CFTC takes step to improve carbon markets, but major gaps remain
Washington, D.C. – The Commodity Futures Trading Commission (CFTC) today issued final guidance on the listing of voluntary carbon credit derivative contracts, outlining key criteria to enhance the credibility and integrity of the market.
“Voluntary carbon markets can play a role in mitigating climate change, but only if the underlying carbon credits are high-quality,” said Kathy Fallon, Land Systems Director at Clean Air Task Force. “To date, inadequate standards, inconsistent implementation, and weak governance have led to the sale of low-quality credits leading to the loss of public and investor confidence. The CFTC’s final guidance is a step in the right direction, but it does not do enough to ensure transparency into projects underlying credits. Too much still depends on crediting protocols being robust enough to accurately reflect greenhouse gas reductions or removals from a project.”
In February, CATF submitted comments to the CFTC urging stronger oversight of voluntary carbon markets. Recommendations included greater transparency into the details of individual carbon credits, the inclusion of carbon storage durability and credit vintage to determine credit quality, and proper accounting for the risk of reversal.
“Our research on carbon credit certification guidelines underscores the importance of baseline analyses to quantify emissions reductions or removals, safeguards against carbon storage reversal, and independent third-party verification,” said Rebecca Sanders-DeMott, Director, Ecosystem Carbon Management. “Unfortunately, existing crediting protocols are insufficient to address integrity concerns. Project-specific details are needed to make sure investments go to projects that deliver real emissions reductions or removals. By continuing to rely on crediting protocols that are in need of a major overhaul, this guidance is insufficient to address those issues.”
A recent op-ed from Fallon calls for stronger government oversight to protect investors, prevent market manipulation, and ensure credits deliver tangible climate benefits. This need for reform is especially urgent as countries prefer for the 29th Conference of Parties in Azerbaijan, where rules around the use of carbon credits under Article 6 of the Paris Agreement will be shaped.
CATF will continue to advocate for stringent standards and government oversight to ensure voluntary carbon markets can play a meaningful role in addressing climate change.
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About Clean Air Task Force
Clean Air Task Force (CATF) is a global nonprofit organization working to safeguard against the worst impacts of climate change by catalyzing the rapid development and deployment of low-carbon energy and other climate-protecting technologies. With more than 25 years of internationally recognized expertise on climate policy and a fierce commitment to exploring all potential solutions, CATF is a pragmatic, non-ideological advocacy group with the bold ideas needed to address climate change. CATF has offices in Boston, Washington D.C., and Brussels, with staff working virtually around the world. Visit catf.us and follow @cleanaircatf.
