Thursday, 3 October 2024.
The US Commodity Futures Trading Commission (CFTC) recently approved final guidance regarding the listing for trading of voluntary carbon credit (VCC) derivative contracts.
Defining VCC as "a tradeable intangible instrument that is issued by a carbon crediting program [that] represent[s] a [greenhouse gas] (GHG) emissions reduction to, or removal from, the atmosphere equivalent to one metric ton of carbon dioxide.”, the CFTC did not depart significantly from its proposed guidance, issued for public comments on December 2023.
This step represents the first time that a U.S. financial regulator moves toward building a financial system that provides effective tools in achieving emission reductions, with a contract design and listing process that may help to advance the standardization of voluntary carbon credit derivative contracts in a manner that fosters transparency and liquidity.
“Regulatory guidance for contract markets that list financial contracts aimed at providing tools to manage risk, promote price discovery, and foster the allocation of capital towards decarbonization efforts” said CFTC Chairman Rostin Behnam.
US Secretary of the Treasury Janet L. Yellen also praised CFTC’s Final Guidance on Voluntary Carbon Markets.
“I commend Chair Behnam and the CFTC for the release of their final guidance to support high-integrity voluntary carbon markets (VCMs). The CFTC’s guidance will promote the integrity of carbon credits and enable greater liquidity and price transparency. I look forward to continued collaboration with the CFTC and other government agencies involved in shaping the development of responsible, high-functioning, and high-integrity VCMs as part of the Biden-Harris Administration’s ambitious efforts to tackle the climate crisis and accelerate a clean energy transition that benefits all Americans.”
This final guidance comes a few months after the Government of United States released the Voluntary Carbon Markets Joint Policy Statement and Principles, which emphasized the importance of credit and market integrity in VCMs.
This final guidance is the result of over five years of collaboration with a diverse group of market participants, such as agricultural stakeholders, ranchers, foresters, landowners, commercial end users, energy market stakeholders, emission-trading focused entities, CFTC-registered exchanges and clearinghouses, carbon-credit rating agencies, crediting programs, public interest groups, academics, and others key stakeholders in the voluntary carbon credit markets.
You can download below this Final Guidance from Sept. 20, 2024.
