New guidelines released Tuesday by a federal financial regulator could build confidence in the struggling voluntary carbon market and address fears that investors are financing bogus projects that do not address climate change.
The new rules from the Commodities Futures Trading Commission will urge some projects funded by the voluntary market to demonstrate that they actually reduce planet-warming emissions.
Businesses fund climate-related projects through the voluntary market to offset their own emissions. The multibillion-dollar market has faced increasing questions about its effectiveness and whether the projects needed funding from investors through the market.
The commission’s rules will affect a sliver of the market — transactions that involve derivatives, whereby a purchaser bets on the future value of a climate project they are funding.