IOSCO consults on carbon markets

Global securities regulators are launching a consultation on ensuring that carbon markets work well and can meet their ultimate goal of pricing carbon emissions, and allowing companies and investors to achieve their environmental targets.

The International Organization of Securities Commissions (IOSCO) published a pair of discussion papers today that seek feedback on recommendations for enhancing the resilience and integrity of carbon markets (both so-called compliance markets and voluntary offset markets).

The report on compliance markets sets out a series of recommendations for developing efficient, liquid markets, based on the experience with existing compliance markets so far.

Similarly, IOSCO’s report on voluntary markets examines the conditions for developing sound, resilient markets, and seeks feedback on regulatory oversight for these markets.

“In recent years, carbon markets have gained significant importance as a mechanism for corporates, and society in general, to facilitate their transition towards net zero. However, they have so far fallen short of their objectives,” said Jean Paul Servais, chairman of IOSCO, and of the Belgium FSMA, in a release.

“No market can function without appropriate levels of integrity and, transparency, and liquidity so IOSCO today hopes to lend its international, market expertise to help develop appropriate frameworks for sound and well-functioning carbon markets, focusing on promoting integrity and liquidity and increasing transparency to facilitate price discovery,” he said.

“The consultation is an opportunity to consider a framework that promotes market integrity and drives investor capital to high integrity carbon credits in the [voluntary carbon markets],” noted Rostin Behnam, chairman of the U.S. Commodity Futures Trading Commission (CFTC) and IOSCO vice chair.

“We are seeking feedback on the role of financial markets regulators in increasing the resilience of these markets and leveraging experience and insights from regulatory frameworks applicable to existing financial markets,” he added.

The deadline for feedback on both papers is Feb. 10, 2023.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.