October 17, 2022

Warren, Booker Lead Lawmakers in Urging the CFTC to Pursue Stronger Oversight of Carbon Offsets Market

Text of Letter

Washington, D.C. – U.S. Senators Elizabeth Warren (D-Mass.) and Cory Booker (D-N.J.) led five colleagues in urging the Commodity Futures Trading Commission (CFTC) to take concrete steps to implement rules governing the voluntary carbon offsets market, also referred to as carbon credits.

Facing pressure to reduce greenhouse gas emissions in order to reach worldwide net-zero emissions by 2050, companies, investors, and governments have turned to a strategy of purchasing carbon offsets from organizations claiming to sequester greenhouse gasses through strategies like tree planting or installation of renewable energy. This has led to rapid growth of unregulated carbon markets that allow corporations to make claims about emission reductions and pledges to reach “net zero” while actually taking little action to address the climate and environmental justice impacts of their industry.

“The carbon market enables wealthy corporations and countries to continue polluting due to broad standards that ineffectively regulate what counts as an offset,” wrote the Senators in a letter to CFTC Chairman Rostin Behnam. “Carbon offsets as they currently stand are not compatible with climate justice goals, as they enable wealthy corporations to continue emitting while using fraught tactics that prioritize their bottom line over the health and well-being of vulnerable communities.

“To reduce risk to frontline communities, investors, and the planet, the CFTC should take concrete steps to implement rules governing the carbon market. These rules should include a clear definition of a carbon credit and a robust standard for auditing, and they must take into account the environmental justice risk of growth in the offset market,” continued the Senators.

In the letter, the Senators urged the CFTC to:

  • Investigate the integrity of currently approved derivatives and their underlying carbon offsets, and develop qualifying standards for carbon offsets that effectively reduce greenhouse gas emissions and can serve as underlying commodities for approved derivatives in the future.
  • Create a registration framework for offsets, offset brokers, and offset registries.
  • Pursue cases of individual project fraud.
  • Develop a working group to study both the risk to investors associated with carbon offsets and derivatives (legal, reputational, and regulatory) and the systemic climate financial risk created by their availability and usage.

The letter was cosigned by Senators Ed Markey (D-Mass.), Richard Blumenthal (D-Conn.), Bernie Sanders (I-Vt.), Jeff Merkley (D-Ore.), and Kirsten Gillibrand (D-N.Y.).