CFTC Moves to Set Voluntary Carbon Market Standards

The Commodity Futures and Exchange Commission (CFTC) today released its final guidance on listing standards for the trading of carbon offsets derivatives on CFTC-regulated exchanges. The new guidance outlines the factors that designated contract markets (DCMs) should consider before listing any contract whose underlying asset is a carbon offset. In response, Clara Vondrich, senior policy council with Public Citizen’s Climate Program released the following statement:

“The CFTC’s guidance seeks to add guardrails around the use of carbon offset derivatives, which are fundamentally prone to fraud and manipulation.

“But carbon offset derivatives, as a category, should not be greenlighted for trade in the first place. Carbon offsets have been discredited by a vast range of academic papers, investigative reports, and community testimonials. The voluntary carbon market is shrinking rapidly, with a market cap of less than $1 billion today.

“The CFTC is stuck between a rock and a hard place: a small volume of carbon offsets derivatives are being traded, and powerful interests are seeking to expand that market. The guardrails CFTC set today have the potential to keep the lowest-quality products off the market and hasten the demise of this dangerous experiment. We especially thank Commissioner Christy Goldsmith Romero and her staff for their commitment to pursue individual cases of fraud in the underlying carbon markets in order to keep consumers and investors safe.”