CFTC looks at carbon markets
The Commodity Futures Trading Commission last week convened an all-day meeting on carbon markets to try to understand the field and figure out what role the CFTC should play in regulating these emerging markets, and released a Request for Information on Climate-Related Financial Risk to get stakeholders’ views on the issue.
In an opening statement at the June 3 convening, CFTC Chairman Rostin Behnam said, “There is now a common understanding that climate change presents an emerging and increasing threat to financial stability, and can cause sub-systemic shocks and wide-ranging ripple effects to the U.S. financial system and larger economy. However, climate change also presents opportunities as we work to ensure decisive and cohesive leadership over the markets and institutions charged with monitoring and managing risk, capital, and asset allocation.
“The CFTC is uniquely poised as the regulator at the forefront of climate-related risk management as firms and individuals will increasingly turn to the derivatives markets to mitigate climate change-induced physical and transition risk and seek price discovery for new and evolving risk management products.”
Behnam said, “The RFI will seek feedback on all aspects of climate-related financial risk as it may pertain to the derivatives markets, underlying commodities markets, registered entities, registrants, and other market participants.”
House Agriculture Committee Chairman David Scott, D-Ga., was keynote speaker at the convening. “Our farmers, ranchers, and foresters deserve a reliable and transparent accounting and verification framework that ensures the integrity of these carbon offsets,” Scott said.
National Council of Farmer Cooperatives President and CEO Chuck Conner said that some aspects of carbon trading, such as the contracts farmers sign with companies, don’t fall under the purview of the CFTC, DTN/The Progressive Farmer reported.
“They have a high threshold to show those contracts are under the regulatory mandate of the Commodities Exchange Act,” he said.
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