Comment Text:
General comment: WWF supports the Commodity Futures Trading Commission (CFTC) efforts to regulate the voluntary carbon market. While the voluntary carbon market is a relatively small market to date, it has the potential to grow substantially and WWF sees great value in setting out guidance that improves transparency and integrity of the carbon market to encourage the carbon market to support GHG emissions reductions including increased carbon sequestration. Under the CFTC’s mandate to protect market integrity and avoid systemic risk, it is critical that the CFTC uses its regulatory oversight function to encourage high integrity carbon crediting and weed out opaque carbon credits that have little or no environmental value and may be detrimental to the environment and/or associated communities.
Due to the limited number of voluntary carbon credit derivative contracts and the newness of this function for the CFTC, WWF encourages the CFTC to disallow self-certification in this regulation.
Response to General Question 1 and Risk of Reversal Question 10: The commodity characteristics, as outlined by the proposed guidance, include the core tenets of high-quality carbon credits including: transparency, additionality, permanence and risk of reversal, and robust quantification (ref. pg. 24). All of these attributes are important. WWF recommends that the CFTC strengthen the risk of reversal guidance to go beyond assessing this risk and encourage market participants to include risk mitigation measures. Regarding the forestry sector, the Tropical Forest Credit Integrity Guide, which is referenced in the regulation, includes key aspects for promoting permanence and reducing the risk of reversals in carbon credits.
Response to Additionality Question 8: Additionality is critically important and in markets where laws and regulations are regularly enforced, voluntary carbon credits (VCCs) should not be credited if they are required through other means including if the activity is required by law, regulation or legally binding mandate. If a project developer can prove that laws or regulations have not been enforced in the area in which the project is or would be operational and that the project would not move forward absent the financing provided by the credit due to lack of law enforcement even if there are laws, regulations or legally binding mandates in place requiring the activity, the VCCs may be credited.
Response to Risk of Reversal Question 9: Reversal is an issue so proper provisions must be in place to minimize that risk and account for reversals if they should occur. WWF recommends having a buffer pool of credits to replace reversed emission reductions and removals. Credit protocols should only be issued for practices for which there is a methodology for monitoring, reporting and verifying the underlying emissions reductions or removals and a third party should be used to do that verification. There needs to be data and research that documents that the emissions reductions or removals are measurable and the degree of reduction/removal is either consistent enough to have a reliable range or have a highly accurate measurement system to measure each credit submitted (i.e., ability measure the actual reductions and not just the implementation of the practice as proxy).
Response to Governance Question 12 and Sustainable Development Benefits and Safeguards Question 16: WWF strongly recommends the CFTC to include an additional VCC commodity characteristic when addressing quality standards to include a characteristic that explicitly addresses project safeguards and how the projects maximize the local benefits under just and equitable agreements. Safeguards, just and equitable agreements principles and standards are common attributes of high integrity development projects and should be included so that communities and surrounding ecology are not negatively impacted. In response to question 16, it is imperative that a designated contract market (DCM) consider whether a crediting program has implemented a strong safeguard policy and equitable agreements principles, which should be transparently reported.
Response to Inspection Provisions Question 15: The proposed guidance notably includes references to three important actors including the project developers, the crediting program and an independent third party verifier (ref. pg. 10). This third-party verification process should be a requirement to improve the integrity of the credit and ultimately the integrity of the voluntary carbon market.
Response to Sustainable Development Benefits and Safeguards Question 17: WWF remains committed to encouraging corporate partners to reduce emissions within their own facilities, energy consumption and supply chains as a first order goal. Contrary to the proposed guidance, WWF does not support market participants purchasing carbon credits “to help meet their mitigation goals…” (ref. pg 13) but instead market participants should set and meet mitigation goals and purchase carbon credits in a way that is consistent with the Science Based Targets initiative, or SBTi. It is critical that any carbon credit purchase does not lock in high-emitting GHG assets by allowing entities to purchase offsets to avoid strong mitigation action.
