CFTC to issue carbon credits rulebook by year end

investmentnews.com:

The US Commodity Futures Trading Commission expects to finalize its guidance for carbon credits within the next six months, as it pursues a broader crackdown of fraud and manipulation in the embattled market.

CFTC Commissioner Christy Goldsmith Romero said she anticipates the final rulebook will be issued by the end of the year and maybe as soon as September.

For carbon credits to trade “on our markets, we have to ensure there’s integrity,” Romero said in an interview on the sidelines of City Week 2024 in London. “We have to make sure we have something trading that people can rely on to be what it is, to be what it says it does.”

The CFTC review follows a confusing period for buyers, sellers and traders of such credits, which are used by companies to offset their reported carbon emissions. Currently, most carbon credits are sold over the counter rather than through an exchange and the market has been the focus of intense scrutiny for overblown green claims. Companies are now desperate for signs of a minimum bar they need to meet in their offset procurement to avoid greenwashing allegations. 

The guidance from the CFTC would flesh out a baseline standard that commodity exchanges would have to comply with to list futures and other derivative products based on carbon credits. The CFTC released draft guidance in December, and it’s now in the process of reviewing comments that it received.

While it’s unusual for an industry to seek more regulation, it’s also clear that market participants want to avoid getting into “trouble with their investors or their regulators, so they’re looking for standards,” Romero said.

Kyle Harrison, head of sustainability research at BloombergNEF, described the initial draft guidance from the CFTC