CFTC Finalizes Guidance on Carbon Credit Derivatives

The CFTC issued final guidance on the listing of voluntary carbon credit ("VCC") derivative contracts.

The CFTC said this final guidance was intended to "advance the standardization of these VCC products [to] promote[] transparency, liquidity, ... and market integrity." Under the final guidance, the CFTC outlined factors that designated contract markets ("DCMs") should consider when addressing the CEA's Core Principle requirements and CFTC regulations on the listing for trading of VCC derivative contracts. These factors concern terms and conditions on underlying commodity credit quality, contract design, listing and market surveillance to prevent manipulation.

In a press release, the CFTC said that the guidance reflects input from "five years of collaboration with a diverse group of market participants" in the voluntary carbon market.

Statements

• CFTC Chairman Rostin Behnam emphasized the Commission's critical role in supporting high-integrity voluntary carbon markets. He asserted that the final guidance promotes transparency, liquidity and market confidence in voluntary carbon credit derivatives. Mr. Behnam also said that the guidance aligns with IOSCO's global initiatives to strengthen financial integrity in carbon markets.
• Commissioner Summer K. Mersinger dissented, arguing that VCCs are a product with minimal market activity. She criticized the guidance as unnecessary, claiming it promotes political agendas such as Net Zero goals that are irrelevant to the regulation of derivatives. Ms. Mersinger said that focus on these products reflects ideological promotion rather than good regulatory policy.