The practice of securing carbon offsets has grown more common as companies aim to reduce their environmental impact. However, clear guidance on what qualifies as a credible carbon offset has been limited. To address this, the Commodity Futures Trading Commission (CFTC), which oversees the integrity of derivatives and other financial markets, issued its final guidance on October 15, 2024, for listing carbon credits in voluntary markets. This guidance aims to enhance the integrity of these credits by setting standards for project developers, crediting programs, and third-party verifiers. The new standards are intended to prevent manipulation in voluntary carbon credit markets, which operate outside regulated cap-and-trade systems, and ensure proper oversight of contract terms.
Recently, carbon credits have come under increasing scrutiny and criticism for being ineffective and, in some cases, baseless. Critics argue that many carbon offset programs lack transparency and verifiable impact, allowing companies to claim reductions in carbon emissions without delivering meaningful environmental benefits. Investigations have revealed instances where carbon credits are issued for projects that either overstate their carbon reduction potential or would have occurred regardless of the credits. This has led to accusations that the voluntary carbon market is more of a public relations tool than a genuine mechanism for combating climate change. As a result, there is growing pressure on regulators and market participants to ensure that carbon credits are backed by rigorous standards, credible verification processes, and tangible environmental outcomes.
The CFTC guidance is part of a larger effort to enhance the scrutiny and reliability of carbon credits, with the commission addressing this issue in part because standardization and accountability mechanisms are still being developed. It comes months after the White House released its own guidance with the goal of restoring integrity to the voluntary carbon market. The CFTC's guidance enhances transparency and quality in carbon credit derivatives, while the White House policy aligns voluntary carbon markets with net-zero goals. Together, they promote trust and accountability in the voluntary carbon market. California has also made its own efforts by passing the Voluntary Carbon Market Disclosure Act (VCMDA) last year mandating certain disclosures around the use of carbon credits. For more details on the White House Offset Guidance and the VCMDA, please visit our previously posted First To Knows.
The CFTC emphasized that markets listing carbon credits should structure their contracts with provisions aimed at ensuring quality standards, defining delivery points and facilities, and incorporating inspection protocols. For the printing industry, the CFTC’s guidance opens opportunities to confidently engage in carbon offsetting by accessing standardized and transparent carbon markets, allowing printers to reduce their emissions and support credible environmental claims
To meet quality standards, the CFTC outlined several recommendations for the markets:
- Provide publicly accessible data to ensure transparency
- Implement procedures to assess or verify additionality
- Account for the risk of credit cancellation
- Use conservative methods to quantify greenhouse gas emissions reductions or removals for accurate and reliable measurements
The CFTC advised that when managing the delivery of contracted carbon credits, markets should evaluate whether the crediting program has a governance framework that ensures independence, transparency, and accountability. To assess this, markets should examine the organization's decision-making processes, public and stakeholder engagement policies, and risk management procedures. Additionally, the agency stressed the importance of tracking carbon credits throughout their lifecycle — from issuance to transfer and retirement — and implementing safeguards to prevent double-counting.
CFTC’s guidance comes at a time when corporations are seeking assurance that carbon credits, whether used alongside operational emissions reductions or to offset emissions, correspond to measurable emissions removed from the atmosphere. Experts have emphasized the critical need for greater transparency in carbon credits to ensure the quality and credibility of contracted credits.
In this article, Sara Osorio, Coordinator, EHS Affairs, PRINTING United Alliance, discusses the CFTC’s new carbon credit guidance. More information about this and other sustainability issues can be found at Business Excellence-EHS Affairs, or reach out to Sara directly if you have questions about how these issues may affect your business: sosorio@printing.org.
To become a member of PRINTING United Alliance and learn more about how our subject matter experts can assist your company with services and resources such as those mentioned in this article, please contact the Alliance membership team: 888-385-3588 / membership@printing.org.