Comment Text:
Below is an executive summary of BeZero Carbon's response to the proposed guidance. A full, detailed response can be found in the accompanying PDF document.
* BeZero Carbon welcomes efforts to bring greater regulatory safeguards to the Voluntary Carbon Market (VCM). We believe this is vital to help the market scale.
* The CFTC’s guidance rightly highlights the importance of carbon credit quality. However, “quality” is a complex and contestable concept which requires a judgement to be made at a project level across risk factors like leakage, over-crediting and additionality (comprising of financial, activity, policy and legal considerations). BeZero Carbon’s independent ratings simplify this for market participants by condensing this multi-dimensional risk analysis into a single 8-point scale which is applicable to all credit types.
* We therefore believe that carbon credit derivative contracts should include independently assigned ratings as a key requirement in order to account for the quality of credits in a robust but proportionate fashion, as in the financial market.
* We also believe that the CFTC’s guidance is incorrect in treating carbon credits, and their associated derivatives, as binary commodities. Our ratings show that carbon credit quality is a spectrum, even across specific sectors and project methodologies, and therefore standardising “quality” risks creating a race to the bottom.
* We welcome the CFTC’s ongoing engagement on the VCM, and were particularly grateful for the opportunity to speak at a CFTC conference this summer.
