Wednesday, 20 November 2024.
Today we start a series of 3 posts focusing on new sources of finance for the climate-related transition plans, under the perspective of one global regulator.
IOSCO, the International Organization of Securities Commissions is the international policy forum for securities regulators, with over 200 members from 130 jurisdictions, representing 95% of the world's securities markets. It is recognized as the global standard setter for securities regulation.
Since early 2022, IOSCO has also been exploring the status, potential vulnerabilities, and good practices in both Compliance Carbon Markets (CCMs) and Voluntary Carbon Markets (VCMs).
According to IOSCO, “one of the key distinctions between CCMs and VCMs relates to the obligations of the participants in those markets. This distinction is key as it underpins the “compliance” versus “voluntary” nature of those markets, independently from whether VCM participants or activities are regulated or not. In a compliance market, companies in certain sectors are required to participate to meet legal emissions reduction targets; in a voluntary market, participation is not typically driven by legal mandates, but their underlying functioning may be regulated, as is now the case, for example, in Egypt, China, Australia, and Abu Dhabi.”
In November 2022, IOSCO published two Discussion Papers for consultation, one for CCMs and another for VCMs.
Already in July 2023 there was a Final Report on CCMs, providing a set of recommendations for relevant regulators and authorities across jurisdictions in establishing or enhancing their CCMs.
As to VCMs, IOSCO published a Consultation Report in December 2023, identifying a set of key vulnerabilities in VCMs and proposing an initial set of Good Practices for sound and well-functioning VCMs.
The key vulnerabilities in VCMs IOSCO identified were:
• the quality of carbon credits and availability of information pertaining to their quality,
• data availability, accessibility, and general lack of transparency in the market,
• the operating framework of registries,
• conflicts of interest across the value chain, and
• the lack of standardisation (e.g. verification processes).
Targeting the enhancement of the financial integrity in those markets, IOSCO’s final list of Good Practices for the VCM was published last week.
Tomorrow we will analyze these Good Practices, as they represent a diligent and key reference by a leading global regulator, in times when both COP 29 and G20 debate forms of financing the climate-related transition plans.
Then on Friday November 22, closing this 3-posts series, we will highlight what the same regulator reported about the transition plans themselves, from a perspective of what still needs to be improved in order to attracted the so-much needed finance.
