The CFTC Should Raise Standards and Mitigate Fraud in the Carbon Offsets Market

The voluntary carbon market is a market in which people can purchase carbon offsets in order to offset their own emissions. The market is growing as more companies strive to reduce their emissions, but there are concerns about the quality of the offsets and the potential for fraud. This report examines the current state of the market and provides recommendations for how to improve it. The report highlights the already well-documented and numerous problems in assuring the quality of offsets, such as how some avoided-emissions projects may result in new emissions happening elsewhere, or how some projects would likely occur even if they had not received funding from the purchaser of the offset. Given these problems, the report argues that current standards are insufficient to prevent fraud in offsets markets and that government action is necessary to disincentivize the proliferation of low-quality nature-based offsets and a risky derivatives market based on them. It concludes with an analysis of the Commodity Futures Trading Commission (CFTC)'s legal authority and provides recommendations for how the agency can act to improve standards and curb fraud and manipulation in the market. Without regulatory oversight, there is no guarantee that offsets can truly offset purchasers’ emissions.