On March 1, ISDA submitted a response to IOSCO’s Voluntary Carbon Markets Consultation Report. The response welcomes IOSCO’s work on developing good practices for regulation of voluntary carbon markets (VCMs), as well as its recognition of the critical role that financial market participants play in VCMs. Clear legal and regulatory categorisation of voluntary carbon credits is key to building liquidity in order to support scaling VCMs and to develop safe, efficient markets in VCC derivatives.

We support development of harmonised international principles for regulatory frameworks governing trading in Voluntary Carbon Credits (VCCs). As part of this work it is important to make a clear distinction between regulation of trading activity in VCCs that are already in issue, and the work ongoing at an international level to develop principles supporting the issuance of robust and verifiable VCCs at the project level. While many of the regulatory principles applicable to securities markets may be helpful in supporting VCMs, it will be important that financial regulation is focused on issues in the financial markets rather than in the underlying projects. Similarly, many aspects of trading in VCCs are already addressed by existing financial services regulation (e.g., with respect to trading in OTC derivatives), and any regulation specific to VCCs should be consistent with this and should not duplicate it.