Sylvera at the CFTC VCM convening

Voluntary Carbon Markets (VCMs) are currently unregulated, but this looks likely to change in the near future. Financial regulators in a number of jurisdictions are showing increasing interest in VCMs as they scale and as climate action becomes more urgent. In the US, the CFTC (Commodity Futures Trading Commission) is playing a key role.

I was honored to be invited on behalf of Sylvera to a recent session convened by the CFTC in Washington DC. It was a real reflection of Sylvera’s transformative impact on the market, and also a great opportunity to hear from other innovators and leaders in the space.

Read on for a full rundown of the meeting and my reflections.

What is the CFTC and what’s their interest in VCMs?

The CFTC is a financial regulator, overseeing derivatives exchanges in the US. In the context of VCMs, their interest is primarily to counter fraud. Recently they announced a new Environmental Fraud Task Force alongside a whistleblower alert seeking tips relating to carbon markets misconduct. 

The CFTC is also developing advisory guidance on their role in facilitating the smooth running of VCMs. As Chairman Rostin Benham summarized: “The CFTC has an important policy responsibility to promote product innovation, price discovery, and liquidity for high-quality carbon credits.”

What was the VCM convening?

This meeting followed a similar event last year. Experts from across the VCM ecosystem - including standards, exchanges, and integrity initiatives - were invited to give evidence about the current state of the VCMs, the impact of recent innovations and initiatives, and how the CFTC can promote integrity. 

The aim of the convening was to identify actionable recommendations the CFTC could include in its upcoming guidance.

My reflections

1. Being asked to participate in the convening was a real validation of what we’re doing at Sylvera, in a number of ways. We are working in a market that is being taken seriously by the regulator of the world’s largest derivatives market. That market is changing for the better; channeling ever more finance to essential climate solutions. And the CFTC recognizes that the work we are doing to bring visibility to carbon credit integrity is facilitating and accelerating that change.

2. It’s easy to feel overwhelmed by the complexity of technical and philosophical questions facing VCMs. But it is clear that there is a growing pool of experts working on addressing these issues and having an impact. Real progress has been made on increasing the integrity of VCMs, on both the supply and demand sides. This was explicitly recognized by the Honourable Dan Berkowitz (former CFTC Commissioner and former General Counsel of the SEC): "I'm struck today listening to the presentations by the private sector participants, by the organizations that are rating carbon projects, and by colleagues across the government how much progress has been made in the last 2 years”.

3. This isn’t to say we’ve solved the problem. There is still a lot of work to do to address the issues still facing VCMs. Climate action gets more urgent every day, and VCMs need to scale with ever-increasing integrity to provide meaningful climate impact and help expedite progress toward societal net zero.

4. Regulation has the potential to play a significant role in this, and it’s hugely encouraging to see how seriously US regulators and policy-makers are taking the issue. Now we hope to see other countries follow suit, such as with the upcoming UK government VCM consultation and the EU’s increasing interest in greenwashing and climate finance.

Stay up to speed

Regulation of VCMs is a complex and fast-moving space. Get up to speed with our latest report on climate regulation, or register for our upcoming webinar with Patch.