The Commodity Futures Trading Commission (CFTC), an independent government body responsible for regulating derivatives markets in the US, is turning its attention to voluntary carbon offsets. These offsets, which represent emissions reduction or removal, are bought and sold on unregulated markets. However, they have been heavily criticised for failing to deliver on promised emission reductions and have been described as a “climate scam” and a “Wild West”. The voluntary market for carbon offsets is expected to be worth up to $100 billion by 2030. The CFTC recently released a whistleblower alert asking for tips about fraud and manipulation in voluntary carbon markets, and announced a new Environmental Fraud Task Force. It is considering a more proactive regulatory role in this area. The CFTC regulates the US markets for derivatives, contracts where prices are derived from the value of an underlying asset or benchmark. Carbon offsets are more complicated than tangible commodities like wheat, as it is unclear what constitutes the legitimate delivery of a carbon credit. Concerns have been raised about fraudulent assumptions and inadequate standards, which can result in offset credits not actually reducing emissions. The CFTC could impose penalties or refer cases to the Justice Department for prosecution. Other regulatory bodies, such as the Securities and Exchange Commission and the Federal Trade Commission, are also considering measures to prevent greenwashing and to establish transparency and standards for carbon offsets. However, the CFTC has shown the most interest in enforcing regulations in this area. The CFTC is accepting submissions from the public until 18 August as it explores further action on voluntary carbon markets.
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ICE is preparing to introduce a futures market for carbon credits under CORSIA, which will focus on reducing airline emissions.
Intercontinental Exchange (ICE) announced plans to launch a physically delivered futures contract for carbon credits eligible for use by the...
