IOSCO Consults On Paris Agreement Article 6 Compliance Carbon Markets And Discusses Best Practices For Voluntary Carbon Markets – Commodities/Derivatives/Stock Exchanges

On November 9, 2022—at COP27’s “
Finance Day”—the International Organization of
Securities Commissions (IOSCO) announced 90-day
consultations regarding both a 45-page report
on Compliance Carbon Markets (CCM Report) and a
34-page discussion
paper on Voluntary Carbon Markets (VCM DP).

CCM Report

The CCM Report “sets out a series of recommendations for
jurisdictions seeking to establish compliance markets as a way to
meet their obligations under Article 6 of the Paris Agreement.
Building on the lessons learned from the experiences of existing
markets, it offers insights into appropriate regulatory and
oversight frameworks to allow for the development of sound,
efficient and liquid compliance markets.”

The CCM Report also “explores the functioning of existing
and well-established compliance markets in order to gain an
understanding of potential vulnerabilities in the functioning of
these markets and how to mitigate these” and
“[b]uilding upon the lessons learned from existing compliance
carbon markets and good practices in commodity derivatives markets,
… delves into both primary markets and secondary markets
considerations, spot and derivatives trading.”

VCM DP

The VCM DP “explores an array of attributes that can
foster sound carbon credit markets, as well as vulnerabilities that
prevent these carbon credit markets from upscaling. Conscious of
the evolving framework associated with Article 6.4 of the Paris
Agreement, … offers for discussion a series of key
considerations for the development of resilient carbon credit
markets, and it asks respondents to consider the role of financial
markets regulators in the oversight of these markets.”

As such, the VCM DP also is intended to “advance[e] the
discussion about what sound and efficient Voluntary Carbon Markets
(VCMs) should look like and what role financial regulators may play
in promoting integrity in those markets” and to
“generate a discussion about appropriate market
infrastructure and existing good practices in relation to the
functioning of primary and secondary markets – both spot and
derivatives – as well as the activities of participants in
these markets.”

Comments Due by February 10

Comments on the CCM report and the VCM DP are due by February
10, 2023 and are to be made as provided in the CCM Report and VCM
DP, respectively.

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