Implications of the FRTB for Carbon Certificates: A Global Perspective

The Fundamental Review of the Trading Book (FRTB) includes higher capital charges for carbon trading under the standardized approach to market risk, which has implications for banks in their role as intermediaries in the emissions trading system (ETS).

In an earlier paper, ISDA investigated whether the regulatory treatment of carbon credit trading under the FRTB is justified by focusing on the EU ETS. The appropriate treatment is important as overly stringent capital requirements would impair the functioning of the carbon market and hamper the willingness of firms to invest in the transformation to a green economy.

This paper extends the findings by investigating the risk of carbon certificate trading in two North American markets – the Western Climate Initiative and the Regional Greenhouse Gas Initiative – as well as the UK’s ETS.

Documents (1) for Implications of the FRTB for Carbon Certificates: A Global Perspective

ISDA AGM Studio: Jacques Vigner, BNP Paribas

Jacques Vigner, ISDA board member and chief strategic oversight officer for global markets at BNP Paribas, speaks with Mark Gheerbrant, global head of risk and capital at ISDA, on the key obstacles to a consistent, risk-appropriate capital framework and how to...

ISDA AGM Studio: Future Leaders in Derivatives

Following publication of the latest whitepaper from the ISDA Future Leaders in Derivatives (IFLD) program, Collateral and Liquidity Efficiency in the Derivatives Market: Navigating Risk in a Fragile Ecosystem, Joel Clark talks to IFLD participants Koen Ottenheijm, senior treasury and...