CFTC’S New Guidance, Recent High-Profile Enforcement Raise the Stakes for Voluntary Carbon Credit Market Participants
Highlights
• The Biden administration and the Commodity Futures Trading Commission (CFTC) have recently issued principles and guidance to enhance the credibility of voluntary carbon credits (VCCs) and the integrity of voluntary carbon markets (VCMs)
• The administration underscored the importance of those directives with coordinated parallel civil and criminal proceedings by the CFTC, SEC and DOJ against a high-profile developer and marketer of VCCs
• VCM participants, including developers, issuers, and marketers, need to mindful of the spotlight that is on the quality of carbon emission projects underlying VCCs and the potential risks posed by any related misconduct
Companies that voluntarily seek to reduce their emissions beyond what they are able to do internally use voluntary carbon credits (VCCs) – emissions reductions or removals by another party, acquired by market participants to supplement emissions reductions or removals achieved from the participant’s own operations or activities – to augment their carbon mitigation efforts. VCCs trade bilaterally or on cash exchanges and stand in direct contrast to mandatory markets, such as cap-and-trade, emissions or allowance trading systems established by other governmental markets and initiatives.
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