IOSCO Consults on Paris Agreement Article 6 Compliance Carbon Markets and Discusses Best Practices for Voluntary Carbon Markets

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.