guidance on how they should do so.

That has meant they came second to other values that are easier to quantify, wrote Richard Revesz, administrator of OMB’s Office of Information and Regulatory Affairs suboffice, and OSTP Director Arati Prabhakar in a joint blog post Tuesday.

“Failing to fully account for nature’s bounty has led to undervaluing and erosion of our nation’s natural assets,” wrote Revesz and Prabhakar.

PLASTIC POLLUTION

SURPRISE, SURPRISE — The plastics and petrochemical industries are less than enthusiastic about the EPA’s draft national strategy to prevent plastic pollution, comments on which were due Monday.

It’s the EPA’s first major recommendation that has industry groups most riled up: “Reduce the production and use of single-use, unrecyclable, or frequently littered plastic products.”

Turns out, gunning for plastic production itself doesn't sit too well with the Plastics Industry Association and the American Chemistry Council, two leading trade groups.

The ACC calls on EPA to consider the “impacts” of a reduction in single-use plastics and argues that alternatives aren’t always environmentally preferable, citing the use of plastic in electric vehicles and food packaging.

The Plastics Industry Association is arguing that EPA should revise the draft to “foster circularity, not advocate production limits” and to recognize that plastics serve a "critical and sustainable role in modern life,” not just that they have “some potential benefits,” as EPA wrote.

The ACC also took issue with EPA’s scrutiny of pyrolysis, a type of chemical recycling that was targeted in the draft strategy.

On the other side, Beyond Plastics, a group led by former EPA regional administrator Judith Enck, called for policies that reduce plastic production, ban toxic chemicals, and exclude chemical recycling in any and all forms.

YOU TELL US

GAME ON — Welcome to the Long Game, where we tell you about the latest on efforts to shape our future. We deliver data-driven storytelling, compelling interviews with industry and political leaders, and news to keep you in the loop on sustainability.

Team Sustainability is editor Greg Mott, deputy editor Debra Kahn and reporters Jordan Wolman and Allison Prang. Reach us all at gmott@politico.com, dkahn@politico.com, jwolman@politico.com and aprang@politico.com.

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WHAT WE'RE CLICKING

— Bloomberg reports on increasing concern that credit raters are misreading climate risks in the global bond market in a way that could lead to problems for both borrowers and lenders.

— Companies with high environmental, social and governance scores pollute just as much as lower-rated ones, according to new research. The Financial Times has the story.

— The Economist looks at what it calls the demonization of Larry Fink in a profile of the BlackRock chairman and CEO.

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