CFTC to Exercise its Jurisdictional Hook: Regulating Voluntary Carbon Markets via Futures Exchanges
- Media Manager
- Dec 8, 2023
- 1 min read
Updated: Dec 14, 2023
Morgan Lewis
Written By: Levi Mcallister, Pamela T. Wu & Sarah V. Riddell
Published: December 8th, 2023
The CFTC’s proposal is the latest effort in its push during 2023 to regulate the carbon markets. As more derivative contracts on voluntary carbon market products are traded on CFTC-regulated exchanges, the CFTC has taken steps to identify ways in which it can address climate-related financial risk in the derivatives markets and underlying spot markets.
The proposed guidance identifies criteria that should be addressed clearly in the design of a voluntary carbon credit derivative contract to help ensure that trading in the contract is based on accurate information about the underlying voluntary carbon credit. It identifies quality standards, delivery points and facilities, and inspection provisions as the criteria that exchanges should address to promote accurate pricing and to help to reduce the susceptibility of the contract to manipulation.
