Policy

How to prepare for upcoming climate regulation

Annalise Downey
Senior Technical Climate Consultant
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The voluntary carbon markets are in need of a rebrand. Not as a result of recent bad press, but rather because “voluntary” is a slightly misleading adjective. If anything, voluntary is the liminal period when a nascent market recognizes integrity is a constraint of growth, but it still lacks the guardrails that enable accurate, timely, and auditable data to underpin integrity. 

Regulatory action may seem daunting, but well designed interventions can help increase participation in sustainable activities like carbon credits. 

Voluntary disclosure and assurance is the status quo today, but regulations around climate disclosure, ESG (Environmental, Social, Governance), and transition risks on the horizon are set to impact carbon markets. Companies are acting today to get ahead of regulations to ensure compliance and stay competitive. 

To get the full overview, download the white paper.

Direct regulation of the voluntary carbon markets is unlikely in the immediate future, but there are more broad upcoming regulations that will impact the carbon market. There are three categories of regulations that are important for carbon market stakeholders to follow:

(i) Disclosures: Regulations mandating the reporting of ESG information with the goal of improving quality and consistency of corporate sustainability disclosures.

(ii) Claims: Regulations surrounding the kinds of climate and mitigation commitments, or green claims, a company can make. For example, claims regulation would set criteria and governance for statements like “net zero” or “carbon neutral.”

(iii) Legal treatment of carbon credits: Voluntary carbon credits are treated as commodities in some jurisdictions, but there is not yet consensus on the legal characterization of a carbon credit. The legal status of an asset, for example security or commodity, dictates regulatory treatment, level of oversight, as well as the regulatory agency responsible.

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