CFTC Holds First-Ever Voluntary Carbon Markets Meeting – Commodities/Derivatives/Exchanges
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On June 2, 2022, the United States Commodity Futures Trading Commission (“CFTC”) hosted the first-ever voluntary Carbon Markets Meeting at its headquarters in Washington, D.C. This event brought together climate policy experts from across regulatory and market sectors to discuss issues relating to credits for the reduction or removal of carbon dioxide emissions from the atmosphere, also known as carbon offsets. Companies wishing to meet their climate commitments and emission reduction targets can voluntarily purchase carbon offsets to offset emissions that otherwise could not be directly reduced. The CFTC has increasingly emphasized the need for standardization within voluntary carbon markets as well as appropriate safeguards for market integrity.
At the start of the one-day event, Chairman Rostin Behnam stressed that voluntary carbon markets offer both the derivatives market and regulators like the CFTC an opportunity to play a bigger role in managing climate risks. In response, many panelists offered their support for public policy measures to increase standardization and transparency in voluntary carbon markets. Other panelists, however, cautioned that a universal standard might overlook important distinctions between different sectors. In addition, panelists highlighted the need to collect the data necessary to ensure the integrity of carbon offsets by demonstrating that they actually result in carbon reduction or emissions avoidance. Panelists also offered their views on global supply and demand-side factors impacting high-quality carbon offsets and described the changing market structure for trading carbon offsets. and carbon derivatives.
On the same day as the Voluntary Carbon Markets Convening, the CFTC also issued a Request for Information (“RFI”) seeking public comment on climate-related financial risks in the derivatives and commodities markets. According to the CFTC, information collected through this RFI may be used to modify existing policies or regulations. Comments are expected by August 8, 2022. The CFTC therefore appears poised to expand its footprint within the regulation of carbon markets and facilitate the transition to a net zero economy. Indeed, Chairman Behnam emphasized that, in the CFTC’s role as market regulator, it will implement the rules and regulations necessary to help voluntary carbon markets grow responsibly.
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