TheCityUK response to IOSCO Consultation Report on Voluntary Carbon Markets

We welcome the opportunity to respond to the International Organisation of Securities Commission's (IOSCO) Consultation Report on Voluntary Carbon Markets (VCMs). We consider the Good Practice set out in the report to be broadly appropriate. In our response, we highlight the need for any guidance from IOSCO to follow existing financial markets best practice and regulation where possible. Our response outlines the overall coordination role that IOSCO could play and encourages IOSCO to focus attention on specific aspects of the market infrastructure where further guidance would support the integrity of the market and build greater market confidence.

Our key recommendations for IOSCO are:

• IOSCO should focus on guidance for voluntary carbon markets (VCMs) that brings best practice from financial and commodity markets.
• For carbon markets to operate in a similar way to other primary markets, carbon credits should be based on outturn data which evidences verified carbon impact.
• Regulatory frameworks and market tools that exist in financial market infrastructure are well-established and should be used to effectively manage carbon markets in a way that maintains participant and regulator confidence.
• IOSCO should prioritise issues that relate to the secondary market and to the integrity of primary issuers, which could have an adverse effect on the secondary market.
• Carbon markets are global in nature. International alignment and consistency in regulatory frameworks and standards will be crucial to ensure they function effectively.
• We support existing initiatives and frameworks that have emerged to add greater standardisation and integrity to the market at an international level.
• IOSCO should help coordinate current market initiatives and convene relevant stakeholders to ensure international alignment and consistency in the development of regulatory frameworks and standards for VCMs.
• Regulators need to establish reliable frameworks and infrastructure for the settlement of carbon credits to build and maintain market confidence.
• Registries must be held to a similar level of protection as the regulated financial market. They are a critical part of the value chain and should be subject to standard operating principles.
• IOSCO should consider further work on the custody of carbon credits and addressing the reliability and security of registries.

 To read our full submission, click ‘Read here’.