US Commodity Futures Trading Commission Proposes Plan to Increase Oversight of Carbon Credit Markets

As world leaders gather in Dubai for the COP28 Climate Summit, the US Commodity Futures Trading Commission (CFTC) proposed guidance for companies seeking to list voluntary carbon credits for trading, Reuters reported (12-4-23).

The proposal details expectations for a CFTC-registered market looking to offer trading of carbon credits, which some firms buy in a bid to offset or mitigate greenhouse gas emissions. According to Reuters, regulators have pushed for heightened scrutiny of voluntary carbon markets, which have developed outside government oversight, due to concerns over quality and double counting.

In a statement cited by Reuters, CFTC Chair Rostin Behnam said the CFTC needs to strengthen the integrity and transparency of markets for derivatives of such credits to ensure they are “real, additional, permanent, verifiable” and represent unique metric tons of greenhouse gas emissions reduced or removed from the atmosphere.

The plan calls for listing firms to establish quality standards, delivery points, and inspection provisions for any voluntary carbon credits, among other requirements. Firms should only list contracts that are not readily susceptible to manipulation, the CFTC proposal said, per Reuters.

As of November, 18 futures contracts for voluntary carbon market products have been submitted for listing with the CFTC, the agency said in its proposal. CFTC said in a separate statement it is seeking public comments on the plan, Reuters noted.