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U.S. COMMODITY FUTURES TRADING COMMISSION FIRST GUIDELINES FOR CARBON CREDIT MARKETS
Sep. 24, 2024
Source: Reuters news service
The U.S. Commodity Futures Trading Commission on Friday approved the first guidelines for the trading of voluntary carbon credit derivative contracts in the country.
Carbon credit derivative contracts are financial instruments that derive their value from carbon credits, which represent the right to emit one metric ton of carbon dioxide or an equivalent amount of greenhouse gases.
The contracts allow traders and market participants to hedge against or speculate on the future price of carbon credits, similar to how traditional derivative contracts function in commodities or financial markets.
Regulators have pushed for heightened scrutiny of voluntary carbon markets, which have developed outside government oversight, due to concerns over quality and double counting.
The U.S. derivatives watchdog has outlined guidance for derivatives exchanges to crack down on price manipulation.
"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," said CFTC Chairman Rostin Behnam.
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