The Commodity Futures Trading Commission (CFTC) has approved final guidance for designated contract markets (DCMs) regarding the listing of voluntary carbon credit (VCC) derivative contracts.
The guidance provides factors for DCMs to consider when assessing compliance with relevant regulations and outlines considerations for submitting new derivative contracts or contract amendments to the CFTC.
CFTC Chairman Rostin Behnam emphasized the importance of this guidance in promoting transparency, liquidity, and market integrity in VCC derivatives markets.
“The CFTC’s unique mission focused on risk mitigation and price discovery puts us on the front lines of the now global nexus between financial markets and decarbonization efforts,” Behnam said.
“Leveraging the CFTC’s personnel and expertise demonstrates our commitment to taking a thoughtful and deliberate step toward building a financial system that provides effective tools in achieving emission reductions.”
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The guidance reflects the CFTC’s engagement with a wide range of stakeholders, including agricultural interests, foresters, landowners, commercial end-users, energy market participants, emission-trading entities, exchanges, clearinghouses, carbon-credit rating agencies, crediting programs, public interest groups, academics, and others involved in the voluntary carbon market.
By providing factors for DCMs to consider in contract design and listing, the CFTC aims to advance the standardization of carbon credit derivative contracts and enhance market transparency and liquidity.
This guidance marks the culmination of over five years of collaboration among various market participants and is expected to contribute to the growth and development of the voluntary carbon market.
