At a Glance

• The CFTC’s Climate-Related Market Risk Subcommittee emphasized the need for regulation in the evolving and complex carbon market space, specifically for voluntary carbon-offset programs.
• The subcommittee and invited speakers discussed the process in which they can advise the CFTC on regulatory approaches to achieve stability in the carbon markets.

The Commodity Futures Trading Commission’s (CFTC) subcommittee meeting for carbon markets met on March 15, 2024. The subcommittee specifically discussed the CFTC’s recently proposed guidance for trading of voluntary carbon credit derivative contracts. The meeting addressed the translation of the CFTC’s guidance into actionable regulation.

The CFTC, created in 1974, is an independent governmental agency that regulates the U.S. derivatives markets. One of the Commission’s advisory committees, the Market Risk Advisory Committee (MRAC) advises the CFTC on matters relating to evolving market structures and movement of risk across clearinghouses, exchanges, intermediaries, market makers and end-users. The MRAC is comprised of several subcommittees, one of which is the Climate-Related Market Risk Subcommittee, which hosted the March 15 meeting that specifically addressed carbon markets and the regulations thereof.

At the meeting, the Climate-Related Market Risk Subcommittee emphasized the need for regulation in the evolving and complex carbon market space, specifically for voluntary carbon-offset programs. The discussion focused on the need for stability in the carbon markets, which could possibly come from increased integrity, credibility and visibility of the carbon markets. The subcommittee and invited expert speakers discussed the process in which they can advise the CFTC on regulatory approaches for achieving such stability.

The subcommittee focused on ways to translate regulatory principles into action through transaction reporting, secondary market regulation, accountability standards for intermediaries, business conduct standards and standardized documentation. The meeting addressed regulation in three panels: (1) Market Integrity Disclosure, Transparency and Enforcement; (2) Market Design and Intermediation; and (3) Product Design and Reliability. The panels’ diverse group of industry experts provided regulation recommendations in their respective areas of discussion. The proposed recommendations will be presented to the CFTC for review.

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