Washington, D.C. — Faced with growing pressure to reduce carbon emissions, many companies have turned to the booming carbon offsets market. But there is one major problem: There is no reasonable guarantee that carbon offsets actually work.
A new report released today by the Center for American Progress examines the poorly regulated and, at times, fraudulent carbon offsets market and calls on the Commodity Futures Trading Commission (CFTC) to play a leading role in regulating it. The report is being published alongside CAP’s comment letter in response to the CFTC’s request for information on climate-related financial risk.
Both the report and the letter argue that the lack of stringent standards places the carbon offsets market at particular risk of fraud and manipulation. Federal oversight would help remedy this.
The report maintains that the CFTC should consider taking the following actions:
- Ensure that carbon offset standards result in the promised greenhouse gas emissions reductions.
- Refuse to endorse specific, existing standards that are not yielding meaningful results.
- Exercise authority over the four main offset registries in their role as delivery points for offset contracts.
- Bring enforcement actions against individual projects for fraud and market manipulation.
- Investigate the role of businesses acting as brokers in the marketplace.
- Allow certification only of derivatives products based on high-quality offsets.
“Too often, carbon offsets serve as a convenient way for businesses to claim that they are climate-friendly while avoiding taking steps toward tangibly reducing their own carbon footprints,” said Todd Phillips, director of financial regulation and corporate governance at CAP and co-author of the report. “An unregulated offsets market may be worse for climate change than no offsets at all.”
Read the report: “The CFTC Should Raise Standards and Mitigate Fraud in the Carbon Offsets Market” by Alex Fredman and Todd Phillips
For more information or to speak with an expert, please contact Julia Cusick at email@example.com.