Legal & Regulatory News

International Organization of Securities Commissions release consultation on promoting integrity in carbon markets

On 9 November 2022, the International Organization for Securities Commissions (IOSCO) launched a consolation paper (the Consultation) which sets out its recommendations on establishing a credible and well-functioning compliance carbon market (CCMs). In addition, IOSCO launched a discussion paper (the Paper) seeking industry views on the role of financial market regulators in voluntary carbon markets (VCMs).

The Consultation concerns the development of the CCMs, also called "cap-and-trade" or "Emission Trading Schemes," where carbon emission allowances for domestic firms and sectors are issued by governmental bodies and latterly traded on a secondary market. The allowances come in the form of permits or credits equal to the emission of one tonne of pollutants, providing organisations with a maximum amount of carbon they can emit annually. The Consultation therefore seeks to understand current market practices, the potential vulnerabilities in the function of CCMs and how effective these might be mitigated using IOSCO's recommended best practices of CCMs.

IOSCO also seeks to promote the development and integrity of the VCMs, where entities buy carbon credits to offset their business activities carbon footprint. Within the VCMs, carbon credits are issued in relation to climate change mitigation project, either by carbon removal or reduction projects that are then certified by a standards organisations. However, the Paper identifies a number current market characteristics and the potential vulnerabilities, particularly around ensuring the integrity of the credits, as well as providing a number of key considerations for legislators. The IOSCO is looking for feedback on these considerations and to understand where and how ISOCO could provide guidance on VCMs.

The deadline to respond to the Consultation and the Paper is 10 February 2023.

Click here to view the press release.

Click here to view the consultation paper.

Click here to view the discussion paper on voluntary carbon markets.