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The US derivatives watchdog has finalised the first federal guidelines for unregulated carbon offsets, as the Biden administration seeks to standardise a disorderly market in a bid to tackle climate change.
The Commodity Futures Trading Commission adopted measures announced on Friday that ask exchanges to validate carbon offset derivatives, which base their prices on those of financial instruments bought by companies to offset emissions.
Treasury secretary Janet Yellen issued a statement on Friday praising the new guidelines as a means to “promote the integrity of carbon credits and enable greater liquidity and price transparency”.
The unregulated market for carbon credits is estimated to grow to $100bn by 2030, up from $2bn this year, according to Morgan Stanley. But the voluntary carbon derivatives market has languished, with only a handful of contracts attracting substantial trading volume due to concerns about credibility.
“We actually have a legal responsibility to ensure the health and transparency of both the derivative side, but also the underlying cash market,” CFTC chair Rostin Behnam told the Financial Times.
The guidelines, which were initially proposed in December, seek to crack down on manipulation and price distortions by pushing exchanges to ensure that voluntary carbon credit derivatives comply with CFTC regulation as well as…
