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Insights from the CFTC’s Second Convening on the Voluntary Carbon Market

Insights from the CFTC’s Second Convening on the Voluntary Carbon Market

by Adam Shedletzky, Director of Policy, Flowcarbon
July 21, 2023

The Voluntary Carbon Market (VCM) is gaining significance as a vital tool to mobilize private capital for combating climate change. Alongside global initiatives like SBTi, VCMI, and ICVCM that establish commonly accepted standards for a high-integrity VCM, regulatory bodies such as the Commodity Futures Trading Commission (CFTC) and the International Organization of Securities Commissions (IOSCO) are increasingly engaged in supporting the growth of high-integrity carbon markets.

On July 19, the CFTC hosted its Second Convening to discuss the future of the VCM and explore the role of regulatory bodies, government departments and market participants in its growth. Here we delve into the key takeaways from the event, highlighting the CFTC's commitment to the VCM, the U.S. government’s “whole-of-government” approach to climate action, and the proactive engagement of market participants in shaping a high-integrity and scalable VCM.

Takeaway 1: The CFTC Appears Poised to Regulate the VCM — And the VCM Appears to Welcome It

Chairman Rostin Behnam's opening remarks reiterated the CFTC's commitment to the VCM, emphasizing the importance of leveraging anti-fraud and anti-manipulation authority to ensure market integrity. In the past month, the CFTC's Whistleblower Office issued an alert seeking tips relating to carbon market misconduct, the CFTC's Division of Enforcement created a new Environmental Fraud Task Force, and during the convening it was announced that the CFTC's Climate Risk Unit will be drafting agency guidance addressing VCM standards. The Chairman also noted that an issuance of a request for public comment on this guidance would likely be forthcoming.

Encouragingly, the CFTC recognizes the significance of collaborating with the private sector, stating that it is “not a climate regulator” and confirming that it is “not within our authority to require that market participants comply with a specific climate policy or foreclose access to our regulated markets based on any such policy.” Recognizing the global nature of carbon markets, Chairman Behnam also underscored his appreciation for the importance of securing global alignment of standards, particularly the ongoing work of IOSCO.

The convening witnessed widespread support for CFTC engagement in the VCM. Given the acknowledged need for enhanced credibility, most participants favored CFTC engagement, although with differing points of emphasis. Several leading market participants called for a light regulatory touch regarding spot markets, leveraging ICVCM/VCMI work and ensuring transparency in information sharing, while urging the CFTC to prioritize efforts on ensuring the integrity of the futures market. Both Verra and Gold Standard voiced support for CFTC engagement, while several market participants agreed that CFTC guidelines beyond enforcement actions would help encourage corporations to participate in the market.

Takeaway 2: The US Government Is Quietly taking Noteworthy VCM-Enabling Steps

An array of key U.S. government departments showcased their commitment to scaling up climate action and supporting the VCM: 

  • The Department of Agriculture highlighted its $300 million investment in improving measurement, verification and tracking of carbon sequestration and greenhouse gas emissions in agriculture and forestry. This foundational investment in robust data management was acknowledged as a critical enabler for the growth of a high-integrity carbon market. 
  • The Department of Transportation underscored the importance of international schemes such as CORSIA to reduce emissions from the aviation industry and serve as a core standard for other sectors like international shipping. 
  • The Treasury Department emphasized the need to enhance market efficiency, transparency and access to ensure the VCM's effectiveness, expressing concern that in some instances the cost of sourcing and diligence exceeds the value of the carbon assets themselves. 
  • Meanwhile, the State Department is leveraging the VCM through initiatives like the LEAF Coalition and the Energy Transition Accelerator, as well as employing “soft power” to promote globally aligned principles that support the VCM's growth.

Takeaway 3: VCM Stakeholders Are More Energized — and Committed — Than Ever Before 

A remarkable breadth of stakeholders expressed their dedication to establishing a high-integrity and scaled-up VCM. Organizations ranging from the World Bank, International Swaps and Derivatives Association (ISDA), and rating agencies to NGOs, financiers and exchanges demonstrated unanimity of purpose. The VCM was hailed as a critical tool, particularly in the absence of comprehensive government regulations. Stakeholders recognized the urgent need to mobilize private capital to meet ambitious climate change goals.

Other Noteworthy Comments From Market Participants and Takeaways:
  • In the massive $783B Inflation Reduction Act, no funding was secured to drive financing to developing countries. The VCM is the best tool we have to accomplish this incredibly important goal — and is why Former Secretary Kerry is so invested in making the VCM work. 
  • One interesting dynamic to be explored further in coming months is perceived tension between incenting the creation and use of high-quality carbon credits and lower barriers to entry to entice more corporate participation and the scale that is needed to have meaningful impact.
  • The ICVCM will release its Category-Level Assessment Framework this month and aims to have CCP-labeled credits begin to appear in the market by COP28.
  • Many stakeholders referenced the importance of maintaining perspective and not letting the perfect be the enemy of the good. Robin Rix from Verra effectively described the history of the VCM as having been a “boutique sector” that was, by necessity, experimental. As science keeps evolving and innovative technology tools are introduced, the evaluation of carbon credit project outcomes continues to improve. The ICVCM reinforced that setting global threshold standards will be a continuous and iterative process based on best science and best practice, and that undoubtedly mistakes will be made along the way. It stressed that any mistakes made should not lead to a wholesale questioning of the market’s existence or importance. Instead, stakeholders should learn from mistakes and take corrective action.
  • Several financiers discussed enthusiasm voiced by their clients and how much capital is sitting on the sidelines, waiting for clear guidance to increase confidence in the VCM’s future. Others discussed how the recent pause in growth of carbon credit retirements is a lagging indicator — and noted that if one analyzes the growth of new projects being initiated and registered with standard bodies, the VCM growth continues unabated.


The CFTC’s Second Convening on the VCM shed light on the collective efforts to shape a reliable and scalable VCM. The CFTC's commitment to using its power in a collaborative and strategic manner, coupled with a whole-of-government approach to climate action, provides a solid foundation for the market's future, while active participation from diverse market participants reinforces the VCM's importance and the urgency to mobilize private capital effectively. With enthusiasm and capital waiting to be deployed, clear guidance, increased transparency and efficient market mechanisms will play a pivotal role in unlocking the VCM's full potential. The future of the VCM is bright — and it promises to contribute significantly to the global fight against climate change.

Watch the CFTC’s Second Convening on the VCM here.

About Flowcarbon

Flowcarbon develops climate solutions leveraging new technologies and innovative financing solutions to scale the voluntary carbon market. 

Adam Shedletzky is the Director of Policy at Flowcarbon, where he contributes to the development and growth of a high-integrity voluntary carbon market.

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