CFTC VCM Event Highlights Need for Evolving Exchange Products
The following is a LinkedIn post from Russell Karas, Head of Commodities at Xpansiv. Russell participated in the CFTC’s 2nd Voluntary Carbon Market Convening on July 19th in Washington, D.C.
Yesterday’s 2nd Voluntary Carbon Market Convening by the Commodity Futures Trading Commission (CFTC) brought together thorough and thoughtful panelists from a wide range of backgrounds, including governmental bodies, NGOs, registries, trading firms, ratings agencies, and exchanges. I was pleased to participate on behalf of Xpansiv.
At the forefront of this conversation was the urgent need to leverage on-going global efforts to provide guidance to purchasers of offset credits. The market is looking for integrity standards, and there has been considerable recent progress on this front. Participants at the Convening demonstrated broad support for initiatives such as the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), Voluntary Carbon Market Integrity Initiative (VCMI), and Integrity Council for the Voluntary Carbon Market (ICVCM).
The VCMI advises firms how to use offsets while the ICVCM provides guidance on what types of credits to use. The VCMI recently issued guidance that CORSIA credits from the Pilot and First Compliance meet the requirements of “Purchase and Sale of High-Quality Carbon Credits” in their Claims Code of Practice. The ICVCM also announced in March that CORSIA will factor into their approval process for programs/registries.
But it was CORSIA, which is backed by the UN’s International Civil Aviation Organization (ICAO), that headlined the discussion. The program is preparing to enter its first compliance phase in 2024, and its Technical Advisory Body (TAB) has done the hard work of establishing VCM ground rules for the airline industry.
As the industry prepares to enter its first Compliance Period under the TAB’s new standard, the underlying voluntary carbon offset products will adapt. This includes the Xpansiv Global Emissions Offset (GEO) contract, which uses CORSIA as its foundation. We are currently working on the next iteration of the GEO for use in the first CORSIA Compliance Period, and we welcome market input into the contract design.
Having synergies across these three crucial standards is necessary for new and existing market participants to navigate this market. As an exchange, Xpansiv looks forward to offering products that align with goals outlined through CORSIA’s compliance phases, the ICVCM, and the VCMI.